The SARS Announcement on 02 April 2024, may look, for the untrained eye, like standard narrative. As a tax attorney in day-to-day practice, there are daily examples of very expensive tax mistakes. Tax practitioners and South African taxpayers are well advised to switch to a moment of seriousness; and take note of the following with discernment –
“The Compliance Programme uses data, artificial intelligence and machine learning algorithms to successfully counter criminality and willful non-compliance.” (emphasis added)
Striking Realisation that SARS have Caught Up
As a criminal attorney, you often see that look in someone’s eyes when they have been arrested and know they are in deep trouble now and their life has forever changed in an instant. The same happens with many taxpayers when they for the first time see a real SARS Audit and some deep penetrating questions. We are not talking about taxpayers who boast they have been “audited” by SARS each year and have a “tax clearance” certificate. The more assured they come, the harder they fall. When you have any complexity to your financial affairs or you have unexplained wealth, a proper SARS tax audit changes you for the rest of your life. SARS has befriended Artificial Intelligence to do the heavy lifting.
Example of SARS Artificial Intelligence
Here is an example from 18 March 2023 where SARS’ various technology advances has pulled together a list of questions which suddenly reprioritises your life -
How Comfortable are you with these SARS Questions?
The questions show clearly that SARS has a deeper degree of understanding of your financial affairs. You are then asked very direct questions, but which is also a bit vague, like a good cross examiner if you were on trial. Answering the following gives you little room to move –
- (Question 5): “Highlight all credit deposits with a description for all accounts”
- (Question 6): “Reconcile all your income … with your declaration made to SARS. All bank accounts”
- (Question 7): “List all your assets and liabilities ; Business and Private …”
It is evident that SARS is using the cross-referencing of data to investigate taxpayers. The level of detail and sophistication showcased in the document necessitates a heightened standard of diligence.
Handling Tax Complexities
We all like to keep things simple, but unfortunately the world is complex and SARS must fulfil its mandate to collect all taxes due. Making it easy for non-compliant taxpayers is not part of the SARS mandate. SARS and AI do not know who the compliant taxpayer is and who are the tax evaders - so the innocent also gets the same scrutiny.
Taxpayers will have to become more proactive and diligent. The emergence of AI-driven investigations means that inaccuracies or discrepancies will not be overlooked. SARS' enhanced capabilities demand meticulous record-keeping and adherence to regulations.
The tax practitioner plays a critical role in this process. We increasingly see that this now comprises more than one firm or professional. There needs to be someone strategic, who deals with daily SARS complexities; an attorney ensures the benefit of legal privilege on your taxes; and the registered accountant or chartered accountant is essential for the complex numbers and reconciliations. Most importantly is the tax practitioner, who as your trusted advisor understands your history and future objectives.
Written by Roxanna Naidoo, Tax Attorney at Tax Consulting SA