The South African Revenue Service (Sars) has been given a huge injection of R3-billion to improve its technology infrastructure and artificial intelligence capabilities.

The tax authority has been nearly decimated by years of capture under former commissioner Tom Moyane, impacting on its ability to collect taxes desperately needed to fund service delivery.

The additional spending will also be used to expand and improve the use of data analytics and to participate meaningfully in global tax compliance initiatives.

“A digitalised Sars is intended to lower costs of compliance, simplify tax administration and improve collections,” national treasury says in the 2021 Budget Review.

The Commission of Inquiry into Tax Administration and Governance by Sars (the Nugent Commission) was appointed to look at the institutional damage and governance failures done to the once world-class tax agency.

In the end it made 27 recommendations to address these failures at the institution. According to treasury, Sars commissioner Edward Kieswetter has implemented 14 of these recommendations.

Spending boost

The commissioner said publicly that Sars required R800-million to address its technological and skills needs. The boost of R3-billion therefore shows a real commitment by government to restore Sars to its former strength.

Efforts in this regard have so far included the re-establishment of the Large Business Centre as well as the units focusing on litigation, compliance and integrity. The performance of the previous executive committee was reviewed, and operational policies related to Vat refunds, settlements and debt collection contracts are being amended.

Sars has also started legal processes to recover unwarranted expenditure and has handed over case files on persons identified in the Nugent Commission’s report.

The inter-agency working group on criminal and illicit economic activities has completed 117 investigations, resulting in additional revenue of R2.7-billion.

Customs and excise operations are reducing the illicit movement of goods across borders, assisted by specialised cargo scanners, resulting in 3 393 seizures valued at R1.5-billion for the fiscal year to January 2021.

Treasury says Sars will continue its focus on consolidating wealth data for taxpayers through third-party information. This include bank accounts, and information supplied by estate agents and financial institutions. “This will assist in broadening the tax base, improving tax compliance and assessing the feasibility of a wealth tax.”

Treasury will soon publish a discussion document proposing legislative amendments to Sars’s governance. The publication of the document has been delayed due to the Covid-19 pandemic. The document outlines processes to appoint and remove a commissioner, and the establishment of at least two deputy commissioner roles as well as an executive committee.

It also considers measures to improve governance and integrity in oversight processes, including the feasibility of a governance board, an inspector-general and mechanisms to account to the minister of finance.

Tougher sentences

In recent times, several changes have also been made to the Tax Administration Act that increase the possibility of taxpayers being criminally charged for certain offences. This includes the wilful or negligent act of not alerting Sars to any changes to a taxpayer’s personal information such as a change of address.

This could result in a two-year jail sentence or a fine. The change has been introduced to ensure more success in the courts when taxpayers are being charged with non-compliance.