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SARS will do lifestyle audits in bid to recover billions

SARS will do lifestyle audits in bid to recover billions

Several South Africans will be subjected to lifestyle audits by the South African Revenue Service as it implements measures to recover shortfalls in tax collections.

On Monday 11 January, Judge Dennis Davis, who heads up the Tax Review Committee, spoke about measures the tax collecting authority would implement to address this issue.

Davis told Bruce Whitfield on 702’s Money Show that lifestyle audits of the country’s wealthy would be used as a means to collect the under-recovery in taxes the government faced every year. He referred to lifestyle audits as “low-hanging fruits” — simple and effective ways for SARS to force tax dodgers to pay up.

Davis believes numerous South Africans do not accurately disclose their net worth in order to avoid high tax submissions to SARS. He said the actual number of South Africans reflecting taxable incomes of more than R5 million a year was unrealistic.

“There are only about 5,000 to 6,000 people who reflect taxable income of more than R5m… Drive around Clifton, Camps Bay, Bishopscourt, Bryanston, Sandton… How many people have to have that level of income for the upkeep?

There are a lot of rich people around who aren’t disclosing,” Davis said in the interview on 702.

Davis also said the values of luxury vehicles were not being disclosed by certain individuals.

“If you have a R3m Ferrari and are reporting R100,000 in taxable income, I think the revenue authority is entitled to knock on your door and ask you to explain,” he said.

He believes individuals with luxury vehicles and those who own homes in the country’s premium suburbs should be subjected to lifestyle audits as a means to encourage compliance and rectify under-collection of tax revenue.

“That is apart from all of the luxury motor cars you see on our roads. So, if you take R5m [as the top bracket], there are a lot of rich people who probably have a lot more than that and are not disclosing it,” Davis said.

High Net Worth Individuals (HNWIs) are defined as US dollar millionaires or people with a net worth of $1 million (R15.27 million).

The New World Wealth and AfrAsia Bank published data in early January showing the number of South Africans who are classified as high net worth individuals (HNWIs). According to this data, there are 35,000 HNWIs in the country.

The coronavirus pandemic and extended lockdowns have added financial pressure on individuals and many businesses. South Africa is short of R300bn in revenue this year.

“I am hopeful we will get some of these low-hanging fruit back into the tax net,” Davis said.

A shake-up of individuals dodging the taxman is imminent. Davis said he was working with SARS to prepare its auditors to start carrying out lifestyle audits on individuals who were not disclosing accurately.

“Once we start this process the word will get around. People will knock on the door of SARS,” Davis added.


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