Two years after the South African Revenue Service (SARS) began work to modernise the value-added tax (VAT) system, the agency is preparing to release a consultation paper “in due course”.
This follows National Treasury’s mid-August tabling of the 2025 Draft Tax Administration Laws Amendment Bill, which paves the way for the VAT Modernisation Project.
The Bill contains tax proposals from the 21 May National Budget as updated from the second iteration presented on 12 March.
SARS media head Siphithi Sibeko tells ITWeb the draft legislation lays the “building blocks for VAT modernisation in South Africa”.
The consultation paper will outline the project’s scope and invite stakeholder collaboration, including media, to build a world-class VAT system, he says.
National Treasury notes the VAT modernisation project “forms part of a broader effort to transform tax processes, improve customer service and engagement, reduce the VAT gap and streamline tax administration for VAT traders, businesses and SARS”.
Sibeko says the consultation paper will detail plans to renovate “the country’s VAT administration by introducing a digital ecosystem” that will be built on the three pillars of e-invoicing, an interoperability framework and e-reporting.
Countries such as Mexico, Peru and Chile have already adopted similar e-invoicing systems, showing that real-time digital VAT data can narrow collection gaps, improve compliance, and reduce fraud and error, says online resource VAT Modernisation South Africa.
This resource is independent of SARS.
In September 2023, the revenue service published a discussion paper on modernising the VAT system, saying the document was a move towards providing digital and streamlined online services and making it easy for taxpayers to comply with their obligations.
VAT is the second-largest source of revenue for SARS, which is targeting R1.986 trillion in tax collections for the current fiscal year. Yet the VAT system has not been substantially upgraded in over a decade.
“Although the administration of the VAT value chain has adopted the use of technology, such as e-registration, eFiling and e-payments, it is the tax type with the least supply chain visibility from a self-assessment perspective,” the discussion document notes.
It adds that this lack of visibility exposes the fiscus to revenue leakages that are time-consuming to detect and require frequent audits and verifications, placing a burden on vendors and their businesses.
In its five-year annual performance plan for the period until the end of the 2029/30 financial year, presented to Parliament in April, SARS said it aims “to build a smart, modern SARS with unquestionable integrity that is trusted and admired”.
As part of this plan, SARS is rolling out SARS 3.0, which uses artificial intelligence to drive a digitally-enabled organisation. This initiative forms part of its Vision 2029 Programme, which builds on the previous SARS 2.0 programme implemented between 2019 and 2024.
According to the VAT Modernisation South Africa website, the draft legislation published in mid-August is a “decisive” step towards the revenue service’s goal, with full implementation expected by 2028. However, this date has not been confirmed by SARS.
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