Cape Town – The South African Revenue Service (SARS) is accelerating plans to automate value-added tax (VAT) assessments as part of a broader digital transformation programme aimed at improving tax compliance, reducing administrative burdens and closing revenue leakages.
According to MyBroadband, the proposed system will eventually allow SARS to assess VAT using transaction data collected electronically from businesses, moving away from a system that relies heavily on periodic tax declarations and retrospective verification.
The plans form part of SARS’ broader VAT modernisation strategy, which includes electronic invoicing, digital data-sharing systems and the automated reporting of transactions. In an August consultation paper, SARS said the reforms would move the country towards a system where tax compliance becomes part of businesses’ everyday operations.
South Africa’s development priorities
“SARS’s belief” is that modernisation will reduce the burden on compliant vendors, strengthen compliance and safeguard revenue needed to fund South Africa’s development priorities, Commissioner Johnstone Makhubu said.
The initiative is also expected to improve SARS’ ability to identify discrepancies between reported sales and purchases, detect potential fraud and target high-risk transactions more effectively.
In a separate report, Eyewitness News reported that SARS expects to receive between R4 billion and R4.5 billion from a R6.9 billion special appropriation to accelerate its modernisation programme during the 2026/27 financial year.
Makhubu said the investment would support three priorities: VAT modernisation, improved monitoring of excisable products such as alcohol and tobacco, and the upgrading of SARS’ information and communications technology infrastructure.
“We are using this money to accelerate our modernisation,” he said.
Potential benefits
However, the transition will require businesses to adapt their accounting systems and adopt standardised electronic invoicing, potentially creating additional costs, particularly for smaller enterprises.
Research published by The Conversation highlights the potential benefits of digital tax systems while cautioning that technology alone cannot eliminate tax evasion.
Drawing on experiences in other African countries, the researchers emphasised the importance of matching buyers’ and sellers’ records, investigating discrepancies and ensuring legitimate VAT refunds are processed promptly.
SARS has said the proposed model will be implemented through a phased, consultative process. The long-term objective is to make VAT administration more efficient and transparent while improving revenue collection and reducing the effort required from compliant taxpayers.
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Compiled by Betha Madhomu
