SARS has just announced that Individual taxpayers, both provisional and non-provisional, will be able to file their annual tax returns from 15 July 2024. 

In an effort to make compliance “easy and sometimes seamless”, SARS will, between 01 – 14 July 2024, be issuing auto-assessment notices for the average (non-provisional) individual taxpayer. This may sound like an enhancement of efficiency, but in reality, is more likely a means to eliminate low-risk taxpayer reviews, allowing SARS’ radar to home in on criminally non-compliant and affluent of society. 

With the enhanced efficiency propelled by SARS’ use of Artificial Intelligence (AI) data driven compliance insights, “Open Season” on non-compliant taxpayers is year-round, but Filing Season presents a unique opportunity for SARS’ expert marksmen to step up!

Criminality of Non-Compliance

SARS has, like all strategic movers, made distinct examples of the rich and famous, flouting tax laws, and being hung out to dry, often including some serious jail-time. We all know their names, so let me not take up your time on the new prison-chef or jailhouse rock singers, but what is not common knowledge, is the average Joe on the street can land in the same hot water!

Taking it from the ground up, there are some basics you need to know to stay on the right side in SARS’ War on Non-Compliance. As an example, the man on the street is not aware that section 234 of the Tax Administration Act, provides a laundry list of actions and inactions, which constitute criminal offences.

This list includes acts committed based on an absence of tax literacy, such as retaining specific documentary items or issuing an incomplete document to SARS. On the flip side, failure to commit acts, such as the submission of a tax return, or notifying SARS of a change in registered particulars, may also result in criminal charges being laid against you.

Whilst the listed offences range from the obvious, such as pretending to be a SARS official, to the seemingly unassuming such as submitting erroneous statements to SARS, they all carry a liability, upon conviction, of a fine, or a maximum prison sentence of 2 years.

AI Aiding Data Driven Compliance Insights

A common misconception amongst low-medium income earners, is “what SARS don’t know, won’t hurt me”. Don’t make the same mistake the affluent have already learnt from – SARS, and other revenue authorities around the world, know more about your finances than your own family do.

Through on-going multilateral engagements, SARS has had in place an automatic exchange of information with scores of revenue collection agencies around the world. Although this information gathering capability has been tried and tested, the issue was a lack of man-power to effectively process and prosecute those guilty parties – the solution, SARS’ pilot AI project! 

This AI capacity bolstering technique has already been seen across SARS’ historic audit processes, being used to maintain thoroughness and accuracy, whilst deriving data driven insights almost instantaneously. This move underscores a broader trend towards the integration of technology in tax administration, promising to revolutionize the way tax compliance is monitored and enforced.

Avoid Penalties, and Prosecution

Where you find yourself, or in the case of finance professionals, your clients staring down the barrel of a non-compliance cannon, it is imperative to ensure a timeous response to SARS, with all correct supporting documentation. If you fail at this first hurdle, and you have made an incorrect disclosure to SARS, you will feel the walls closing in when those Additional Assessments are raised, or Final Demands received for overdue tax debts. 

The nail in the coffin is always the Understatement Penalties, capping at a bank-breaking 200% of the capital taxes due!

As a rule of thumb, any and all correspondence received from SARS should be holistically addressed by a by a strong multi-faceted tax, legal, and financial team – the “A-Team”. In instances of non-compliance with tax laws, legal professional privilege is a must, especially where SARS have suspicion of, or have already detected current/historic non-compliance, or “risk(s)”. 

This will not only serve in safeguarding you or your clients against being prisoners of war, but also allow for the correct legal stopper to be put in place preventing SARS from implementing aggressive collection measures. As compliance specialists in their own right, enlisting your correct A-Team ensures taxpayers and their astute practitioners will be correctly advised on the most appropriate solution to ensure full tax compliance.

Written by Jashwin Baijoo, Head of Strategic Engagement & Compliance at Tax Consulting SA