SARS leaving nowhere to hide, tax experts warn
A legal specialist at tax group Latita Africa, Thomas Lobban, says that the South African Revenue Service’s (SARS’) use of AI and high-level data processing has already lit the fuse for any would-be tax dodgers looking to escape its gaze.
According to Lobban, the taxman’s use of AI and machine learning has done more than automate tax affairs in South Africa but has also opened the door to a type of mass surveillance akin to Big Brother in George Orewell’s 1984 when it comes to private financial affairs.
“SARS isn’t just using AI to become more automated or efficient, but to crack open the private financial affairs of taxpayers and with startling efficiency,” Lobban said.
Anyone hiding their undeclared wealth within digital coffers “will find refuge in them no more,” he said. “The canary in the coal mine has died. It’s time to come clean-or face the consequences.”
Lobban noted that the revenue service has been promising stricter enforcement for years. And, with increasing frequency, it has started demonstrating how true to its word it is keeping, tightening the net on non-compliant taxpayers across the spectrum.
“Win or lose, SARS’ court battles with big names like South African Breweries, Coronation Fund Managers and Sasol, among others, have been splashed all over the media. And the exposure of tax and VAT fraud worth millions has put perpetrators in prison, with SARS bearing its sharp teeth more than ever,” Lobban said.
However, the tax expert warned that it’s not just big business and kingpins who need to worry about SARS bearing its teeth.
“We’re seeing SARS hold directors personally liable for their company’s tax debt. Or, it’s infiltrating bank accounts to check why taxpayers’ deposits add up to more than their declared income.”
In effect, the taxman has made it so there is nowhere taxpayers can hide, short of physically hiding cash.
Automation crunch
Lobban said SARS doesn’t necessarily have the auditing workforce to review such huge volumes of data, suggesting that it’s flexing its AI and machine learning capabilities to get the job done.
“Don’t think for a minute that SARS is just fiddling with AI. It’s wrong to underestimate the predator hunting you,” he said.
Speaking at the SAIT Tax Indaba this week, SARS commissioner Edward Kieswetter pointed out that the tax service has sniffed out R260 billion through “discreet compliance actions” in the 2023/24 financial year.
R100 billion of this, he said, was tied directly to the group’s automation efforts.
The commissioner has also noted that SARS can now complete an assessment in under seven seconds, meaning its revenue hunt is becoming even more efficient.
While these processes depend on access to third-party data, this is also becoming more readily available to SARS every year – and probably even more so in the future.
At the Indaba, Kieswetter said SARS is strongly advocating a unique digital identity for every individual and business in the country, which could expose, for example, those double dipping into the social grant system and tax rebates.
“Imagine all your financial activities being branded to identify you as the sole actor behind them. Perfectly traceable, bundled, ordered and analysed by AI to reveal not just what you earn but how you live … and what you’re hiding,” Lobban said.
“Such a future is approaching rapidly, with SARS showing no sign of slowing down. And its cascading successes in this regard only serve to add more fuel to the fire.”
The tax expert said that with SARS exploiting AI and third-party data like never before, “there’s little chance of hiding undeclared wealth for much longer,” warning taxpayers to “take the plunge” and get their house in order.”
“The evidence that SARS is serious about enforcement is there for anyone to see, so delaying the inevitable is just courting disaster,” he said.
Echoing tax advice from various sources, Lobban said that taxpayers should avoid trying a “wait and see” approach when SARS comes knocking.
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