SARS Announces Crackdown On Transfer Pricing

by Robert Lee, Tax-News.com, London

17 October 2001

Following the establishment of its crack team of tax evasion specialists earlier this year, the South African Revenue Service has announced that its new office, opened just outside Johannesburg, will be concentrating on wealthy companies and individuals in South Africa, looking at transfer-pricing mechanisms, derivative financial structures, and payments to senior executives.

Despite criticisms that the agency is reaching for 'low growing fruit' by picking on the easily visible corporate sector, the SARS is excited by the progress that has been made so far- according to Revenue spokesperson Fani Zulu, the new Woodmead Centre has already collected over R200 million in tax. 'The work so far has only reached the fringes of the practice of transfer pricing, but we are already seeing positive results,' she enthused.

The autonomous SARS is finding it easier than ever to recruit talented and qualified staff since it replaced the old government run Inland Revenue department, as the compensation packages which it is permitted to offer are no longer tied to civil service pay scales. In fact, in a reversal of fortunes, the revenue department is now poaching staff from the private sector, rather than the other way around.

Although this flood of bright young things has undoubtedly been beneficial to the agency, and has reportedly increased revenue collection, the changes have not been welcomed by all. Quoted in the South African Financial Mail, an unnamed victim of the newly enthusiastic agency grumbled: 'They will send a peremptory request for documentation, give you a deadline that has almost expired by the time you get the letter, and then threaten to send a summons if you don't meet the deadline.'

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