South Africa Cracking Down on Rich Tax Evaders

April 17, 2012 Taxation in South Africa

South African RandPRETORIA – The Minister of Finance of South Africa has rejected recent claims made by the national media regarding the extent of taxes owed by high net worth individuals in the country, and issued an assurance that the government will take steps to prevent rich taxpayers from neglecting their tax obligations.

On April 16th the Minister of Finance of South Africa Pravin Gordhan released a written response to a parliamentary query, indicating that the national media have recently  reported that high net worth individuals (HNWI)  in South Africa currently owe as much as ZAR 50 billion in unpaid taxes, but this figure is actual misrepresents the real situation and is just an  estimation of the cumulative current gross income of all HNWIs. in South Africa.

The Minister also said that the estimation is based on the calculations completed by a third party and contradict information currently held by the South African Revenue Services (SARS), saying that “…an accurate estimate of the potential tax liability of this group is not possible as each case is unique.” He explained that HNWIs often utilize a wide array of business structures, and have several income sources from more than one country, making it difficult to calculate total tax liabilities without conducting a case-by-case in-depth investigation.

According to Pravin Gordhan, the SARS is currently initiating stricter controls to ensure that HNWIs are meeting their tax obligations in South Africa, and tax authorities are now making greater use of data provided by other government departments or other third parties in order to verify the information submitted by taxpayers. In addition, the SARS has now begun to carry out joint audits with national tax authorities in the UK, Botswana and the USA. In addition to the measures currently being taken, the government of South Africa is also investigating potential legislative changes to eliminate tax loopholes and remove potential arbitrage opportunities for local entrepreneurs operating groups of entities registered in South Africa and overseas.

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