Budget 2021

SARS allocated additional R3 billion to drive digital strategy, clamp. down on non-compliance

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A digitalised SARS will go a long way in lowering costs of compliance, simplify tax administration and improve collections, says Treasury.
A digitalised SARS will go a long way in lowering costs of compliance, simplify tax administration and improve collections, says Treasury.
  • SARS will receive an additional R3 billion to bolster its digitalisation strategy.
  • The revenue service has been rebuilding its capacity to clamp down on non-compliance – digitalisation is expected to improve its efforts.
  • The finance minister will soon issue a document, in line with Nugent recommendations, to propose legislative changes to improve governance at SARS.

The South African Revenue Service (SARS) will be allocated an additional R3 billion to modernise its technology and infrastructure systems and to allow it to participate meaningfully in global tax compliance initiatives, according to the 2021/22 budget review.

Finance Minister Tito Mboweni on Wednesday tabled the national budget where he provided an update on efforts being made to capacitate the revenue service. He requested that Parliament approve R3 billion in additional spending to SARS over the medium term.

The R3 billion will aid efforts to digitalise SARS. "A digitalised SARS is intended to lower costs of compliance, simplify tax administration and improve collections," according to the budget review.

"SARS has started to deepen its technology, data and machine learning capability. It is also expanding specialised audit and investigative skills in the tax and customs areas to renew its focus on the abuse of transfer pricing, tax base erosion and tax crime," Mboweni said.

"In this coming fiscal year, SARS will establish a dedicated unit to improve compliance of individuals with wealth and complex financial arrangements. This first group of taxpayers have been identified and will receive communication during April 2021," Mboweni announced.

In the budget review Treasury indicated that SARS is focusing on consolidating wealth data on taxpayers through third-party information - which will be useful in assessing the feasibility of a wealth tax.

Commissioner Ed Kieswetter previously told Parliament that funding of R14 billion is required to help rebuild capacity and implement recommendations of the Nugent commission- which had conducted an inquiry into tax administration and governance at the revenue service.

So far, 14 out of 27 recommendations by the Nugent commission have been implemented, according to Treasury's budget review. These include the re-establishment of the Large Business Centre and other units focused on "litigation, compliance and integrity".

The unit focused on tackling the illicit economy has completed 117 investigations which have yielded R2.7 billion in revenue.

In line with Nugent recommendations, the minister will soon publish a document proposing legislative amendments to SARS – this was previously delayed due to the pandemic.

"The document outlines processes to appoint and remove a commissioner, and the establishment of at least two deputy commissioners and an executive committee.

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

SARS has lodged legal processes to recover unwarranted expenditure and handed over case files on persons implicated in the Nugent report.

During a post-budget briefing Kieswetter welcomed the additional R3 billion allocated to SARS. He said the rebuilding of SARS will require developing skills competencies particularly to tackle abuse in the area of base erosion, transfer pricing practices and generally white-collar crime.

Apart from building technical competencies, the revenue agency will expand its use of data, Kieswetter said. "We can't run an effective SARS without a full command of analysis and predictive capability that data allows us, using machine learning algorithms and artificial intelligence and increasingly building efficient end-to-end technology platforms on which we administered it."

Kieswetter said that if SARS does well in terms of bolstering its administartiv capacity it would go a long way to achieve sustainable revenue growth.

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