Individuals suspected of deliberately hiding sources of income from the authorities by purchasing luxury goods are being investigated, as part of a clampdown by the South African Tax Agency.
The agency is looking at who is buying luxury apparel and trying to find out where do these people get their funds,” Chief Revenue Officer Johnstone Makhubu said. The project is a step toward giving tax authorities a broader view of people that “aren’t in the purview that they would like to bring into the net.
The probe is part of the South African Revenue Service’s efforts to bolster tax compliance and rebuild capacity. The focus of the tax office is on high-net-worth individual taxpayers with complex financial arrangements. It completed 25 lifestyle audits during the fiscal year through March, which flagged about 474 million rands ($27.3 million) of assessments that it’s now working to collect.
The South African Revenue Service is on a drive to improve data engineering and analytics to improve compliance and ensure that initiatives like lifestyle audits become “hardwired” into its operations. Some data led to investigations into people suspected of siphoning money off faith-based organizations to fund their lifestyles.
The agency also set up data exchanges that help it probe financial emigration, a process used by South Africans based abroad to cease their local tax residency. It has identified about 300,000 transactions exposed through the Pandora Papers for possible investigation.