Welcome to tax year 1984. Okay, we’re not in the clutches of George Orwell’s totalitarian, brainwashed society just yet. But, for South African taxpayers, his novel’s depiction of mass surveillance by the state is approaching like a speeding bullet.
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.
Read: Calls for another tax and exchange control amnesty to help close tax gap
Anyone hiding their undeclared wealth within digital coffers will find refuge in them no more. The canary in the coal mine has died. It’s time to come clean or face the consequences.
Enforcement for everyone
Sars has been promising stricter enforcement for years. With increasing frequency, they’ve started demonstrating how true to their word they keep, tightening the net on non-compliant taxpayers across the spectrum.
Won or lost, Sars’s court battles with big names like South African Breweries, Coronation Fund Managers, and Sasol, among others, have been splashed all over the media. The exposure of tax and Vat fraud worth millions has put perpetrators in prison, with Sars bearing its sharp teeth more than ever.
Read:
Two-pot withdrawal applications total R4.1bn so far, says Sars
A collective sigh of relief after Coronation case
Tax incentives under fire again
However, it’s not just big business and kingpins who need to worry. Now, 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. Need proof? See exhibit A and exhibit B below:
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.
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, which 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, which could expose, for example, those double-dipping into the social grant system and tax rebates.
The Sars Commissioner again echoed this sentiment 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.
Read: When an influencer becomes a Vat vendor
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, 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 will 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 “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 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.
Thomas Lobban is a legal specialist at Latita Africa.
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All this fancy technology and bravodo, and yet the taxi industry is dodging tax worth billions everyday in broad daylight. A simple threat to the assessor’s life does the trick and it simply means that the rest of us has to pay more.
155
Not to mention the tabacco and illegal cigarette industry which would be a breeze to tackle for taxes however the problem is that you first need to want to. This elusive trait is sorely lacking for fear of exposing the elite.
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Efficient AI, you say? I, a pensioner, was slapped last year with an extra R 750 000 “undeclared rental income”, R 250 000 tax + R 15000 penalties on this “underdeclariation.” My husband and I had lived in primary home A, no tenants, sold and moved to home B, where we lived alone, new primary residence. When they had to concede this was rubbish, I had to explain my “non declaration of rent” on every single property they could find I have ever owned and sold in the past 40 years, mosty unbuilt erven. Efficiency, idiocy or malice? They had to concede it was all fiction and dropped the case. But guess what, on this year’s assessment they still demand the R 15 000 penalty generated on this wholly fictional “underdeclared income”. SARS is still a mess, now only with added malice towards the honest people already paying taxes. They shy away from the shiny shoes and the Breitling watches and cash under the mattress.
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A bunch of clowns in the SARS circus. Also had to struggle with them to get money that they took from my annuity payout when the error was on their side.
Now I got a letter of demand without an explanation. Three emails to them without a reply.
50
moneyweb, what is your cut for publishing a bangmaak article like this?
all aimed at the mostly defenseless garden variety taxpayer?
who will increasingly rather err on the save side.
2 000 000 taxpayers X R1 000 = R2 000 000 000 xtra income
xtra tax on the above at 40% = R800 000 000
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In money terms, by FAR the biggest tax leakage in SA is inter-company charges between SA entity and a related party PO Box in a tax haven. Solution : no tax deduction in SA unless foreign jurisdiction taxes foreign income at at least 20%
Second biggest, probably middleman / agent schemes on imports and exports. So an entity (on fees or margin) between the real foreign exporter/importer and real SA importer/exporter respectively. Probably hard to nail unless can trace the beneficial ownership or scare people with sworn statements?
Third biggest, probably close race between taxis and tobacco. I cannot understand how those sectors recycle their cash income to be available in other formats useful for the scale that must be involved being billions per month. The faster we make physical cash an illegal payment mechanism, the better. Cash between parties can disappear entirely for any transaction over R5000, cash deposits into bank accounts leave a nice trail.
The tax leakage from improper travel claims, home office claims, undeclared rentals, cash transactions, etc by individuals is peanuts in my opinion. Nowadays individuals would battle to hide bank accounts, broker accounts – whether in SA or foreign. The US rules about FATCA compliance mean that for ABCD Bank, hiding beneficial ownership for a client is not worth losing US banking privileges over. Johnny can have a secret bank account with ABCD Bank but increasingly, that bank account can transact with almost nobody else.
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Please just sought out your Call Centre . This talk of AI is annoying when you can’t even answer the phone . Edward when you get to the office tomorrow phone your call centre number before you have coffee . This will enlighten you no end . . If u don’t have the number it’s 0800 007 277 .
51
Still I do not see reports on Super SARS’ actions on the list of names easily extracted from the Zondo Commission Report. Or have all those mentioned been checked and all proven to be fully tax compliant?? I wonder – too sensitive?, too scared? or maybe simply disinterested because it’s too much hard work? SARS spokespeople / journalists I thought would have jumped on this. Oh well. Much easier to go and bully the ordinary law abiding Joe Citizen I guess. Not much effort in writung about how scary SARS is becoming. No end to these type of articles recently.
54
SARS, the curse on South Africa, legalised mafia style to extort money from the working class. Zondo-named politicians laughing their backsides off because of a malfunctioning judicial system, and SARS using it to their dishonest benefit. Rest of world go cashless, here we are forced to use cash due to the regime’s big brother mentality.
29
The best way, it seems, it to financial emigrate and deregister for tax in SA.
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