  South African taxpayers are facing a new reality as SARS ramps up its use of artificial intelligence (AI) to enforce tax compliance with unprecedented precision. "SARS isn’t just using AI to become more automated or efficient, but to crack open the private financial affairs of taxpayers with startling efficiency," says Thomas Lobban, Tax Legal Specialist at Latita Africa.
Anyone hiding undeclared wealth in digital accounts will find refuge no more. The warning signs are clear: it’s time to come clean or face the consequences. Enforcement for everyone SARS has been promising stricter enforcement for years. With increasing frequency, they’ve started demonstrating how true to their word they keep, tightening the net on non-compliant taxpayers across the spectrum. Won or lost, SARS’ court battles with big names like South African Breweries, Coronation Fund Managers and Sasol, among others, have been splashed all over the media. And the exposure of tax and VAT fraud worth millions has put perpetrators in prison, with SARS bearing its sharp teeth more than ever. However, it’s not just big business and kingpins who need to worry. Now, we’re seeing SARS hold directors personally liable for their company’s tax debt. Or, it’s infiltrating bank accounts to check why taxpayers’ deposits add up to more than their declared income. Need proof? See exhibit A and exhibit B below: SARS AI and vision for the future “SARS doesn’t necessarily have the auditing workforce to review such huge volumes of data, suggesting that it's flexing its AI and machine learning capabilities to get the job done,” says Lobban. Don’t think for a minute that SARS is just fiddling with AI. It’s wrong to underestimate the predator hunting you. Speaking recently at a Public Economics Forum[1] , Commissioner Edward Kieswetter revealed SARS had used AI to detect over R10 billion in invalid refunds, and could now complete an assessment in under seven seconds. These processes depend very much on access to third party data that is becoming more readily available to SARS every year - probably even more so in the future. For example, SARS has been making big strides towards the digitalisation of VAT (think “e-invoicing”). Kieswetter said SARS strongly advocates a unique digital identity for every individual and business that could expose, for example, those double dipping into the social grant system and tax rebates. This sentiment was again echoed by the SARS Commissioner at the 2024 Annual Tax Indaba hosted by the South African Institute of Taxation in September. Imagine all your financial activities being branded to identify you as the sole actor behind them. Perfectly traceable, bundled, ordered and analysed by AI to reveal not just what you earn but how you live … and what you’re hiding. Such a future is approaching rapidly, with SARS showing no sign of slowing down. And its cascading successes in this regard only serve to add more fuel to the fire. Voluntary disclosure or bust For those with hidden wealth, the best way out may be through SARS’ voluntary disclosure programme (VDP) – and the sooner the better. The VDP is an amnesty that allows taxpayers to come clean about undeclared income, avoid criminal liability and have penalties either scrapped or substantially reduced. It’s not a free pass, though, as the outstanding tax and interest often needs to be paid over to SARS within one week after the process has been completed. In addition, it’s typically an invasive process that demands complete transparency, documented proof, and a verifiable explanation for the behaviour behind the non-compliance. For these reasons, it might be tempting to enter a wait-and-see pattern, but that’s just exacerbating the problem. When SARS eventually does raise an adverse finding, or even just notifies you of an impending or potential audit, VDP will be off the table and criminal charges could potentially apply. And while you wait, the interest compounds uncapped, making settlement even more difficult as time goes by. Tax and legal assistance It’s best to approach a tax legal expert with strong experience in SARS’ VDP and internal systems as soon as possible. A tax legal specialist firm should offer complete client confidentiality and can walk you through the process before you ever approach SARS. They’ll also help you calculate your tax liability beforehand and set out a full roadmap towards compliance, making it clear how you should proceed. That way, you’ll gain valuable time to plan how you’ll raise funds to pay the tax debt. This is critical as payment plans and debt reduction are severely limited in the context of a VDP. In the recent case of Commissioner for SARS v Medtronic International Trading S.A.R.L. 86 SATC 158, the Supreme Court of Appeal confirmed that a taxpayer cannot have their “bread buttered on both sides” by obtaining a remission of interest after successfully concluding a VDP application Can’t run, can’t hide With SARS exploiting AI and third-party data like never before, there’s little chance of hiding undeclared wealth for much longer. So, it’s time for taxpayers to take the plunge and get their house in order. “The evidence that SARS is serious about enforcement is there for anyone to see, so delaying the inevitable is just courting disaster,” says Lobban. ENDS https://www.dailymaverick.co.za/article/2024-09-04-treasury-sars-leverage-ai-to-improve-efficiencies-and-outcomes/
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 South Africa’s Financial Sector Conduct Authority (FSCA) recently approved the license applications of 63 more crypto asset service providers (CASPs). They are therefore now authorised to act as financial services providers.
This brings the total number of approved CASPs to 138 of the current 383 applications. The good news is that this forms an important part of South Africa’s project in escaping its grey-listed status with the Financial Action Task Force. However, when it comes to taxpayers maintaining their compliance with SARS, many crypto traders remain none the wiser about the correct tax treatment of their investments. “In some ways, SARS and National Treasury expect crypto-active taxpayers to remain compliant while the rules around crypto are still abstract,” says Thomas Lobban, Tax and Legal Sr. Associate at Latita Africa. According to Lobban, authorities are perceived by many to be putting the cart before the horse as they focus on enforcement first but much less on clarifying crypto taxation mechanics. CASP regulation takes hold Lobban says that Latita Africa fully supports the regulation of the crypto economy, which promises to:
As CASPs start to implement know-your-customer processes, once anonymous usernames are being replaced with detailed customer records. “The warning in this is that not only will current and future crypto trades be exposed to SARS’ data collection efforts, but also historic untaxed transactions previously protected by that anonymity,” says Lobban, “While this is certainly nothing new, as SARS has requested taxpayer information from CASPs before, this information will now be much more readily available.” It remains to be seen whether SARS will apply its formidable AI technologies to crypto trader records en masse or if it will initially focus on high-value targets only. Complex treatment South African law does not recognise the term “cryptocurrency”. Instead, crypto is seen as a digital asset (“crypto asset”), not unlike property or stock market shares. Its basic tax treatment depends very much on how it is acquired and disposed of, being revenue from a trade stock sale, income earned from employment, capital gains on disposal, a windfall from a competition, or some other source. And it is taxed accordingly. But it’s not that easy to determine a crypto asset’s tax status. “If I buy and sell crypto in the short term, it’s not necessarily income, and if I hold it over a long period, its disposal is not necessarily counted as capital,” says Lobban. In addition, crypto taxation can be a more multilayered tax experience. For example, loans leveraged in crypto, or interest earned in the form of crypto, still leave key questions open-ended. Many of the tools currently available to taxpayers, for calculating their profits and losses in crypto for tax purposes, still miss the mark in insidious ways. As another example, exchanging rand-bought Bitcoin for an NFT and later converting the NFT back to Bitcoin is not a passive transaction just because rands are not involved. Both are considered to be assets and, by law, the mere exchange of assets triggers tax implications at that instant. They are therefore required to pay tax in rands at the prevailing exchange rate in the tax year the transaction was completed, even if they never cash in the Bitcoin. This goes against the commonly held but mistaken belief that tax is only assessed when the crypto asset is converted back to fiat. Crypto confusion Lobban says that SARS and National Treasury should focus more on providing further clarity and removing the ambiguity in the tax laws applicable to crypto assets, to create certainty around how different classes and instances of crypto assets will be taxed. And it should endeavour to better educate crypto traders on these treatments. “This is not a rare occurrence. Notably, for traditional stock trading, section 9C of the Income Tax Act generally deems shares held for more than three years as being subject to CGT on their disposal, not income tax,” says Lobban. “This type of clear direction is what crypto traders need to remain tax compliant and authorities should be driven to provide this as much as they are in the equally important imperative of enforcing the current laws.” ENDS MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Latita Africa please visit: Website: https://latitaafrica.com/ LinkedIn: https://www.linkedin.com/company/latita-africa/?originalSubdomain=za Facebook: https://www.facebook.com/latita.africa/ X: https://twitter.com/latita_afric  Taxpayers increasingly view themselves as walking a tightrope from a compliance perspective, with SARS (South African Revenue Service) on one side and a daunting administrative burden on the other.
The stakes can be very high, and it does not help that the rules of engagement are always changing. When it comes to disagreements with SARS, things certainly have changed from how they used to be. Providing half answers to SARS requests, with no substantial detail, along with an inclination to try and keep important information away from SARS is now hurting more and more taxpayers. SARS is evolving, and in order to avoid friction with the taxman, taxpayers need to adapt. One of the golden rules in tax is that the onus of proof generally falls on the taxpayer. At the same time, the tax authority has become increasingly proficient and vigilant in its collection efforts. So, how do you ensure you’re not caught on the wrong end of SARS, or in the crossfire of a SARS dispute? “Prevention is certainly better than cure, when it comes to tax. But when things do go wrong, before you decide to lodge a dispute, it’s crucial to first be honest about the completeness and accuracy of your submissions – and to approach the dispute from that angle,” advises Razael Manikus, COO at Latita Africa. Common Reasons for Tax Disputes In the past, taxpayers would often point fingers at SARS for their woes. Denied their deductions and misplaced assessments, despite providing sufficient evidence, were common culprits. Now, however, the tables are turning. According to Manikus, an increasing number of tax disputes are arising from taxpayers or their accountants either submitting incorrect (e.g. nil) returns or providing incomplete to no information during SARS verification requests. “More and more, we have found disputes becoming necessary due to rushing tax return submissions through at the last minute to avoid late penalties. Many times, this is done under the impression that it will be corrected later, which is not always the case and there are many instances when no corrective steps are taken in time. Unfortunately, this only makes matters worse,” says Manikus. Becoming Tax Compliant and Resilient According to the firm, the best defence against an adverse tax assessment by SARS is a strong offense – in other words, proactive tax management. For both businesses and individual taxpayers alike, integrating tax planning and management into your financial routine is essential. Being well prepared for submissions on time eliminates the need to rush and reduces the risk of costly errors or omissions. A strategic, evidence-first approach to your tax affairs is key. “A competent tax advisor will help you develop a personal and business tax management system that keeps you compliant and resilient to adverse tax events. This should be a hallmark of your relationship with your advisor,” says Manikus. Getting the Ball Rolling SARS is not infallible. Mistakes can occur, and when they do, having a proactive stance allows you to address the issues head-on. Your first step in challenging an incorrect tax assessment is usually to submit a Request for Reasons, compelling SARS to provide definitive reason for their assessment if one has not already been given. This not only equips you with valuable information to build your case but also keeps SARS to the defined issues (i.e., reasons) later on. With an evidence-based approach, meeting the (generally 80-business-day) deadline to lodge an objection becomes a lot more manageable. Even if this deadline is missed, you can still take action up to three years later in many cases, provided you have compelling reasons for the delay. Knowing When to Hand Over Navigating the maze of the tax dispute resolution process with SARS requires more than just mere persistence or principle; it demands expertise. A diligent tax practitioner also knows that a dispute is not the only tool at their disposal. They might, for instance, recommend a (non-contentious) Request for Reduced Assessment when appropriate. Understanding the full range of mechanisms available for dealing with SARS is crucial. A qualified tax practitioner, armed with a mastery of these tools and strong legal expertise, can protect your rights throughout the process. “SARS is to be commended for its commitment to becoming a technologically advanced tax authority, but taxpayers will increasingly need specialist help to stay ahead of the compliance curve, as it remains a moving target,” adds Manikus. Staying Ahead in the Compliance Game In the world of tax compliance, staying ahead of the game requires more than just following the rules – it requires strategic planning, proactive management, and expert guidance. As SARS evolves, so must your approach to SARS engagement. In the land of the blind, the one-eyed man is king. Equally so, by taking an evidence-first approach and seeking the right expertise where necessary, you can confidently navigate this new era of tax compliance with a full view of the risks ahead of time and the means to effectively deal with them. ENDS MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Latita Africa please visit: Website: https://latitaafrica.com/ LinkedIn: https://www.linkedin.com/company/latita-africa/?originalSubdomain=za Facebook: https://www.facebook.com/latita.africa/ X: https://twitter.com/latita_afric  If you are in debt with SARS or received a notice of final demand, there’s no need for panic, says Thomas Lobban, Tax Legal Specialist at Latita Africa.
"You’re not the first and you won’t be the last; there are generally honest ways to get through this without taking big hits," he says. Which is exceptionally good news now that SARS is upping its debt collection game to never-before-seen levels of efficiency. A word of advice The first and most important step is for you to take action immediately. "The last thing you want is to stay shell shocked and just stand there like a deer in headlights," advises Lobban. "You must do something proactive right now." Because if you don’t, you can be sure SARS will. That includes collecting the tax debt from third parties, like your employer, your bank, your investment broker or anyone else who owes you a buck. SARS is also empowered, where necessary, to attach your assets in order to collect on the tax debt. So, tick-tock, time’s a-wasting. Clean the slate, bottom up The second step might simply be to admit that if you’re in trouble, you’ve either been trying to do it all yourself - and you’ve been getting it wrong. Or, you’ve been receiving poor advice and bad service from a tax advisor who’s not up to speed on tax or tax law themselves. You might even “know a guy”, and it goes belly-up (or worse, nowhere at all). That doesn’t mean you should blame yourself, only that you acknowledge it’s time for a radically new approach – working with someone who knows what they’re doing. Just recently, SARS Commissioner Edward Kieswetter mentioned 53 tax practitioners who remain non-compliant in their own tax affairs. This, he said, "explains, in part, how they advise their clients and why their clients are equally delinquent." Ouch. "There can often also be a correlation drawn between how well you resolve your tax debt and the competency of the tax advisor who mediated with SARS on your behalf," says Lobban. So, above all, perhaps don’t try to fix the problem using the same party that got you into it in the first place. Your options There are really only two conditions that make a difference: SARS got their sums or facts wrong, or SARS got their sums and facts right. If they are wrong, you can work with your new tax practitioner to dispute their assessment and bring the tax debt back to reality. If SARS is right, then you may face a tax debt that is onerous or downright unaffordable. However, you still have two saving graces at your disposal. Defer the debt First, you can negotiate with SARS to defer the debt, which means developing a payment plan that allows you to pay it off in reasonable instalments. Deferment is also handy in some cases where you intend to dispute the assessment, because of SARS’ "pay now, dispute later" policy – it can cushion you from an immediate and possibly unaffordable full settlement. Compromise the debt Second, if you qualify, you can enter into a tax debt compromise agreement with SARS in terms of section 200 of the Tax Administration Act. This allows you to reduce your tax liability, sometimes substantially. Be aware, though, that the compromise process involves an invasive assessment, requiring SARS to dig deeply into every aspect of your finances and personal wealth. And a final settlement must still be fair to the South African fiscus. Get the law on your side Any of these situations are best handled through a tax advisor with legal muscle to spare and a firm grasp of SARS’ often confusing and complex debt resolution processes. This is especially the case where there are other potentially problematic issues the taxpayer is facing. Many tax practitioners – especially newly minted ones – don't usually have legal expertise or the experience to negotiate effectively with SARS in sensitive matters. "But, rest assured that how well your practitioner deals with SARS will likely determine how beneficial the outcome is for you and how little stress you ultimately have to suffer," says Lobban. Now go beat this thing! ENDS MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Latita Africa please visit: Website: https://latitaafrica.com/ LinkedIn: https://www.linkedin.com/company/latita-africa/?originalSubdomain=za Facebook: https://www.facebook.com/latita.africa/ X: https://twitter.com/latita_afric |
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