By Lehlohonolo Lehana.

South African Revenue Service (SARS) Commissioner Edward Kieswetter called on National Treasury to exercise caution when implementing budget cuts in the coming budget, as this would pose a threat to the country's "fiscal integrity".

Kieswetter said that budget cuts at SARS would work against the positive strides that have been taken at the tax office, especially undermining the digitisation and automation processes that have yielded significant results for the country's tax revenues.

"Once you suspend funding, the end result will always be the suspension of innovation and regression against the progress of other administrations. This goes against the intrinsic value of digitalisation in improving tax compliance and detecting tax non-compliance," Kieswetter said.

Kieswetter was speaking at the second Network of Tax Organisations (NTO) under the theme: ‘Digitalisation of Tax Administrations and Contemporary Issues’

The commissioner said the revenue collector had since managed to restore some additional funds to continue with the modernisation process.

"But we are still substantially underfunded to move at the necessary speed in an environment that is changing exponentially," said Kieswetter.

"Business models are being disrupted, and tax crime proliferating at an alarming rate," he said.

Kieswetter said the challenge faced by the revenue collector was not only having to play catch up after many years of under-investment, but the need to accelerate modernisation to remain relevant in the digital landscape.

He also said the suspension of funding went against the intrinsic value of digitalisation in improving tax compliance and detecting non-tax compliance.

Kieswetter said digitalisation was becoming more important as more financial transactions take place digitally and third-party data sources are shared with tax administrations, alongside the emergence of central bank digital currencies.  

"The importance of digitalisation and consequently the use of data science, and artificial intelligence have become central to revenue collection, compliance and trade facilitation," he said.

Kieswetter said that going digital would require strong political will and competent institutional leadership.

Though Kieswetter admitted achieving a single digital identity fell beyond the scope of tax administration, he believed Sars could lead the way due to its "dependence "on digital systems and "effective administration".