Kathy Gibson reports – Machine learning (ML) in risk analysis has helped the South African Revenue Services (SARS) increase what it calls the “compliance dividend”, collecting more taxes and alleviating the need to increase the taxpayers’ burden.
That’s the word from Edward Kieswetter, commissioner of the South African Revenue Service, who says the institution’s operations are increasingly data-driven and drawing on ML algorithms for risk profiling and compliance improvements. He was speaking at the PSG Konsult “Think Big” seminar series.
Kieswetter points to the seamless experience that 3,1-million taxpayers enjoyed last year when, drawing on third-party data and algorithms, SARS was able to present them with completed tax returns and automatic rebates where relevant.
With calls for a tax revolt becoming louder, Kieswetter says government and the private sector need to work with one another, and points out there are many compelling reasons to pay taxes.
“Any contribution to furthering a lack of law and order means you are part of the problem, not the solution,” he says.
And the people who are hurt when individuals and companies don’t pay tax are those least able to support themselves. “Social grants are a safety net that keeps a lot of people from destitution and even demise. We pay taxes to help the people who will hurt the most, the most vulnerable among us.”
He believes that every fundamental change in South Africa has come about not because of governance, but because citizens understand their agency, and their role in creating change. “So let’s get off our seats, becoming activists towards changing society. And if the government does not come to the party, they should not be in government.”
That South African taxpayers are experiencing a crisis of confidence is a reality, Kieswetter says. “I think the majority of South African’s are completely disenchanted with the lack of service delivery, slow progress and, most significantly, the inordinate disruption to social and economic activity from loadshedding. To deny that would be burying your head in sand.
“I believe that most South Africans are tired of excuses, and they have every right to be so.”
But Kieswetter doesn’t think this would trigger a tax revolt. “Most South Africans would think long and hard before embarking on that. In their heart they understand that by withholding taxes they would be hurting the very people we need to be protecting.”
Speaking about his experiences in leading SARS, Kieswetter says it’s completely different to leading a corporate in the private sector.
“In the private sector, things move faster – there is a strong bias for action, rather than a slow bureaucracy.”
In an attempt to regulate operations, government operations lean to inefficient procurement and recruitment. “Things that should take a day or two can take months,” Kieswetter says.
“Having been on both sides of the fence, one of my biggest frustrations is that when you have to make a decision it is delayed by a framework designed to regulate not liberate.”
Most frustrating, he adds, is that despite the tedious and time-consuming regulatory framework, wholesale corruption has still flourished. “Billions of rand was stolen during Covid by political elites working and colluding with the private sector to defraud the fiscus. We can never sit back and say that’s fine.”
Rebuilding SARS in the post-State Capture era is a slow process, Kieswetter says. “We have a long way to go, but we have made measurable progress. We have seen an improvement in revenue collection and compliance, with trends all on a positive upwards trajectory.
“But comparing the improvement against the inordinate challenges we face, we have a long way to go.”
Despite this, SARS is slowly regaining its status as an employer of choice and attracting top skills. “I cannot compete with the private sector in terms of remuneration, so I have to offer a commitment to service and a higher purpose.
“It is harder, but we have seen an improvement, and the tide is turning. Slowly we will claw out way back.”
SARS has a collection target of R1,68-trillion, which could be impacted by the continued loadshedding.
“Loadshedding has had a huge impact on economic activities, and crippled many companies,” Kieswetter says. “We also find that during times of crisis people are more likely to be conservative and withhold taxes wherever possible. So it’s harder to collect. But we will leave no stone unturned because we understand that every additional rand we collect is one that the Minister of Finance does not have to go out and borrow, mortgaging our children’s future.”
In the upcoming budget, Kieswetter doesn’t expect taxes to be raised, or a wealth tax declared.
“Directionally, the aim is not to raise taxes. Of course, there are people who have bandied around the idea of a wealth tax, but I still believe the compliance dividend has reduced the need for this. We cannot completely dismiss the idea that there could be pressure to raise taxes, but for now our collective mindset is to improve administrative competence and not increase the burden on taxpayers
“If everyone pays at the level they ought to be paying, there is no need for a knee jerk reaction.”