Some musings on the new Tax strategy of SARS

(The yin, the yang, the yawn, and some super shady lawns, whilst we’re at it)

How does a government increase its income without adding new taxes? After all, there are important local elections this year and reassuring the public that you REALLY will do your very utmost ‘bestest best’ NOT to pull the tax noose tighter, the Government needs more money.

Easy – it digs deeper and finds those who are not paying a fair contribution towards the fiscus to pay more. But only if you are not in Parliament it seems. To harken back to the byline above: I want to raise two issues here in terms of light and dark and how the current Powers That Be muddy the waters:

  1. The South African Revenue Service (SARS) wants landlords to pay taxes on their rental income, yet lack the political will to make parliamentarians and Organs of State pay their rent.
  1. Lifestyle audits and the multiplicity of touchpoints SARS can access to check exactly what you own and make you pay for it, yet lack the political will to make parliamentarians come clean about their gifts, assets, and earnings on the side.

The first issue: income from property

SARS is going to target landlords. They know thousands of landlords are not declaring rental income.

The strategy is quite simple. SARS has access to the deeds office and can link you to all properties that you have purchased. They know that you own three properties and only declare income from one. You will be asked to explain that income that enters your bank account every month.

Erring Ministers, new and old

Ironically, Public Works Minister Patricia de Lille had to send out letters of demand to a number of high-profile politicians in an effort to recover more than R8 million in rental arrears. The ‘poor’ Cabinet ministers are ‘forced’ to have two state houses – one in Pretoria and one in Cape Town. They are allowed to stay rent-free in one of these official residences but they must pay 1% of their salary to stay in the other. Guess who subsidises these houses? The taxpayer of course. Now imagine having to pay only 1% of your salary for rent …

I guess Auntie Pat should not wait for a cheque in the mail

The South African Post Office (SAPO) has quite spectacularly failed to pay rent on many of its offices for quite some time now. It is well known that this state-owned enterprise has been in financial trouble for more than one very long, dry season… It has had to close down 55 branches due to non-payment and, in some cases, landlords have seized equipment and unceremoniously kicked the erring Post Office out of the Mall. Notices on the doors of many branches now state “closed until further notice” without a clear indication of how much further into the future that would be.

Some beleaguered Post Office Tannies and Ooms in small towns have been trying to run basic Post Office services from their own homes! I know a particular Tannie that gives you the best coffee whilst you wait – I doubt the Post Office reimburses her or sends her milk!

The second issue: Lifestyle audits

Another trick that SARS has to flush out information from those they suspect is fudging their figures in order to over-declare their expenses, is to demand proof of expenses. (Do you know where the rates account from 4 years ago are kept?) They may go as far back as ten years…

A landlord submitted a summary of costs and, in her mind, she was owed a R24 000 refund. SARS decided to ignore all her expenses and she now owes them R40 000! You see, handing in a schedule of costs is not sufficient. They want evidence of expenditure and proof of payment.

And yes – we do have a problem

During a recent webinar, Judge Dennis Davis, chair of the Davis Tax Committee, stated that many South Africans who are living lavish lifestyles only declare meagre incomes to SARS.

He said the country loses more than R100 billion each year – around 10% of South Africa’s total tax income – from people and businesses dodging tax. He thinks that a good place for SARS to start would be to ramp up lifestyle audits for wealthy South Africans by monitoring Natis, which maintains a registry of cars in the country, and to look at people who own expensive luxury vehicles and supercars.

He added that he would welcome proper lifestyle audits of all people who are accused of corruption at places like the Zondo Commission. What I would like to know is why, after more than a quarter of a century in office, the Government is not conducting lifestyle audits as a matter of course for parliamentarians? The technology exists but the political will to enforce this is absent!

This month SARS appointed 360 new staff members in the forensic department to carry out these audits. It would serve us well to ask: do these INCLUDE the Parliamentarians?

But, dear Reader, SARS WILL take their pound of flesh

If you win the LOTTO or someone gives you an extraordinary financial gift, or it becomes time for you to retire and a suspiciously large lump sum is detected in one of your accounts, SARS reserves the right to seize any monies which they believe is due to them – even when the debt has nothing to do with the money in question. One individual recently had SARS take over R100 000 of his pension because he owed SARS taxes going back several years.

A wry bit of ‘good news’ – one of our Cabinet Ministers were treated the same

A senior Cabinet Minister had been found guilty in a court of law. She was ordered to pay the legal costs racked up as she fought her battle in court out of her own pocket, rather than saddling taxpayers with the burden. She did not feel like doing so. What she did not realise is that it would come back to bite her – SARS blocked her entire pension payout.

Learn the lesson!

Stop trying to be your own Tax Practitioner, especially if you are a provisional taxpayer. Those adverts that suggests it is easy to make your submissions are not accurate.

Instead, use the services of an experienced registered Tax Practitioner. If you are feeling a bit rattled, know that you are not alone! The number of people who contact us grows by the week. As is going to the dentist, enlisting help proactively can save you a lot of pain. Just like a root canal, a tax dispute takes time, is expensive and complicated. It is really in your best interest not to wait!

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