Businessman Dave King. (Gallo)
Businessman Dave King’s settlement last week with the South African Revenue Service is a cautionary tale for the country’s mega-rich who may want to take on the taxman.
“Think very carefully before doing what I did,” King told the Mail & Guardian this week. “Taking on the state with its huge resources is extremely difficult.”
Despite a decade or so of acrimonious litigation, which ended in the R706.7-million settlement agreement, Sars has already reclaimed a hefty amount of money from King.
This was through the sale of a number of his assets, including the Quoin Rock wine estate in the Western Cape — all of which will go towards the settlement.
According to King, the cash balance owed to Sars is about R380-million.
The advent of the new Tax Administration Act, said King, proved a tipping point in his battle with Sars.
The Act gives Sars greater powers of enforcement, including power to repatriate assets held abroad in the pursuit of money it believes is owed to the fiscus.
'It wasn't worth it'
King said he could have pursued further attacks on the constitutionality of the Act, but this would have resulted in “several more years of adversarial litigation”.
“I just didn’t believe it was worth it,” said King.
He added that Sars was extremely fair, and firm, in the subsequent settlement negotiations.
King is not the only individual of a high net worth that Sars has been pursuing.
In its most recent compliance update in April, Sars flagged as “high risk” 109 of the estimated 2 300 individuals with a gross income of R7-million or more, or assets worth R75-million.
Of these, 62 full audits were conducted, yielding R184-million in unpaid taxes.
A further 37 cases are being “risk profiled” through its ongoing review of the high net worth category, Sars spokesperson Marika Muller said.
“Potential serious offenders”
Fourteen more cases — identified as “potential serious offenders” because of the magnitude of their outstanding returns — have been “routed for criminal investigation”.
The revenue service is currently pursuing three criminal cases against recalcitrant taxpayers.
The total tax liability of this group of wealthy people not paying their fair share is difficult to determine, as returns are still outstanding, meaning additional liabilities such as penalties and fines cannot be calculated.
In a Sars presentation from January of 2012 it estimated that there could be as many as 7 000 additional individuals of high net worth who should be registered to pay tax.
It also said consultations with one local financial institution indicated that the company had identified at least 20 000 people who could afford to invest over R1-million a year.
Sars estimated that the shortfall in taxable income from these individuals stood at a possible R48-billion.
This is still the most workable estimate of the impact of tax evasion by individuals of a high net worth.
This amount was likely to alter over time, said Muller, as investigations progress or are completed.