AI is making it harder to hide income from South Africa's taxman

For millions of South Africans, tax season remains a dreaded ritual, a time of scrambling for receipts, checking for deductions, and hoping to avoid the taxman's wrath. But for Sibusiso Moyo, a small business owner from Johannesburg, the stakes are higher than ever. His business, which he started from scratch, has been growing steadily, but the thought of being audited still keeps him up at night. The fear of being flagged for something that might not even be his fault is real, and it's only getting worse.

Long before Sibusiso logs into his eFiling account, the South African Revenue Service (SARS) has already got its eyes on him. Armed with artificial intelligence (AI), machine learning, and advanced data analytics, SARS has transformed its tax collection process into a high-tech operation. AI has become the unsung hero of tax administration, helping to assess risk, match third-party information, and identify which returns deserve closer scrutiny. This shift marks one of Africa's most significant examples of AI being deployed at scale in government, and it's a trend that's only gaining momentum.

SARS has taken a data-driven approach to tax administration, leveraging data science, machine learning, and AI to create a comprehensive digital picture of taxpayers. By integrating data from employers, financial institutions, medical schemes, retirement funds, insurers, investment managers, and other reporting entities, SARS has built a robust system that can detect anomalies and identify compliance risks. This is no longer a manual process, driven by intuition and guesswork, but a sophisticated operation that relies on algorithms and data to make decisions.

The impact of AI on tax collection is already visible. According to Siphithi Sibeko, Head of Communication and Media at SARS, the compliance programme contributed R304 billion ($18.2 billion) during the 2024/25 financial year. AI-assisted fraud detection and verification prevented more than R417 billion ($25 billion) in impermissible refund outflows over the past five years. These numbers are impressive, but they also raise questions about the future of tax administration. As AI becomes more pervasive, what does it mean for small business owners like Sibusiso, who might not have the resources to keep up with the latest technology?

For Sibusiso, the fear of being audited is real, but it's also a reminder that AI is not always the answer. While it can help to identify compliance risks, it's also a tool that can be used to target small business owners who might not have the resources to comply with complex regulations. The relationship between citizens and the state is changing, and it's not always clear who is winning. As AI becomes more integral to tax administration, it's essential to consider the human angle and the impact that it has on people's lives.

As AI continues to shape tax administration, it's likely that we'll see more sophisticated systems that can detect anomalies and identify compliance risks. We might also see a shift towards more personalized tax services, tailored to individual taxpayers' needs. But what does this mean for small business owners like Sibusiso? Will AI make it easier for them to comply, or will it create new barriers to entry?## The Future of Tax Administration As SARS continues to modernize its tax administration processes, it's clear that AI is here to stay. But what does this mean for the future of tax administration? Will we see more transparency and accountability, or will AI create new opportunities for corruption and abuse? These are questions that policymakers and regulators need to consider as they navigate the complex landscape of tax administration. The stakes are high, and the consequences of getting it wrong are real. As Sibusiso Moyo would say, "tax season is not just about numbers, it's about people's lives."