The Journey of SARS Tax Return Automation and Tax Compliance

The Journey of SARS Tax Return Automation and Tax Compliance

• 22 September 2025
• Tax Administration
• Yolisa Dyasi

Imagine this: It’s filing season in 1998. A brown envelope arrives in your postbox, bearing the familiar SARS logo. Inside is your tax return form, pages of blue-bordered boxes waiting to be filled out by hand. You gather your IRP5 or payslips from your employer, sift through bank statements, and sit at the kitchen table with a black pen, carefully writing in your income and deductions. Once complete, the return is slipped back into an envelope, stamped, and dropped off at the post office, joining thousands of others on their way to a SARS office.

Weeks later, in the bustling SARS mailroom, clerks sort through towering piles of envelopes. Returns are batched, manually captured into aging computer hardware, and assessed by staff. Only after all the hard work is completed do you finally receive your assessment via another letter in the post. Delays are routine, mistakes are common, and if something doesn’t add up, you’ll likely spend hours in a branch queue or on the phone trying to set it right.

Fast forward to the early 2000s. The revenue service begins whispering about a new way of filing tax returns — something called eFiling. At first, it sounds almost futuristic: no envelopes, no stamps, and no waiting in line at the post office or a SARS branch. Instead, you could log onto a website, complete your return online, and send it directly to SARS with a click.

In 2002, the service was still in its infancy, used mostly by companies and accountants with the right access. But by 2006, ordinary South Africans were starting to test it out. The numbers were small at first — just a few thousand early adopters brave enough to swap pen and paper for keyboard and mouse — but the idea was catching on.

For those who tried it, the difference was night and day. No more weeks lost in the mailroom shuffle. Assessments began to come back quicker, errors were easier to identify and fix, and refunds reached bank accounts sooner. Slowly but surely, the ritual of posting a brown envelope faded into memory. Filing taxes was still no one’s favourite task, but with eFiling, the process felt less like an administrative marathon and more like a task you could tick off in an evening at home. By the mid-2000s, the era of purely paper returns was ending, and a digital tax revolution was quietly taking shape in South Africa.

The numbers tell a clear story. In 2003/04, SARS received about 2.4 million returns, up from 2.1 million the year before. By 2010/11, as eFiling gained traction, SARS reported a net revenue of about R686 billion and over 13 million registered individual taxpayers. Fast forward to 2022 and the register had swelled to nearly 25 million individual taxpayers, 3.5 million companies, and close to a million VAT vendors.

Compliance rates were climbing — not because South Africans suddenly loved paying tax, but because SARS made it easier to do the right thing. Technology lowered the barriers, and the system began to work more with taxpayers than against them.

Then came 2019, and with it the arrival of a new Commissioner, Edward Kieswetter. He took over at a time when SARS’ reputation had been dented and public confidence was shaky. His mandate was clear: restore trust, strengthen compliance, and bring the institution into a new era of data-driven modernisation.

Kieswetter’s SARS was not just about collecting taxes — it was about anticipating them. Notices of auto-assessments began appearing in millions of email inboxes, built from third-party data submitted by employers, banks, and medical aid providers. Many taxpayers discovered that their returns were already completed, requiring only a few clicks to confirm. What once took a night’s task now took minutes.

At the same time, SARS ramped up its compliance programme. Armed with data analytics and machine learning, it began spotting anomalies, detecting refund fraud, and targeting enforcement where it mattered most. In 2023/24 alone, these efforts contributed nearly R294 billion in revenue, up from R232 billion the previous year, and prevented over R100 billion in impermissible refunds.

In 2023, SARS invited the public to imagine yet another leap. It published its Discussion Paper on Value-Added Tax Modernisation, outlining a future where VAT data flows almost in real time from vendors’ systems into SARS.

Picture this: You issue an invoice, and instantly SARS sees it, aligning sales and purchase data across supply chains. Refund fraud becomes harder, compliance becomes easier, and audits can be sharper and faster. It’s a vision of tax administration where technology leaves very little room for evasion while making honest compliance nearly effortless.

But tax return automation is not just about convenience — it’s about embedding compliance in the very design of the system. Every amendment to tax law, from medical credits to retirement fund harmonisation to tax rate changes, has to be translated into digital fields, logic, and rules inside SARS’ returns. What once required careful reading of legislation is now hard-coded into online forms and calculations.

Central to this are validation rules, which catch errors and irregularities at the door rather than months later during an audit. If you claim deductions above the legal threshold, the system won’t let you proceed. If your IRP5 income doesn’t match what your employer submitted, an error message pops up. If VAT input claims don’t align with declared turnover, the return is flagged before submission. Payroll systems too validate PAYE and UIF against statutory rates in real time.

This proactive model represents a profound shift — from reactive audits to preventive compliance. By blocking incomplete or inconsistent data at the start, SARS saves time, reduces fraud, and minimises disputes. For taxpayers, it can feel strict, but in reality, it reduces the stress of later corrections and penalties.

This wave of automation hasn’t stopped with VAT. Payroll systems too have been modernised. Employers now submit their EMP201 declarations electronically through eFiling or e@syFile, with some payroll software generating submissions automatically. By 2026, SARS plans to implement monthly payroll detail submissions, making the cumbersome annual EMP501 reconciliation less central.

Trusts — a long-challenging area for SARS — are also being drawn into the net. Returns from trusts have risen sharply, from about 69,000 in 2023 to more than 84,000 in 2024. While progress is being made, the Tax Exemption Unit — responsible for non-profit organisations and other exempt entities — remains slower to modernise. Applications and reviews are still more manual, leaving this sector lagging behind the strides seen in personal income tax, VAT, and payrolls.

Between 2022 and 2025, voluntary compliance continued to climb. Provisional taxpayers, trusts, and individuals filed in greater numbers, supported by auto-assessments, pre-populated returns, and user-friendly channels. For the 2024 tax year, 543,000 provisional taxpayers filed their returns, up from 517,000 the year before.

But the carrots have been paired with sticks. SARS has tightened penalties for non-submission, applied interest more rigorously on late payments, and launched more audits and criminal cases against deliberate evasion. Tax practitioners who mislead or enable non-compliance face suspension or deregistration. The message is clear: compliance is easier than ever — but non-compliance is costlier than ever too.

From brown envelopes in the late 1990s to today’s auto-assessments and real-time VAT discussions, SARS’s journey has been one of steady transformation. Each stage has nudged taxpayers toward compliance — first by making it more convenient, then by making it more automated, and now by making it almost inevitable.

The modern South African tax system still has its challenges. Trusts and exempt institutions need more attention, and large-scale VAT modernisation will demand careful balancing of data access, technology costs, and privacy concerns. But the trajectory is clear. Tax compliance is no longer a paper chase — it’s a digital ecosystem, built to encourage voluntary compliance while deterring evasion with sharper tools.

What started as a brown envelope on a kitchen table in 1998 is now, in 2025, a few taps on a smartphone, a pre-populated return, and a SARS system that knows you better than ever before.

Want to explore this journey further?

Join our upcoming webinar where experts will unpack how SARS’s digital transformation has reshaped compliance, automation, and the taxpayer experience.

Register for the webinar here

0 COMMENTS

LEAVE A COMMENT