An In-Depth Study of the Perceived Fairness in South Africa’s VAT System with the Introduction of Automated Assessments

Challenges that taxpayers face with Value-Added Tax (VAT) audits are the delay in refunds of VAT, as this is caused by the lengthy and time-consuming audits by the South African Revenue Service (SARS) which then affects the non-payment of their refunds. To try to remedy this issue, SARS then implemented the automated assessments in the VAT. The automated assessment will be issued once the due date for submission of the required documents of the audit has passed. It is therefore critical to understand how fair the automated system is to the taxpayer as the assessments will be based on estimates that SARS has on record, and a request for correction is not allowed in the same period of the submission. The qualitative study aims to explore the fairness of the automated system using the elements of tax fairness which are procedural and distributive. In terms of procedural fairness, the study will focus on the automated assessment process and other aspects of the social process that SARS follows before issuing a VAT automated assessment. Distributive fairness promotes the fairness of outcomes and allocation patterns that were followed. The purpose of this research is to acquire knowledge that can assist tax authorities and policymakers in determining if this system adheres with the theoretical tax framework of fairness. This research also aims to make a valuable contribution to optimise South Africa’s VAT system while making sure that new developments in technology are consistent with the principles of fairness and transparency. The study then concluded that the introduction of the VAT automated assessment reflects the elements of fairness and was achieved.