Lifestyle audits to be ‘hardwired’ into Sars

The South African Revenue Service (Sars) is “going full speed” towards ensuring lifestyle audits are hardwired into the tax authority’s normal operations.

Sars had been conducting these audits, which look into cases where the lifestyles of taxpayers did not match their income declared for tax purposes, since as early as 2007. 

However, Johnstone Makhubu, the chief revenue officer at Sars, told delegates on the first day of the 2022 Tax Indaba on Monday the agency had only recently had enough data to conduct “meaningful” lifestyle audits.

Earlier this year, Sars commissioner Edward Kieswetter revealed that the tax agency had completed 25 lifestyle audits in 2021. The audits, Makhubu said on Monday, had led to the raising of R474-million in assessments, which Sars was working to convert into collections.

“We are finding more and more that, as we enrich the data, we are able to have impactful lifestyle audits … The richness of the data allows the depth in the quality of such lifestyle audits, such that, when we put forward the results and the outcomes, the investigative work that has gone in allows for easier conversion,” he said.

In its strategic plan to 2024-2025, Sars noted there had been increasing non-compliance by taxpayers. This non-compliance was the result of weak case selection and taxpayer profiling, the inability to identify potential tax-avoidance schemes, as well as inadequate resources and skills.

The tax administration, Makhubu said, needed to be able to link traditional auditing skills with data science. “As a tax administration, we are moving more towards that.”

Makhubu said Sars had found a number of individuals had been syphoning money from faith-based organisations in order to fund their lifestyles. 

According to the Sars 2020-2021 annual report, its focus over a number of years had been on religious entities and connected individuals. In the future, the report noted, there would be even greater attention on those with luxury assets.

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