This article was written by Attila Kadikoy and published on 18 March 2025 on Maya on Money.
SARS’s specialised AI and data-sharing powered crypto unit leaves taxpayers with nowhere to hide.
CRS has come and gone, yet many investors still believe the South African Revenue Service (SARS) won’t touch their offshore pots.
Not so.
The times they are a-changing and the era of AI-powered tax enforcement is here, leaving taxpayers with nowhere to hide.
SARS AI cryptocurrency unit
Tax avoidance is a cat-and-mouse game that has become increasingly risky as tax authorities invest in their technological advancement and use sophisticated AI and global data sharing to identify anomalies in individuals’ tax returns. Now, cryptocurrency holders will also be subject to the same scrutiny.
The South African Revenue Service’s establishment of a specialised cryptocurrency unit, which relies on AI, international cooperation and automatic information sharing to detect tax evasion, is the next step in an increasingly sophisticated global effort to detect tax fraud.
The landscape of wealth protection has evolved dramatically over the past 25 years. The world has moved away from the era of traditional tax havens like Switzerland, where banking secrecy was paramount. Taxpayers who fall foul of the regulations stand to impose severe penalties on taxpayers putting in fraudulent returns. As a result, taxpayers are well-advised to shift their focus to minimising taxes rather than spending their whole lives avoiding them.
The OECD’s Common Reporting Standards, implemented in 2014, transformed international tax transparency. With the 120 participating countries now automatically sharing financial account information, the system facilitated data exchange on 123 million bank accounts worth EUR 12 trillion by 2022, according to the latest OECD data.
While it has taken tax authorities time to mine the vast troves of data generated, their investments in AI to detect fraudulent tax behaviour are paying off handsomely. Australia’s tax authority has prevented $2.5 billion in fraudulent claims using AI models, while Italy’s AI system identified over 1 million high-risk cases last year, according to VAT calculation tax expert Richard Asquith. The effectiveness of these systems is enhanced by the expanding scope of CRS, which will include crypto-asset exchanges from 2027, closing another potential avenue for wealth concealment.
AI identifies common high-net-worth audit triggers
The system is particularly effective at identifying common high-net-worth audit triggers. These include complex income streams, large charitable contributions, foreign bank accounts, and lifestyle expenditures that don’t align with declared income. AI algorithms can now rapidly identify discrepancies between lifestyle indicators and reported wealth, making it increasingly difficult for wealthy individuals to hide assets or income.
Many individuals still act like ostriches, putting their heads in the sand, but today’s reality demands a different approach. What taxpayers don’t realise is that tax authorities are now wielding AI to process the vast amounts of CRS data that previously overwhelmed them, but it is now providing them with a powerful mechanism to detect fraud.
Individuals still prioritising avoidance over minimising their tax exposure will increasingly find they have nowhere to hide.
The technological revolution in tax collection is evident worldwide. France employs AI to analyse satellite imagery for signs of undeclared wealth, such as multiple vehicles or swimming pools at residences under investigation. The UK’s HMRC reported a 22% increase in voluntary disclosures of offshore assets in 2023-24, driven by AI-powered analysis of CRS data and targeted “nudge letters” to potential evaders.
SARS Commissioner Edward Kieswetter emphasises their focus on making compliance easier for honest taxpayers while maintaining “a credible threat for non-compliance.” SARS processes over 1.2 billion records annually, using AI to analyse patterns in wealthy individuals’ financial data and third-party information.
Legitimate tax planning – prioritise tax efficiency over avoidance
Legitimate tax planning to minimise tax due when investing offshore remains possible. However, before investing offshore, you should always engage with an independent tax advisor with the necessary global expertise.
Tax systems are not regressive but always progressive. People cannot afford to judge things on past experience because the consequences of non-compliance today are severe. Penalties reach up to 200% of unpaid tax, and taxpayers may face potential criminal charges in serious cases. If taxpayers don’t disclose previously unreported money to the authorities, they will be fined at maximum rates.
No one wants to pay unnecessary taxes. Thus, understanding the available structured solutions ensures compliance and helps taxpayers avoid unnecessary consequences. It’s also crucial for taxpayers to understand that the future of wealth management lies in prioritising tax efficiency over avoidance.
If you’d like to talk to us about this, please setup an online meeting or contact us directly.