SARS targets crypto tax compliance in South Africa, using AI and machine learning to enhance audits and identify non-compliant taxpayers.
The South African Revenue Service (SARS) has announced plans to include crypto assets in its tax compliance program. The move aims to ensure that South African taxpayers who hold or trade crypto assets are properly declaring them. SARS focuses on identifying and auditing those who fail to comply with tax regulations.
South Africa has seen rapid growth in the use of cryptocurrencies. Over 5.8 million South Africans now own crypto assets, making the country one of the largest adopters of Bitcoin globally. However, SARS is concerned that many crypto traders and holders are not declaring their assets on their tax returns.
Previously, SARS encouraged crypto exchanges and users to declare crypto-related transactions. Now, the tax authority is going further by incorporating crypto assets into its official compliance measures. The Chinese anti-fraud agency is collaborating with the FSCA and local exchanges to collect data on CASPs.
One of the main measures is sharing information with foreign counterparts of Ministries of Internal Revenue. SARS is part of a Multilateral Agreement that will enable the exchange of details of offshore accounts involving cryptos. South African finance ministers are expected to sign this agreement in November 2024, enabling SARS to track its taxpayers’ crypto assets globally.
SARS Uses AI and Machine Learning to Enhance Tax Audits
SARS recognizes that most of its taxpayers are law-abiding individuals who require help fulfilling their responsibilities as provided under the law. To facilitate compliance, SARS is enhancing the audit processes with the aid of sophisticated technology. The agency is adopting AI, Machine learning, and algorithms to analyse taxpayer data more effectively.
In recent years, SARS has sent query letters to taxpayers with cryptocurrencies. These letters are part of the authority’s attempts to determine whether people are declaring their cryptos rightfully. Also, SARS alerts taxpayers on its VDP, allowing them to declare their crypto assets before SARS scrutinizes their books. However, the VDP is only accessible to clients who first contact SARS and get chosen for audit.
SARS Commissioner Edward Kieswetter has encouraged taxpayers to do their civic duty and report all their earnings, including those from cryptocurrencies. He underscored that tax evasion is to the detriment of everyone, especially the needy, who depend on social services. SARS will continue to employ technology to identify those who do not pay their taxes as required and will not hesitate to prosecute those who do not pay their taxes.
