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SARS uncovers non-compliance through data-driven risk detection

SARS uncovers non-compliance through data-driven risk detection

9 December 2021 – The South African Revenue Service (SARS), as one of its strategic objectives is working hard to  increase and expand the use of data to improve the integrity of outcomes and enhance its capability to detect instances of non-compliance. SARS is encouraged by the early success, in the latter.

Using the data from various domestic and international sources, as input into  machine learning models, risk profiling and case selection, a number of trends have already been observed with positive outcomes in a number of instances, some of which were previously reported.

Examples of domestic third-party sources includes banks, retirement funds, medical insurance providers, the properties deeds office, the companies register, the national register of motor vehicles, the National Treasury central supplier data base, as well as the national population register. International data sources includes the automatic exchange of information on South Africans with off-shore financial assets from about 100 foreign jurisdictions, as well as several mutual administrative agreements with sister organisations.

Progress in respect of this strategic work includes:

  • Following the success of collecting over R172 billion revenue from compliance efforts in the prior financial year, SARS in the current year has already collected R115 billion from compliance activities. Of this amount, about 33% results from the automatic risk profiling of taxpayers using data and machine learning.
  • Of the previously reported 26 000 individuals with economic activity and/or assets exceeding R1 million, almost 1000 have been identified as being involved in money laundering and other serious crimes.
  • Of the initial batch of 275 individuals with assets abroad detected using the Automatic Exchange of Information (AEOI) prorgamme, the first 50 individuals have been selected for further scrutiny in relation to assets in tax havens, with more to follow. We are working with the IRS in the US, utilising the Foreign Account Tax Compliance Act (FATCA), which has assisted in connecting a number of South Africans with links to the Pandora disclosures, and investments into a number of states.
  • On the government procurement of PPE, our analysis of the Central Supplier Database (CSD) has highlighted large numbers of vendors who supply services to government who are not tax complaint. Specifically, we identified approximately 1900 entities, each earning more than R1-million (between March 2020 – May 2021), from contracts with government, totalling R6.3 billion, yet are not registered as VAT vendors; a further 2380 VAT registered vendors have filed nil returns, despite having earned collectively over R9 billion from government contracts. The work of regularising the affairs of these taxpayers is well underway. An initial R220 million additional assessments have been raised; almost R75 million fraudulent refunds prevented; with debt collection efforts in progess. In each instance, SARS also considers whether criminal prosecutions are applicable.
  • Using whistle-blower reports as well as third-party data sources, SARS recently, after extensive investigative work, deployed over 90 employees to execute one of the largest search and seizure operations. This operation has identified 11 entities at 4 different sites, and 27 taxpayers for potential fraudulent disclosures in respect of a number of years. All assets have been preserved whilst the investigations proceed.
  • The results from our Criminal Investigations efforts has yielded in excess of 70 convictions in this year alone.

SARS Commissioner, Edward Kieswetter acknowledges that “we still have a long way to go, but are encouraged that our strategic approach is beginning to show early impact”. He continues to advise that “SARS proceeds from the premise that most taxpayers are honest and want to fulfil their legal obligations. To these taxpayers we will work hard to assist them by providing clarity and easing the burden of compliance. Those, however who continue to defraud the tax system, must know that they do so at their own peril, as we make progress on the rebuilding and modernisation of the institution. As we observe Anti-Corruption Day, SARS remains committed to build on its capability to enforce the law and pursue those who willfully or criminally seek to break it.”

It is advisable that those taxpayers who are non-compliant with their tax obligations engage with SARS, via the voluntary disclosure program (VDP) to determine if their disclosure would qualify for the relief provided in the VDP.  Where the disclosure does not qualify for the relief, it is strongly recommended that the taxpayer concerned regularise their tax affairs via the various mechanisms that are currently available. The VDP programme has processed in excess of 1000 applications that has resulted in R2.5 billion in revenue for the current year.

“Our vision to build a smart modern SARS with unquestionable integrity is beginning to bear fruit,” said Commissioner Kieswetter

For further information, please contact SARS at [email protected]

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