SARS knows you better than you think

The South African Revenue Service (SARS) is fighting a war on non-compliance, and taxpayers shouldn’t think that they can hide any information from the taxman.

Individual taxpayers, provisional and non-provisional, will be able to file their annual tax returns from 15 July 2024. From 1 to 14 July 2024, SARS will also issue auto-assessment notices for the average (non-provisional) individual taxpayer.

“This may sound like an enhancement of efficiency, but in reality, is more likely a means to eliminate low-risk taxpayer reviews, allowing SARS’ radar to home in on criminally non-compliant and affluent of society,” said Tax Consulting SA.

“With the enhanced efficiency propelled by SARS’ use of Artificial Intelligence (AI) data-driven compliance insights, “Open Season” on non-compliant taxpayers is year-round, but Filing Season presents a unique opportunity for SARS’ expert marksmen to step up.”

Despite the examples of the rich flouting tax laws and ending up in jail, the average Joe should also keep in mind that they can end up in the same hot water.

The average person may not know that they have stepped on the wrong side of SARS’s war on non-compliance, with section 234 of the Tax Administration Act providing a list of actions and inactions which constitute criminal offences.

“This list includes acts committed based on an absence of tax literacy, such as retaining specific documentary items or issuing an incomplete document to SARS,” said Tax Consulting SA.

“On the flip side, failure to commit acts, such as the submission of a tax return or notifying SARS of a change in registered particulars, may also result in criminal charges being laid against you.”

“Whilst the listed offences range from the obvious, such as pretending to be a SARS official, to the seemingly unassuming, such as submitting erroneous statements to SARS, they all carry a liability, upon conviction, of a fine or a maximum prison sentence of 2 years.”

SARS knows you better than your family

Low- and medium-income earners often believe that they hide information from SARS, but the revenue service likely knows more about your finances than your family does.

SARS also has multilateral engagements, with automatic information exchanges with revenue collection agencies worldwide.

“Although this information gathering capability has been tried and tested, the issue was a lack of manpower to effectively process and prosecute those guilty parties – the solution is SARS’ pilot AI project.”

“This AI capacity-bolstering technique has already been seen across SARS’ historic audit processes, where it is used to maintain thoroughness and accuracy while deriving data-driven insights almost instantaneously.”

“This move underscores a broader trend towards the integration of technology in tax administration, promising to revolutionize the way tax compliance is monitored and enforced.”

How to avoid SARS’s wrath

If one finds themselves in SARS’s crosshairs over non-compliance, it is crucial that they make a timely response to SARS with all the correct supporting documentation.

Those who fail this first hurdle will also have made an incorrect disclosure to SARS. They will feel additional pressure when additional assessments are raised, or final demands are received for overdue tax debts.

“The nail in the coffin is always the Understatement Penalties, capping at a bank-breaking 200% of the capital taxes due.”

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