Flowing from the success of SARS’ segmentation model, such as the High-Wealth Individual Unit and Crypto-Asset Revenue Augmentation Unit, SARS have now introduced “Social Influencers and the Gig Economy”.
SARS’ New Gig – Strategic Objectives Take Centre Stage
This strategic move aligns wholly with SARS’ mandate to collect all revenue that is due to the state. Noting that SARS wrote-off R36,5 billion in taxes last year, there is a deficit which needs to be filled. Initially, it was hoped this would be aided by an increased VAT rate, but we all know how that went. Increasing income tax brackets could be another consideration, but with marginal rates as high as they are, SARS has to look to alternate taxpayer segments to fill any fiscal deficits.
Social influencers generate income through various means such as sponsorship agreements and product collaborations. Notably, SARS asserts that all forms of compensation, whether in cash or kind (including products and travel), must be declared as taxable income under South African tax laws. Influencers are urged to voluntarily disclose their earnings accurately to avoid compliance issues, no matter how they are remunerated.
Practical Implications
To assist social influencers in meeting their tax obligations, SARS has committed to providing targeted resources, such as:
- Educational materials and videos
- Workshops and seminars designed to clarify tax responsibilities
SARS Commissioner Edward Kieswetter emphasised the agency’s desire to collaborate with influencers, ensuring they have clarity regarding their obligations and a positive taxpayer experience. It is essential for influencers to recognise that their non-traditional income sources do not exempt them from tax regulations.
The flip side of the coin is where influencers fail at full voluntary compliance, SARS’ other strategic objective of making non-compliance hard and costly, kicks in!
What this means – SARS using data driven insights to augment man-power efforts in detecting non-compliance, often resulting in a 5-year Audit on the chosen taxpayer, and culminating in understatement penalties of up to 200% being imposed on the offending taxpayer.
SARS Notices In Your Mailbox
Taxpayers who have been active in the influencer space, or gig economy, and have not declared their income, in cash or otherwise, are encouraged to engage with specialist tax attorneys to ensure that their compliance requirements are met.
Such professionals can aid taxpayers with Voluntary Disclosures, assessing their tax liability based on historical transactions and assist to regularize the treatment of income, before SARS initiates any audit proceedings. All this, while maintaining legal professional privilege (where engaging with a tax attorney) and mitigating the exposure to risk.
This recommendation is made off the back of numerous taxpayers who have received Audit Notices and Letters of Final Demand, due to SARS’ improved compilation and interpretation of data driven insights, and system modernizations.
This clearly demonstrates the revenue authority’s intention to send a message to taxpayers – comply, or be made to comply.
Clearing up a common misconception – income from foreign sources / platforms, is not invisible to SARS, and where a taxpayer attempts to sweep their transactions under the rug, SARS will see this and take the necessary measures to ensure that recover what is due.
Recommendations for Social Influencers
For social influencers or those partaking in the gig economy, the following steps are recommended:
- Keep accurate records, and provide full disclosure of all income streams, including those “in kind” to comply with SARS requirements.
- Keep aside a portion of your income for the tax man – similar to a contractor.
- Utilise available educational resources from SARS to better understand your tax obligations.
- Where you have already mis-stepped, immediately consult a tax professional for guidance on income reporting and deductions associated with influencer activities, whilst rectifying historic non-compliance.
The recent expansion of SARS’ framework to include social influencers highlights the significance of adhering to tax regulations in an increasingly digital economy.
The Best Defence is a Good Offense
In order to protect yourself from being the next revenue collection headline, it remains the best strategy that you always ensure your tax affairs are kept in order, heeding SARS’ warning that non-compliance will be both hard and costly for taxpayers. Where influencers or artists find themselves in a potentially precarious position of now disclosing previously undeclared interests, or foreign / secondary income, the best practice is to seek the assistance of a tax professional, ensuring the best compliance strategy is followed.
Should you already find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate legal counsel, ensuring the necessary steps are taken, under legal professional privilege, and providing a degree of protection so you do not lose your loyal followers. In instances of potential conviction on commission of a tax offence, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax and compliance strategy is followed.
