How Sars' VAT Modernisation Project targets tax evasion in South Africa

THE South African Revenue Service (Sars)' proposed Value-Added Tax (VAT) Modernisation Project is geared to combat challenges faced by traders, businesses, and Sars, including compliance inefficiencies, the risk of errors, and tax evasion.

- JASHWIN BAIJOO

Phase 1 will entail inserting key definitions into the VAT Act, including “e-credit note”, “e-debit note”, and “interoperability framework”.

While this VAT Modernisation Project clearly aligns with Sars’ strategic objectives of making voluntary compliance easy, and noncompliance both hard and costly, the streamlined process will also benefit taxpayers, reducing reliance on time-consuming paper-based invoicing and reconciliations.

Although this particular project is still at the proposal stage, Sars has successfully implemented a number of other “Compliance Projects” and collection drives.

Sars modernisations in the age of automation

Sars’ compliance success, in this age of automation, can in part be attributed to its use of data-driven insights, derived from both South African and international sources. These system modernisations allow the revenue authority to detect any degree of noncompliance and hold the perpetrating taxpayer, and in some instances, tax aggressive advisor, accountable.

Flowing from automated processing, the data-driven insights inform Sars of all transactional records pertaining to specific taxpayers, and using AI, the “fine-tooth comb” is no longer needed to extrapolate these records into strong legal cases for noncompliance. This collaborative approach enables Sars to gain access to a comprehensive dataset, facilitating more robust evaluations of taxpayers’ financial activities.