The South African Revenue Service (SARS) says it is working hard to increase and expand the use of data to improve the integrity of outcomes and enhance its capability to detect instances of non-compliance. The tax body said it is encouraged by the early success in the latter.
Using the data from various domestic and international sources, as input into machine learning models, risk profiling and case selection, a number of trends have already been observed with positive outcomes in a number of instances – some of which were previously reported.
Examples of domestic third-party sources include banks, retirement funds, medical insurance providers, the properties deeds office, the companies register, the national register of motor vehicles, the National Treasury central supplier database, as well as the national population register, it said.
International data sources include the automatic exchange of information on South Africans with off-shore financial assets from about 100 foreign jurisdictions, as well as several mutual administrative agreements with sister organisations.
SARS commissioner, Edward Kieswetter, said that progress in respect of this strategic work includes:
- Following the success of collecting over R172 billion revenue from compliance efforts in the prior financial year, SARS in the current year has already collected R115 billion from compliance activities. Of this amount, about 33% results from the automatic risk profiling of taxpayers using data and machine learning.
- Of the previously reported 26,000 individuals with economic activity and/or assets exceeding R1 million, almost 1,000 have been identified as being involved in money laundering and other serious crimes.
- Of the initial batch of 275 individuals with assets abroad detected using the Automatic Exchange of Information (AEOI) programme, the first 50 individuals have been selected for further scrutiny in relation to assets in tax havens, with more to follow. SARS is working with the IRS in the US, utilising the Foreign Account Tax Compliance Act (FATCA), which has assisted in connecting a number of South Africans with links to the Pandora disclosures, and investments into a number of states.
- On the government procurement of PPE, SARS said its analysis of the Central Supplier Database (CSD) has highlighted large numbers of vendors who supply services to the government who are not tax complaint. Specifically, SARS identified approximately 1,900 entities, each earning more than R1-million (between March 2020 – May 2021), from contracts with the government, totalling R6.3 billion, yet are not registered as VAT vendors. A further 2,380 VAT registered vendors have filed nil returns, despite having earned collectively over R9 billion from government contracts. The work of regularising the affairs of these taxpayers is well underway. An initial R220 million additional assessments have been raised; almost R75 million fraudulent refunds prevented; with debt collection efforts in progress. In each instance, SARS also considers whether criminal prosecutions are applicable.
- Using whistle-blower reports as well as third-party data sources, SARS recently, after extensive investigative work, deployed over 90 employees to execute one of the largest search and seizure operations. This operation has identified 11 entities at 4 different sites, and 27 taxpayers for potential fraudulent disclosures in respect of a number of years. All assets have been preserved while the investigations proceed.
- The results from SARS’ Criminal Investigation efforts have yielded in excess of 70 convictions in this year alone.
“We still have a long way to go, but are encouraged that our strategic approach is beginning to show early impact,” Kieswetter said.
“SARS proceeds from the premise that most taxpayers are honest and want to fulfil their legal obligations. To these taxpayers, we will work hard to assist them by providing clarity and easing the burden of compliance.
“Those, however, who continue to defraud the tax system, must know that they do so at their own peril, as we make progress on the rebuilding and modernisation of the institution.”
“Our vision to build a smart modern SARS with unquestionable integrity is beginning to bear fruit,” Kieswetter said. “In order to deliver on its comprehensive programme and despite the financial constraints, SARS is investing 3% of its budgeted resources in its modernization programme so that it can remain abreast in a fast-changing technology space.”