Sars goes hi-tech in battle against tax dodgers

The SA Revenue Service (Sars), using hi-tech data analysis systems, is ramping up operations against tax dodgers and targeting South Africans squirrelling away money and assets in offshore havens.

Sars explained how it was increasing and expanding the use of data and sophisticated machine-learning programs to improve and enhance its capability to detect non-compliant taxpayers.

This, it said, included ramping up collaboration with its international counterparts.

“Using the data from domestic and international sources, input into machine learning models, risk profiling and case selection, trends have already been observed, with positive outcomes in a number of instances.”

Information the taxman is using to find hidden assets includes data from SA banks, retirement funds, medical insurance providers, the deeds office, companies register, the national register of motor vehicles, the National Treasury central supplier database and the national population register.

It said data gleaned from overseas sources included the exchange of information on South Africans with offshore financial assets from 100 foreign jurisdictions.

This was obtained through mutual administrative agreements with sister organisations.

Through data collection and machine-learning programs, Sars had collected R115bn from compliance activities, of which “33% [is from] the results from the automatic risk profiling of taxpayers using data and machine learning.

“Of the previously reported 26,000 individuals with economic activity and assets exceeding R1m, almost 1,000 have been identified as being involved in money laundering and other serious crimes.”

Sars said of 275 people who had been found, through information exchange programmes, to have assets in overseas tax havens, “the first 50 individuals have been selected for further scrutiny”.

Sars is working with the US Internal Revenue Service and that country’s foreign account tax compliance Act to connect a number of South Africans with links to the Pandora Papers disclosures and investments into a number of states.

The Pandora Papers, which consisted of 11.9-million confidential records, was an investigation by the International Consortium of Journalists into murky offshore financial systems used by the wealthy. The records came from law firms, wealth management advisers and corporate agencies which helped wealthy people set up companies in low or no tax jurisdictions.

Sars said through an analysis of the government’s central supplier database of companies involved in personal protective equipment procurements, it had also uncovered a number of non-compliant businesses. These included:

• 1,900 entities that each earned more than R1m between March 2020 and May 2021 from contracts with the government, collectively totalling R6.3bn, yet none were registered as VAT vendors; and
• 2,380 VAT-registered vendors have filed nil returns, despite having collectively earned more than R9bn from government contracts.

Through its analysis Sars had raised R220m from additional assessments, with nearly R75m in fraudulent refunds stopped.

Sars commissioner Edward Kieswetter said while there was still a long way to go, “our strategic approach is beginning to show impact.

“Those who continue to defraud the tax system must know that they do so at their own peril, as we make progress in the rebuilding and modernisation of the institution.”

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