‘Sars needs to play catch up,’ says Kieswetter as tax collector goes digital

South African Revenue Services (Sars) commissioner and vice-chairperson of the African Tax Administration Forum (Ataf), Edward Kieswetter said the revenue collector has to catch up with the digital age.

Speaking at the second Network of Tax Organisations (NTO) recently, Kieswetter said Sars used to be a leader in digital modernisation, before state capture setbacks and budget cuts.

“Partly due to financial constraints… budgets were then frozen for a number of years and, Sars fell behind in driving technological innovation,” he said.

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‘Underfunded’

The Sars commissioner said the revenue collector had since managed to restore some additional funds to continue with the modernisation process.

“But we are still substantially underfunded to move at the necessary speed in an environment that is changing exponentially,” said Kieswetter.

“Business models are being disrupted, and tax crime proliferating at an alarming rate,” he said.

Kieswetter said the challenge faced by the revenue collector was not only having to play catch up after many years of under-investment, but the need to accelerate modernisation to remain relevant in the digital landscape.

He also said the suspension of funding went against the intrinsic value of digitalisation in improving tax compliance and detecting non-tax compliance.

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Why digitalisation?

Kieswetter said digitalisation was becoming more important as more financial transactions take place digitally and third-party data sources are shared with tax administrations, alongside the emergence of central bank digital currencies.  

“The importance of digitalisation and consequently the use of data science, and artificial intelligence have become central to revenue collection, compliance and trade facilitation,” he said.

Urging central banks to exercise caution when implementing budget cuts, Kieswetter advised national treasuries to avoid across-the-board cuts.

“Tax administrations should be excluded from across-the-board austerity measures,” he said.

“The investment in digitalisation should not be disrupted,” he added.

Benefits of going digital

Kieswetter said going digital through enabling technologies and increased reliance on data science and artificial intelligence has had global benefits worth reflecting on:

• Made it easier for compliance: “At Sars we issue 94% of assessments in 5 seconds and we auto-assess almost 4 million tax payers.”
• Exponential growths in the expanded and increased use of data: As an example, Kieswetter said the Automatic Exchange of Information (AEOI) had doubled since inception, from 47 million accounts in 2018 with assets totalling EUR 11 trillion.
• Evident support for digital transformation: Kieswetter said tax administration’s investment into Information and Communication Technology (ICT) had doubled since 2018.

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Doing it like the rest

“In the context of digital transformation and modernisation journeys, a transformative common purpose objective would be to leverage efforts towards a single digital entity,” he said.

“Countries like Chile, Sweden and Norway have used a single unique digital identity for the whole government as well as subscription to financial services,” he added.

“This has enabled them not only to serve citizens better, but also for more effective detection of tax and economic crime, and law enforcement,” he said.

Kieswetter said that going digital would require strong political will and competent institutional leadership.

Though Kieswetter admitted achieving a single digital identity fell beyond the scope of tax administration, he believed Sars could lead the way due to its “dependence” on digital systems and “effective administration”.