Tax Authorities Harness AI to Crack Down on Tax Evasion and Boost Compliance

BY: Saneliso Mlambo

The South African Revenue Service (SARS) is enhancing its efforts to combat tax evasion by integrating artificial intelligence (AI) into its operations. Over the next three years, SARS has been allocated more than R7 billion to modernize its systems. SARS Commissioner Edward Kieswetter highlighted that approximately 30,000 individuals with economic activities exceeding R1 million are not registered for tax. 

Globally, tax authorities are adopting AI to improve tax compliance and administration. For instance, the U.S. Internal Revenue Service (IRS) is exploring AI to better understand and estimate the tax gap—the difference between taxes owed and paid. AI models assist the IRS in identifying taxpayers who are more likely to underreport income or evade taxes, thereby enhancing audit selection processes. 

Additionally, AI tools are being utilized to assist taxpayers. In Singapore, a virtual assistant addresses tax inquiries in multiple languages, significantly reducing the volume of calls to customer service centers. Similarly, South Korea has implemented an AI guide to aid citizens in filing and paying taxes. These applications not only streamline tax processes but also promote transparency and collaboration between tax authorities and taxpayers. 

The integration of AI into tax systems represents a significant advancement in addressing tax evasion and enhancing compliance. By leveraging AI, tax authorities like SARS aim to identify non-compliant taxpayers more effectively and ensure a fairer tax system for all.