Tax dodges totalling tens of billions were thwarted in the last year, SA Revenue Service (Sars) commissioner Edward Kieswetter has revealed.

They involved churches, luxury cars, counterfeit goods, wealthy individuals, personal protective equipment (PPE) and state capture.

Speaking in Pretoria at Sars' 25th anniversary revenue results announcement, Kieswetter said a range of schemes to avoid paying tax were probed by 270 specialised auditors who netted R25bn.

Nine cases were finalised in which payments to investment policies were disguised as tax-deductible insurance premiums. A total of R64m was raised for the fiscus as a result.

Lifestyle audits were carried out on 25 “individuals that have access to luxury assets and extensive business relations”. These raised R474m. 

“Usually capital reconciliations and the use of third-party data are considered in determining the correct declaration amounts,” said Kieswetter.

Investigators also finalised 33 cases relating to ownership of luxury vehicles, bringing in  R160m. Kieswetter said the focus was on individuals and companies who were otherwise non-compliant with their tax obligations.

“These cases are often leads to identify other compliance risks and even criminal behaviour as well,” he said.

Thirty-five cases involving religious institutions brought in R742m.

“The findings on these institutions covers a wide range of misrepresentation of the true nature of income and expenses of the entities and individuals involved,” said the commissioner.

Investigators also uncovered abuse of the employment tax incentive, introduced in 2014 to encourage employers to hire young and less experienced work seekers through a cost-sharing mechanism with the government.

Kieswetter said: “Learning institutions collude with employers to claim impermissible deductions from their payroll, without the intention to provide employment. Thirty cases yielding R245m were concluded.”

In the security industry, 32 cases yielded R682m. Attempted tax dodges included “unsubstantiated zero-rated outputs, under-declaration of income, non-declaration of fringe benefit and disallowable expense claims”.

Sars customs officers made more than 1,900 seizures of illegal imports worth R3.4bn, with counterfeit goods making up almost three-quarters of the total. Drugs (R432m), clothing and textiles (R286m) and cigarettes (R160m) made up the balance.

Customs also collected another R2.7bn for contraventions such as misclassification of goods, duty evasion, undervaluation of goods and infringements of rules of origin.

Cases involving international taxes and transfer pricing — a practice that allows for pricing transactions internally within businesses and between subsidiaries that operate under common control or ownership — raised R11.9bn.

Kieswetter said these cases were a focus of Sars' reinstated large business and international team and would become a focus of other teams.

The commissioner revealed that Sars was involved in 557 investigations of the illicit economy with an estimated value to the fiscus of R42.2bn.

Focus areas included fuel, tobacco, alcohol, clothing and textiles, leather and footwear, VAT carousels in the gold sector, phoenixism (liquidating a company only for the same business to re-emerge from the ashes as a fresh entity), abusive liquidation and business rescue practices and illicit financial flows.

More than 209 completed illicit economy investigations and debt cases had raised R11.9bn in income tax and VAT revenue.

Twenty-nine civil cases related to state capture had been finalised, said Kieswetter, as well as 23 criminal investigations, and 20 matters had been handed over to the National Prosecuting Authority (NPA).

“We are fortunate to have the Investigative Directorate of the NPA located right next to us, which allows for constructive collaboration on a number of high-profile cases,” he said.

Sars had continued with its attempts in the previous tax year to identify tax dodgers who had supplied PPE to the government during the Covid-19 pandemic.

So far, Sars had collected R176m in unpaid tax and registered 77 cases with the SA Police Service. Of these, 50 cases were with the NPA and 20 were on the court roll. Fifteen cases had been completed, resulting in 13 convictions.

In total, Sars chalked up 116 convictions in 2021/22, with 13 cases resulting in custodial sentences totalling 73 years for income tax, VAT and Customs and Excise fraud. Fines of  R3.8m has been imposed “plus orders for R22m to be paid to Sars”.

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