South African taxpayers are going through a brand new actuality as SARS ramps up its utilization of artificial intelligence (AI) to implement tax compliance with unprecedented precision.
"SARS isn’t just using AI to become more automated or efficient, but to crack open the private financial affairs of taxpayers with startling efficiency," says Thomas Lobban, Legal Specialist at Latita Africa.
Any individual hiding undeclared wealth in digital accounts will see refuge no extra. The warning signs are very clear: it’s time to return thoroughly clean or deal with the results.
Enforcement for everyone
SARS has long been promising stricter enforcement for some time. With growing frequency, they’ve started out demonstrating how accurate for their phrase they preserve, tightening the net on non-compliant taxpayers through the spectrum.
Won or lost, SARS’ court battles with massive names like South African Breweries, Coronation Fund Managers and Sasol, among the some others, are already splashed everywhere in the media. And also the exposure of tax and VAT fraud really worth millions has set perpetrators in jail, with SARS bearing its sharp teeth more than ever.
Nevertheless, it’s not simply major business and kingpins who have to have to fret. Now, we’re seeing SARS hold administrators individually responsible for their corporation’s tax debt. Or, it’s infiltrating financial institution accounts to check why taxpayers’ deposits increase around a lot more than their declared income.
SARS AI and vision for the future
“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,” says Lobban.
Don’t think for a minute that SARS is just fiddling with AI. It’s wrong to underestimate the predator hunting you.
Speaking recently at a Public Economics Forum , Commissioner Edward Kieswetter revealed SARS had used AI to detect over R10 billion in invalid refunds, and could now complete an assessment in under seven seconds.
These processes depend very much on access to third party data that is becoming more readily available to SARS every year - probably even more so in the future. For example, SARS has been making big strides towards the digitalisation of VAT (think “e-invoicing”).
Kieswetter said SARS strongly advocates a unique digital identity for every individual and business that could expose, for example, those double dipping into the social grant system and tax rebates. This sentiment was again echoed by the SARS Commissioner at the 2024 Annual Tax Indaba hosted by the South African Institute of Taxation in September.
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.
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.
Voluntary disclosure or bust
For those with hidden wealth, the best way out may be through SARS’ voluntary disclosure programme (VDP) – and the sooner the better. The VDP is an amnesty that allows taxpayers to come clean about undeclared income, avoid criminal liability and have penalties either scrapped or substantially reduced.
It’s not a free pass, though, as the outstanding tax and interest often needs to be paid over to SARS within one week after the process has been completed. In addition, it’s typically an invasive process that demands complete transparency, documented proof, and a verifiable explanation for the behaviour behind the non-compliance.
For these reasons, it might be tempting to enter a wait-and-see pattern, but that’s just exacerbating the problem. When SARS eventually does raise an adverse finding, or even just notifies you of an impending or potential audit, VDP will be off the table and criminal charges could potentially apply. And while you wait, sars efiling the interest compounds uncapped, making settlement even more difficult as time goes by.
Tax and legal assistance
It’s best to approach a tax legal expert with strong experience in SARS’ VDP and internal systems as soon as possible. A tax legal specialist firm should offer complete client confidentiality and can walk you through the process before you ever approach SARS. They’ll also help you calculate your tax liability beforehand and set out a full roadmap towards compliance, making it clear how you should proceed.
That way, you’ll gain valuable time to plan how you’ll raise funds to pay the tax debt. This is critical as payment plans and debt reduction are severely limited in the context of a VDP. In the recent case of Commissioner for SARS v Medtronic International Trading S.A.R.L. 86 SATC 158, the Supreme Court of Appeal confirmed that a taxpayer cannot have their sars “bread buttered on both sides” by obtaining a remission of interest after successfully concluding a VDP application
Can’t run, can’t hide
With SARS exploiting AI and third-party data like never sars tax return before, there’s little chance of hiding undeclared wealth for much longer. So, it’s time for 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,” says Lobban.