Johannesburg — THE South African Revenue Service (SARS) is becoming increasingly vigorous in its dealings with delinquent taxpayers.

If SARS is not satisfied that there has been complete disclosure of income in a tax return, it may embark on a dreaded "lifestyle audit", tax analysts warn.

Ernie Lai King, head of Deneys Reitz Tax, says a lifestyle audit is a tool used by SARS when there is a suspicion that a taxpayer has not been forthright in declaring taxable income.

"SARS may obtain information about nondisclosure of taxable income from various sources, for instance a disgruntled employee, a recently divorced spouse or media reports that raise suspicion about a taxpayer," Lai King says.

Tax analysts say by now alarm bells should have gone off at SARS over recent media reports about the lavish lifestyle of African National Congress (ANC) Youth League leader Julius Malema, allegedly funded by multimillion- rand contracts with the Limpopo government and local authorities.

However, Beric Croome, a tax executive at corporate law advisers Edward Nathan Sonnenbergs, says the public will not know whether Malema is being subject to an audit by SARS because of the secrecy provisions contained in the Income Tax Act. Taxpayers' affairs may not be publicly disclosed by SARS, says Croome. Only a taxpayer may waive the secrecy provision.

Earlier this week, Congress of South African Trade Unions (Cosatu) general secretary Zwelinzima Vavi call for a lifestyle audit of politicians as a means to combat corruption.

Croome says people such as politicians and other office-bearer s should, as a matter of good governance, make disclosure of their tax affairs public.

He points out that in jurisdictions such as the US, politicians make disclosure of their tax affairs. US President Barack Obama recently disclosed several years of tax returns.

Vedika Andhee, a director in human capital and PAYE at Ernst & Young, says the government is considering revisiting secrecy provisions that limit the ability of official agencies under the umbrella of the finance minister to share information with each other.

This was proposed in the recent budget review. It will allow for some exchange of information within a legislative framework.

SARS spokesman Adrian Lackay says in the past two years more than 10000 taxpayers have been subjected to a lifestyle audit.

"SARS conducts investigative audits on individuals considered to be a high risk for tax purposes, ( using) different methods," Lackay says. "For example, a lifestyle questionnaire is used to obtain information about the lifestyle of an identified taxpayer."

The information sources for such audits are third party data from banks, insurance companies, the deeds office, the masters office, and eNaTIS (the National Transport Information System).

The answers received from taxpayers are compared with third- party information.

The risk-based investigative audits procedure was introduced in the late '90s as part of SARS's transformation programme.

SARS has a business intelligence unit, which is responsible for identifying high-risk taxpayers who need to be audited or investigated, says Lackay. They have access to data from many sources including the media and the SARS anticorruption hotline .

Lackay says if it is found that the taxpayer has evaded tax, then penalties are levied, interest is charged and additional tax of up to 200% of the evaded tax is levied.

The case is then handed to the SARS criminal investigation section which then engages the police and the National Prosecuting Authority for prosecution.

Lai King says: "A SARS lifestyle audit is not an easy experience to endure and the powers of SARS are quite staggering. SARS has the power to interview friends and associates of a taxpayer about the taxpayer's businesses and income sources, and is known to have instructed the persons interviewed not to divulge to the taxpayer that they have been interviewed."