Wake-up call for taxpayers in South Africa

 ·8 Apr 2024

Tax experts warn that the gloves are off for tax collection in South Africa, with the national Revenue Service (SARS) now in full swing with its artificial intelligence- and machine-learning-driven collection methods.

This means that the taxman has the backing of advanced technology to do the heavy lifting of cross-examining tax affairs, leaving little to no room for even basic mistakes.

Tax Consulting SA said that announcements from SARS in the past week have made it clear that the room for error in tax submissions is diminishing and that taxpayers will find themselves facing very expensive tax mistakes if they don’t take the matter seriously.

Specifically, the message from SARS about its 2024 compliance programme should catch the attention of anyone dealing in tax affairs, it said.

According to SARS: “The Compliance Programme uses data, artificial intelligence and machine learning algorithms to successfully counter criminality and willful non-compliance.”

This is a signal that SARS has caught up to non-compliant taxpayers, and should be a point of concern for them, Tax Consulting said.

“As a criminal attorney, you often see that look in someone’s eyes when they have been arrested and know they are in deep trouble now and their life has forever changed in an instant. The same happens with many taxpayers when they, for the first time, see a real SARS Audit and some deep penetrating questions.

“We are not talking about taxpayers who boast they have been ‘audited’ by SARS each year and have a ‘tax clearance’ certificate. The more assured they come, the harder they fall. When you have any complexity to your financial affairs or unexplained wealth, a proper SARS tax audit changes you for the rest of your life.

“SARS has befriended Artificial Intelligence to do the heavy lifting,” the group said.

The tax group showed an example of a detailed audit letter, where SARS showed that it had a “deep degree of understanding” about the taxpayer’s financial affairs.

The questions are direct but also vague, which Tax Consulting said leaves very little room for taxpayers to move.

The questions include:

  1. “Clarify your involvement with…”
  2. “Submit proof of sale for…”
  3. “Submit 12 months’ bank statement from all related accounts…”
  4. “Highlight all credit deposits with a description for all accounts”
  5. “Reconcile all your income … with your declaration made to SARS. All bank accounts”
  6. “List all your assets and liabilities ; Business and Private …”

“It is evident that SARS is using the cross-referencing of data to investigate taxpayers. The level of detail and sophistication showcased in the document necessitates a heightened standard of diligence.” Tax Consulting said.

However, while SARS’ framing of the technology is to catch out tax dodgers and evaders, Tax Consulting warned that even compliant taxpayers can get caught up the chase.

The group said that all indications are that SARS is moving and working hard to fulfil its mandate and collect all taxes due – and with the use of AI, compliant and non-compliant taxpayers will come under the same level of scrutiny.

“Taxpayers will have to become more proactive and diligent. The emergence of AI-driven investigations means that inaccuracies or discrepancies will not be overlooked. SARS’ enhanced capabilities demand meticulous record-keeping and adherence to regulations,” the group said.

Read: SARS is coming after South Africa’s rich – as they try to rush billions out of the country

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