Many South Africans are living lavish lifestyles but only declare meagre incomes to the South African Revenue Service (SARS).
This was revealed by Judge Dennis Davis, chair of the Davis tax committee, during a webinar about the future of financial wealth in South Africa.
Davis said they recently did a study on a group of people “with very fancy Ferraris parked outside a hotel”.
The person he was working with at SARS took down the registration numbers of the 26 Ferraris and looked at how much tax they pay.
What it revealed was that not one of the owners returned a taxable income of more than R400,000 per year, or R34,000 per month.
Davis highlighted that it is not possible to fund a lavish lifestyle, like driving an expensive Ferrari, on an income of only R400,000 per year.
He said SARS’ data shows that only 5,000 South Africans report taxable income of R5 million or more.
“That makes no sense to me. I invite people to drive in Sandton, Bryanston, Camps Bay, and Bishopscourt – you have to be earning significant amounts to afford houses in these areas,” he said.
He said the country is losing more than R100 billion each year – around 10% of South Africa’s total tax income – from people and businesses dodging tax.
To address this problem, Davis said SARS should ramp up lifestyle audits for wealthy South Africans.
A good starting point is to use Natis, which maintains a registry of cars in the country, and look at people who own expensive luxury vehicles and supercars.
“If you have a R3 million Ferrari but are only reporting R100,000 in taxable income, I think SARS is entitled to knock on your door and ask you to explain,” he said.
He added that he would like proper lifestyle audits of all people who are accused of corruption at places like the Zondo Commission.
“The Al Capone technique is the best way to stop corruption. If we can do that, I can assure you that we will bring people to book.”