The South African Revenue Service (SARS) is now turning to artificial intelligence and data collection on a mass scale to automatically ensure tax compliance – approaching third parties, including financial institutions and employers, say legal experts from Leap Group.
SARS is also currently working on automating tax return submissions for all taxpayers in the country, the group added.
“This means that more taxpayers may be eligible for auto-assessments, which are already in place for taxpayers who only receive income from sources where taxes were already withheld, and IRP5s and similar documents are available to SARS.”
In 2021, the revenue authority issued auto-assessments for taxpayers, which involved SARS pre-populating taxpayers’ tax returns; nowadays, instead of taxpayers having to accept the auto-assessment for submission, SARS will automatically submit the assessment and notify the taxpayer via SMS.
Leap Group said that the development of technology and agreements between SARS and third parties could result in a larger percentage of taxpayers being auto-assessed, including provisional taxpayers.
The push for more tax compliance through having a convenient system for taxpayers has been stressed multiple times by the commissioner of the tax authority, Edward Kieswetter.
SARS has made it clear that the primary objective of automating the tax return submission process is to streamline the process for taxpayers, said Leap Group.
The company added that it would also help the taxman conduct more precise returns with a reduced risk of errors.
Auto assessments will also free up resources at SARS to allow them to focus on more complex tax issues and audits, said Leap Group.
“SARS will utilise technology as far as possible, one method is through data matching, where SARS uses technology to compare the information provided by taxpayers with other sources of data, such as financial institutions and employers.”
“This process allows SARS to identify discrepancies in income and other financial information. Third parties may include foreign financial institutions and revenue services to avoid situations where taxpayers are not paying taxes in any country,” said Leap Group.
According to Leap Group, another method is artificial intelligence, which can be used to analyse large amounts of data and identify patterns and irregularities to pick up on potential tax evasion or fraud.
The stern shift toward using technology to its full capacity has reaped the rewards for SARS.
Kieswetter has confirmed that SARS has millions of records of South African taxpayers and their foreign assets, Leap Group said.
“Additionally, SARS’s handover of 97 cases to the NPA in the past year, resulting in a conviction rate of 98% and over 75 years of prison time, demonstrates their commitment to improving tax compliance and reducing the tax gap.”
Continued use of advanced analytical tools and collaboration with other entities will undoubtedly further enhance SARS’s ability to identify and prosecute tax evaders, ultimately improving tax compliance in South Africa – making it increasingly important for taxpayers to be on the right side of the law, said Leap Group.
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