Tax Ombud Warns on Digital Divide, Oversight Risks in Modernising Tax Systems

As tax authorities worldwide accelerate their digital transformation, the Office of the Tax Ombud (OTO) has stressed the importance of maintaining fairness, equality, and accountability in South Africa’s modernising tax administration. Speaking at the 12th Annual Tax Indaba in Johannesburg, OTO Acting CEO Mmamelao Malakalaka warned that while technology offers speed and efficiency, it must also serve the principles of inclusivity, transparency, and justice.

Technology: A Tool, Not the Goal

Malakalaka reminded attendees that a truly modern tax system must benefit all taxpayers equally, not just those with strong internet access and digital fluency.

“Technology is a tool, not an end. A truly modern tax system is not only fast and efficient—it is inclusive, transparent, and just,” she said.

Research indicates that urban taxpayers often benefit most from digital upgrades, while rural and underserved communities face significant barriers, including poor connectivity, lack of access to devices, and limited digital literacy. The elderly, small businesses, and low-income taxpayers are particularly vulnerable.

Risks in the Digital Transition

While praising the South African Revenue Service’s (SARS) advances toward a digitised and AI-driven environment, Malakalaka warned that modernisation also creates new risks, particularly for fraud and identity theft.

A key concern is the growing problem of eFiling profile hijackings—where fraudsters gain access to a taxpayer’s online profile, change personal details, and divert refunds.

“The OTO is actively investigating these cases, collaborating with SARS and stakeholders, and expanding our systemic investigation team to counter emerging digital threats,” she said.

Service Accessibility Challenges

Beyond fraud, the OTO has received numerous complaints from taxpayers and practitioners about the SARS eBooking system, citing frequent technical errors, timeouts, and a lack of available appointment slots.

Malakalaka said the OTO is monitoring SARS’s response closely and will consider launching a systemic investigation in 2026 if significant improvements are not made.

Oversight of AI in Tax Administration

As part of the global Tax Administration 3.0 movement, SARS is exploring AI-driven audits and assessments. However, tax practitioners have raised concerns about potential bias and errors in AI algorithms—problems already observed in sectors like banking.

“The OTO is aware of these risks and is preparing to oversee the use of AI in tax administration to ensure fairness and transparency,” Malakalaka confirmed.

Learning from Global Experience

She emphasised that while developed countries offer valuable lessons in digital transformation, South Africa must adapt best practices to local realities and remain alert to unintended consequences.

“We too are modernising and digitising our own complaint-handling systems, improving online access, and using data analytics to detect systemic issues—but we must ensure that in doing so, we don’t create new barriers for those with limited digital access or skills,” she said.

Balancing Innovation with Equity

The OTO’s approach underscores the need for human oversight in an increasingly automated tax environment, ensuring that technology serves all taxpayers—not just the digitally advantaged.

As South Africa’s tax system evolves, the OTO has pledged to remain a watchdog for taxpayer rights, guarding against any erosion of transparency, fairness, and accessibility in the push toward digital modernisation.