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When SARS selects its tax audit targets, this is what it does

by , 05 August 2014
All businesses and every individual is at risk of a SARS audit. The reason is SARS casts its nets wide in an attempt to root out tax evasion and avoidance.

But how does SARS go about choosing its victims for audits each year? Does it draw names out of a hat or does it follow particular criteria?

The truth is it uses a bit of both of these selection techniques. This is how SARS will choose your company for an audit...

SARS uses two audit selection approaches to choose targets for tax audits

 
SARS has two ways of choosing the companies it's going to audit. These are:
 
- Random; and
- Risk assessment.
 
Random is as its name suggests: A random selection. This means SARS will audit your company without a particularly reason, you're just unlucky. 
 
So to a certain extent SARS does draw names out of a hat, although not literally, to select its audit targets.
 
But how does it select targets using the risk assessment method?
 
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Here's what you need to know about SARS' risk assessment selection method for tax audits

 
SARS has five sub-criteria when it comes to its risk assessment. These are:
 
1. Specific referral by other sections within SARS;
2. Specific referral by the general public;
3. Discretionary selection;
4. Computer-generated selection; and
5. Refund audits.
 
These aren't particular criteria to select the target but rather ways to choose a target based on interest in that target.
 
For example, a 'Specific referral by other sections within SARS' means a SARS agent flagged this company as a potential problem.
 
So unfortunately the bad news is there's nothing you can do to escape or prevent an audit. But you can make the process less painful by developing a good relationship with SARS and following good practices.
 
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