South Africa’s tax debt book has grown to more than R600-billion, of which R280-billion has been identified as collectable. This year, the South African Revenue Service (SARS) is targeting the collection of R126-billion of this recoverable amount, said SARS Commissioner Johnstone Makhubu.
Although SARS has various programmes and statutory relief measures in place to assist taxpayers in fulfilling their legal obligations, Makhubu warned during the recent SAIT Tax Indaba 2026 that these mechanisms should not result in fiscal leakages because taxpayers are attempting to “play games” with programmes aimed at providing legitimate relief.
For instance, in 2025 SARS introduced an Expedited Tax Debt Process in collaboration with Recognised Controlling Bodies for taxpayers to settle outstanding, non-disputed tax debts older than 12 months through the debt compromise mechanism. However, the Commissioner said that almost 90% of applications were rejected because applicants could not prove financial hardship, with their bank balances indicating that they could afford way more than the amounts they offered to pay SARS.
Stricter Enforcement Has Arrived
SARS’s tougher stance is already being felt in practice, says Jashwin Baijoo, Partner and Head of Strategic Engagement and Compliance at Tax Consulting South Africa.
For as little as R5 000 outstanding, SARS would now issue a Letter of Final Demand. If no payment is received, SARS is going hard after that money with third-party collector appointments, civil judgments, garnishee orders and holding directors and the like personally liable in the case of juristic entities. “This has become a massive collection drive, almost strike action, from SARS in the last 18 months.”
A few years ago, a taxpayer owing SARS money, might have received a Final Demand to pay up, but the tax authority would not necessarily have followed through, even if the tax debt ran into-millions.
Those days are over, Baijoo cautioned during a free online masterclass on debt and dispute resolution.
Co-presenting with André Daniels, Head of Tax Controversy & Dispute Resolution at Tax Consulting South Africa, they unpacked proposed amendments to the Tax Administration Act, the possible implications for taxpayers with outstanding debt, and delved into proven strategies for advising clients and achieving better outcomes.
What is Tax Debt and How Does it Accumulate?
A tax debt is an amount legally due to SARS that has remained outstanding for 30 days or more. It can arise from taxpayer negligence or a lack of knowledge, but also intentionally where taxpayers lack sufficient funds to settle their liabilities or choose to use available funds to keep a business afloat.
Tax debt can span many years, some dating back 15 years following a historic SARS audit. An initial R2-million tax liability can, for example, grow to R10-million once understatement penalties and interest on late payments are added, creating significant liquidity pressure.
SARS has indicated that more than R25-billion in current tax debt is attributable to administrative penalties. Makhubu told the Tax Indaba that SARS is comparing its penalty regime with some OECD countries to determine whether South Africa’s approach is at the extreme end or comparable.
Remedies Are Available to Taxpayers, But Act Quickly
Baijoo said when it comes to preventing SARS from implementing collection measures, time is of the essence.
Receiving a Letter of Final Demand usually sparks panic, as the taxpayer has 10 business days to remedy the non-compliance. Depending on the circumstances, this could involve entering a payment arrangement, applying for suspension of payment and filing a dispute with SARS, applying for a compromise or paying the debt in full.
Daniels echoed the Commissioner’s warning, emphasising that relief measures allowing for part of the tax debt to be written off are not available to taxpayers who simply want to pay less than what they rightfully owe or who are trying to avoid or evade their legal tax obligations. SARS views such conduct in a serious light and can impose significant penalties.
Debt Relief Can Be Substantial, But the Burden of Proof Rests with the Taxpayer
The tax administration laws provide statutory debt relief mechanisms to assist taxpayers in managing outstanding tax liabilities. These include a Deferral of Payment arrangement, allowing qualifying taxpayers to settle tax debt over time. Although it offers cash-flow relief, it requires full repayment of the liability.
A Compromise of Tax Debt may be appropriate where the taxpayer can prove severe financial hardship. These settlement agreements between a taxpayer and SARS can result in reductions ranging from having to pay anything between 60% of the tax liability to as little as 10%.
The burden of proof rests with the taxpayer when requesting SARS to write-off a portion of the debt, such as interest and penalties.
A prudent taxpayer with a huge outstanding liability should consider undertaking a tax debt diagnostic assessment before SARS’ collection process reaches an advanced stage. The diagnostic will assist in determining the appropriate relief or dispute mechanism to utilise when engaging with SARS.
Pay in Full, Dispute or Debt Relief: Choosing the Right Path
By engaging in debt relief, the taxpayer admits that he cannot afford to pay the outstanding amount but acknowledge the full debt. On the flip side, if there is merit, the taxpayer can dispute the assessment and then fall back on tax debt relief depending on the outcome.
Note that a dispute with SARS does not remove the tax debt or the obligation to pay, nor SARS’s right to recover outstanding tax. However, the taxpayer may request a suspension of payment at the same time as lodging a dispute.
Daniels said dispute resolution is a very specific process and although optional, a taxpayer should request reasons from SARS. This is a right taxpayers should use as it is not always clear on exactly what basis SARS has raised an assessment and it will help the taxpayer to object with particulars.
He emphasised that the biggest risk in a SARS dispute is having a weak legal argument, specifically in terms of objection cases. The grounds set out in an objection can bind the taxpayer during the appeal process if the objection is disallowed, making proper tax legal advice essential.
For taxpayers with outstanding liabilities, immediate full settlement is not necessarily the only option. Getting the strategy fit for your circumstances right from the outset is critical. A thorough tax debt assessment and a well-founded legal argument can help determine whether to pursue dispute resolution or debt relief.
Written by Tax Consulting SA
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