Fostering the effectiveness of reportable arrangements provisions by enhancing digitalisation at the South African Revenue Service

Abstract

Maladministration at the South African Revenue Service (SARS) resulted in the loss of public trust and negative implications on voluntary tax compliance and may encourage taxpayers to partake in aggressive tax planning schemes. This maladministration also resulted in the degeneration of SARS systems whilst technology advanced internationally. Digitalisation at SARS is crucial to address aggressive tax planning that has become more advanced as a result of the mobility of the digital economy. This study used a qualitative research methodology based on exploratory research which involved literature reviews of textbooks and articles in order to provide recommendations of how digitalisation can be adopted by SARS with a specific focus on ensuring the effectiveness of the South African Reportable Arrangements legislation. The operation of the South African Reportable Arrangements legislation was explained in order to benchmark it against the design features and best practices recommended by the OECD in Action 12 of the BEPS project and to highlight how digitalisation can enhance these provisions. Recommendations made considered the current state of digitalisation at SARS, how other countries’ tax administrations have become more digitalised and practical concerns to be borne in mind when deciding the appropriate technology. The study found that there are a handful of recommendations remaining on how South Africa could improve reportable arrangement legislation without unnecessarily increasing the compliance burden. Digitalisation techniques that could be considered are advanced analytics, artificial intelligence, blockchain technology and Application Programme Interfaces. The study proposed, amongst others, that these could be adopted by SARS to be able to gather information from various sources in real time to identify further characteristics of aggressive tax planning, perform completeness checks on reported transactions and re-deploy resources to investigate pre-identified possible reportable transactions.