AI is making headline news right now, and it’s being put to good use by the South African Revenue Service to pinpoint tax dodgers and anomalies in tax submissions. The best thing you can do to stay ahead of SARS’s IT tech systems is to ensure your tax submission adheres to the latest tax laws and guidelines. Otherwise, you or your business could be the next victim of AI.
Artificial Intelligence spots tax errors
SARS is using Artificial Intelligence (AI) to identify false submissions based on a model that identifies a pattern of tax evasion and highlights probable deceptive returns with great accuracy. High-speed cross-referencing abilities mean that SARS can quickly and efficiently uncover if taxpayers mistakenly (or deliberately) hide details like shareholding on their tax submissions.
3rd party data exposes hidden holidays and more
In addition to AI, SARS also accesses third-party systems like property and vehicle registries that highlight inconsistencies – like a taxpayer that submits a modest tax return – while third-party data reveals that they recently went on an exotic holiday, or bought a luxury vehicle. In addition, SARS is now capable of seamlessly sharing data with authorities all over the world and can track hidden income offshore that should be declared under South Africa’s tax laws.
Ignorance and bad bookkeeping are not an excuses
What’s even more worrying for many businesses that haven’t maintained their accounts and whose books are in disarray is the fact that the Income Tax Act now views taxpayer negligence (even if it is unintentional) in the same light as tax evasion. Ignorance is no longer a screen that taxpayers can hide behind. Some negligent errors or omissions on your business’s tax returns may now lead to criminal prosecution, with a fine or imprisonment of up to two years as a result.
In the past SARS had to prove intent – that the person or business was wilfully/intentionally omitting this information – however, this is no longer the case. Some very common errors that may now lead to formal prosecution include:
- Failure to register your details with SARS or to notify them of any changes to your details.
- Failure to appoint a representative taxpayer or to notify SARS of such appointment or a change in representative taxpayer.
- Failure to submit a return when required to do so.
- Failure to retain all relevant substantiating records.
- Failure to provide any information as and when requested by SARS to do so.
- Failure to appear and comply when you are requested by SARS to attend a meeting or a hearing in order to give evidence.
- Failure to comply with a directive or instruction from SARS.
- Failure to disclose any material information to SARS or failure to provide SARS with any notification as required under any tax act.
- You are notified by SARS to pay an amount on another taxpayer’s behalf in settlement of tax debt and you fail to do so.
Submit your tax return with confidence
With the new tax laws and SARS’s advanced technology, businesses need to educate themselves on how SARS’s new technology can expose possible business negligence. They also need to be completely transparent in their declarations and deductions.
For expert assistance with your bookkeeping and submission of your tax returns, speak to our professional tax team today