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SA’s black market in taxman’s crosshairs


SA’s black market in taxman’s crosshairs

Finding itself with teeth once again, Sars will conduct year-long research into how the illegal economy is bleeding the fiscus dry

Senior reporter

The taxman has gone into sleuth mode to uncover those involved in the country’s growing shadow economy.
With estimates putting the illegal economy at roughly R1-trillion, or 20% of the GDP, the SA Revenue Service is researching the extent, reach and impact of the black market on the country.
The GDP is an estimated R4.3-trillion.
Sars enforcement chief officer Viwe Mlenzana told Times Select the research is set to conclude in March 2020.
“A recent report by ACCA, the global body for professional accountants, estimates that South Africa’s shadow economy is expected to rise to 24% of the GDP by then [2020],” said Mlenzana.
He said that based on these and other figures, Sars recently launched a year-long study to try and quantify the size of the illicit economy.
“This research is to try and get a better understanding of the country’s black market and its impact.”
The research is to be conducted by units shut down by disgraced former Sars commissioner Tom Moyane, including the Big Business Unit and the Illicit Economy Unit.
The units were reformed in August 2018, and their first tasks now include investigating roleplayers involved in the SA’s illicit economy.
Mlenzana said it was difficult to gauge how much the country had lost since the loss of Sars’s enforcement capabilities.
“Fortunately, these capabilities are back. With the current government there is political will to stem this tide of these [financial] losses.”
He said they had prioritised high-risk areas.
“The underground economy operates outside of the country’s rules and regulations and is linked to organised crime.
“Globally, illicit trade is a growing problem, involving money and goods. It includes human trafficking, environmental crimes, the illegal trade in natural resources, intellectual property infringements, the smuggling of excisable [taxable] goods, the trade in contraband, and illicit financial flows.”
These activities had a wide-ranging impact, including political and social harm.
Mlenzana said a 2019 report by the Global Financial Integrity research agency, using International Monetary Fund (IMF) data, showed SA lost an estimated $10bn (R143bn) through illicit financial flows.
“To defeat these crimes [dealing in contraband] and stop illicit financial flows it’s essential that relations are strengthened with both international and national partners, including government agencies such as financial intelligence units, the police and customs administrators.
“Agreements have already been reached with various global partners, including between Sars, the IMF and the US national treasury.”
Mlenzana said they were currently dealing with 860 cases where an estimated R13bn due to the fiscus had not been received.
“A lot of this has to do with bogus VAT claims. The research will look into such scams.”
Keith Engel, chief executive of the SA Institute of Tax Professionals, welcomed the study.
“This research gets to the main problem, which is that Sars is too busy auditing taxpayers who are compliant or mostly compliant. Sars is a receiver of information, and given that the illicit economy involves little if any paperwork, the receiver will have to rope in the services of specialised forensic auditors to help it with its study.
“The study will have to not only look at those involved in the informal sector, which is often not illegal, but those such as tenderpreneuers who ship vast sums offshore through corrupt practices.
“The researchers will have to specifically look at those involved in dodgy tenders.”
He said the study would need to be conducted carefully, with the researchers ensuring there was a proper breakdown of where and how the fiscus was losing money so gaps could be identified and filled.

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