In a bold and unwavering move, SARS has intensified its compliance focus on both Small, Medium, and Micro Enterprises (SMMEs) and High Wealth Individuals (HWIs), showcasing its non-discriminatory approach to ensuring tax compliance across the spectrum and collecting tax revenues due!

The reinvigorated targeting of HWIs is fuelled by SARS’ use of data driven insights, derived from both South African and international sources, to detect any degree of non-compliance and hold the perpetrating taxpayer accountable. 

In-line with SARS’ strategic objective of making compliance easy, an “SMME Compliance Programme” was created, which is at 80% completion on pilot testing, with the goal of correcting non-compliant behaviour amongst SMMEs proactively.

Excerpt from pg. 44 of the SARS Annual Performance Plan 2024/25

This dual-target strategy underscores SARS's battle plan on 1 of 5 “must-win battles”, being to “Improve voluntary compliance and fiscal citizenship”.

SARS' Revenue Management Philosophy in Action

In a statement signed by our Minster of Finance, Enoch Godongwana, it is made clear that one of SARS’ biggest challenges is tax compliance; directly translated, SARS cannot collect revenue they do not know about. Without collection, the government cannot fund programmes they deem critical, so where to next…

Well, simply put, SARS’ Compliance Philosophy states that SARS’ work is mainly to ensure taxpayer compliance, and there are 5 “must-win” battles for the revenue collector. Somehow fulfilment of SARS’ collection mandate was left out here but is self-evident in all actions taken by the revenue authority.

In winning the battles, and ultimately, war on non-compliance, SARS has taken proactive steps to gain some public trust and bolster its own internal belief that most taxpayers and traders are honest and strive to promote a culture of compliance. By prioritizing strategic initiatives that leverage technology, SARS aims to simplify compliance for taxpayers and traders, whilst ensuring non-compliance is both hard and costly. These data insights will aid SARS’ transformation into a data-driven organization through the SARS Modernisation Programme.

Significant Boost in Revenue Collections

Recent statistics reveal the efficacy of SARS' intensified efforts. Gross Revenue Collections exceeded R2 trillion in 2023. Viewing SMMEs in isolation, their contributory portion has surged to R466.8 billion, a notable 10% increase year-on-year. 

Despite these gains, the sector still grapples with low levels of voluntary compliance, evidenced by subpar filing rates and widespread under-declarations. SARS has highlighted the need for enhanced education and enforcement measures, working closely with other government institutions to improve compliance rates within this segment, which currently accounts for 28% of total revenue collection.

On the other end of the spectrum, the HWI segment has also seen increased scrutiny. SARS has successfully migrated 4,000 individuals to the high wealth division, with plans to expand this to include an additional 58,000 taxpayers and related entities. This segment has shown a revenue contribution of R12.5 billion.

The saga of Shauwn “MaMkhize” Mkhize offers a vivid real-life example of the consequences of tax evasion. MaMkhize, a media personality and businesswoman known for her role in the television show "Uzalo," reportedly amassed much of her wealth through government tenders to build low-cost housing in KwaZulu-Natal. However, her financial success has been marred by ongoing disputes with SARS. Currently embroiled in a tax scandal involving over R37 million in unpaid taxes, this high-profile case illustrates the persistent and far-reaching efforts of SARS to recover owed taxes. 

Ghosts of Non-Compliance, Past, Present, and Future

SARS' strategy to instil a sense of urgency and responsibility among taxpayers’ hinges on making non-compliance both hard and costly. By detecting and addressing non-compliance rigorously, SARS aims to deter tax evasion and ensure that all taxpayers fulfil their obligations. 

This approach emphasizes that no taxpayer, regardless of their economic standing, is beyond the reach of SARS' compliance efforts. Recent compliance trends have also shown SARS considering not just current compliance, but also deep-diving into historic risks of non-compliance, and in some instances, even requesting taxpayer’s to look into their crystal balls and provide SARS of income and expenditure estimates for future tax periods.

Enhancing Voluntary Compliance Through Technology and Trust

With SARS' enhanced non-compliance detection capabilities and a sharp focus on both past and future non-compliance, correct tax and legal guidance has never been more critical. The most prudent approach to be taken, is to heed SARS’ warning that non-compliance will be both hard and costly for taxpayers. 

In order to protect yourself from financial ruin, and even possible jail-time, it remains the best strategy that you always ensure compliance. 

Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory, ensuring the necessary steps are taken to protect both yourself and your unblemished record, from paying the price for what could be the smallest of mistakes. However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed.

As a rule of thumb, any and all correspondence received from SARS should be legally addressed, as often legal professional privilege is a must in instances of non-compliance. This will not only serve in safeguarding against SARS implementing collection measures or potentially criminal charges, but also being specialists in their own right, taxpayers and practitioners will be correctly advised on the most appropriate solution to ensure full tax compliance.

Written by Jashwin Baijoo, Head of Strategic Engagement & Compliance at Tax Consulting SA; and Michelle Phillips, Tax Attorney at Tax Consulting SA