Auto Assessment and the Continuous Development of Artificial Intelligence
By Mahomed Kamdar, SAIPA Tax Specialist
Recently, representatives from SAIPA attended a conference hosted by the University of Cape Town and the University of Amsterdam. Essentially, the conference highlighted the following:
– artificial intelligence is used to detect tax fraud, and
– artificial intelligence products are subject to further development and upgrading.
In future, all tax authorities will be using software with monotonous regularity. Although, SARS was not present at this conference, we can expect SARS to follow the route adopted by its peers elsewhere in the world.
It is widely known that SARS is already using artificial intelligence to auto assess taxpayers, but one must be mindful of the fact that the software industry is rapidly enhancing their products and hence the new cliché can be heard in the corridor: `software engineers never sleep’.
The continuous development of artificial intelligence software will enable SARS to numerically auto assess more taxpayers in the coming years (we can expect more changes in the 2023 tax-year) and to auto assess the returns more accurately, thereby further reducing the risk of errors.
South African resident taxpayers who earn foreign income should not believe that they can permanently escape from the SARS radar screen or permanently escape from the radar screen of any other tax authority. International foreign financial institutions are submitting critical information to their local tax authority – the global 3rd party information dissemination is a permanent feature of our global financial system. The dissemination of global financial information is also used to counter money laundering and to detect financing of terrorist activities. In simple language, tax authorities are talking to each other.
SARS receives information on foreign assets through the existence of Automatic Exchange of Information systems that exist between tax authorities. Almost all tax treaties concluded between RSA and other tax authorities have Articles on automatic exchange of information. Please remember that SARS has three years to audit taxpayers for income tax purposes, and more importantly, if there is evidence of non-disclosure of income the prescription periods fall away.
If a taxpayer is of the view that he/she is no longer a RSA taxpayer simply because he/she is living abroad, then taxpayers must make concerted efforts to ensure that the actual factual physical and tax circumstances of taxpayers are commensurate with the records on the SARS database. In future, such taxpayers, could also be auto assessed. SAIPA has already predicted (playfully?) that taxpayers should not be surprised that in future that out-of-pocket legitimate medical expenses incurred by individual taxpayers could feature in auto assessment.
The auto exchange of information among tax authorities and the development of artificial intelligence tools could, in future, track income located in what is widely known as low-tax jurisdiction or tax havens. Tax havens jurisdiction are already compelled to apply the economic substance requirements, that is, companies must not exist in `paper’ but have an active business with people and skilled staff, assets must be transferred to companies located in low-tax authorities and interestingly , and tax practitioner / accountant based in the local tax jurisdiction. At least, these measures could increase work opportunities for the professional accountants.