Unpacking SARS Risk Assessment System as Filing Season Draws Closer

Unpacking SARS Risk Assessment System as Filing Season Draws Closer

• 17 June 2025
• Tax Administration
• Yolisa Dyasi

The South African Revenue Service (SARS) plays a critical role in administering the country’s tax and customs systems. Central to this responsibility is ensuring that all taxpayers—individuals and businesses alike—meet their legal obligations. To promote fairness and efficiency, SARS has adopted a sophisticated risk assessment model designed to detect non-compliance, allocate resources strategically, and encourage voluntary compliance while taking action against transgressors.

Since its establishment in 1997, SARS has progressively modernised its systems. This transformation has gained significant momentum under Commissioner Edward Kieswetter, particularly since 2019. Faced with increasingly complex forms of tax avoidance and evasion, SARS has adopted a data-driven strategy, incorporating artificial intelligence, machine learning, and big data analytics to overcome modern challenges. These advances have aligned SARS with international best practices and positioned it as a leading authority in tax risk detection. This shift supports its transition to a more agile model of tax administration—globally referred to as “Tax Administration 3.0.”

At the heart of SARS’ risk framework are the principles of fairness, accuracy, and effective governance. The system segments taxpayers by behaviour, financial profile, and compliance history, grouping them into categories such as large enterprises, high-net-worth individuals, SMEs, and individual taxpayers. Each category is evaluated using tailored benchmarks and risk indicators. Taxpayers who trigger these indicators are subject to further verification or audit, while compliant taxpayers may benefit from faster processing and reduced scrutiny.

The system leverages both structured and unstructured data, including payroll records, banking information, customs declarations, and international data shared through agreements like the OECD’s Common Reporting Standard (CRS). Key risk indicators include inconsistencies in declared income, questionable VAT claims, lifestyle mismatches, and abnormal refund requests. SARS is increasingly capable of cross-referencing this data to uncover potential underreporting or illicit activity.

The framework incorporates both pre- and post-assessment controls. During pre-assessment, automated filters scan returns for anomalies before refunds are issued. Post-assessment, high-risk cases may be flagged for deeper audits or reviews.

Recent developments have strengthened SARS’ oversight capabilities. A single-entity registration system enables holistic tracking of taxpayer activity across tax types. Real-time banking verification reduces refund fraud, while expanded third-party data access supports the detection of undeclared offshore income. The 2025/26 national budget has further reinforced these tools by allocating additional funding to enforcement and technology enhancements.

While designed to detect non-compliance, SARS’ system also promotes honest taxpayer behaviour. Through transparent communication, educational initiatives, and user-friendly platforms such as eFiling and the SARS MobiApp, the agency encourages voluntary compliance. Taxpayers who submit accurate returns and engage with SARS proactively are less likely to face audits or delays—creating a system of positive reinforcement.

To remain compliant, taxpayers should prioritise timely and accurate submissions, retain supporting documentation, and respond promptly to SARS communications. Businesses are advised to consult tax professionals and conduct routine compliance reviews to mitigate risk.

Despite major progress, SARS continues to face challenges. These include data quality limitations, staffing shortages in specialist areas, and the continual evolution of tax evasion techniques. Public trust in SARS’ systems is equally vital, especially as automation and data analytics play a more prominent role. Concerns around privacy, fairness, and risk-scoring accuracy must be addressed through ongoing refinement and oversight.

Looking ahead, SARS plans to deepen collaboration with domestic and international partners while investing further in forensic auditing and data science. These efforts will enhance its ability to support South Africa’s economic and developmental goals.

As filing season approaches, both taxpayers and practitioners must understand how SARS’ risk model works. In an era of digital enforcement, staying informed, transparent, and compliant is essential.

By balancing enforcement with support, SARS’ evolving system holds the potential to foster a more efficient, equitable, and accountable tax environment—one that aligns with the broader goals of governance and fiscal sustainability.

With filing season near, this article explores how SARS uses data and tech to assess tax risk. For deeper insight and practical tips, click here to join our upcoming webinar.

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