When it comes to non-compliance, the South African Revenue Service (“SARS”) takes no prisoners, and has the full backing of the presidency, in its drive to stop tax evasion and other fraudulent activities related to the fiscus, with President Cyril Ramaphosa praising the revenue authority’s efforts in tackling tax dodgers and those benefitting from criminal proceeds.

Not only has SARS’ collections over the last fiscal period, exceeded the budget estimate, but, according to Commissioner Edward Kieswetter, SARS has also paid out a record high amount of refund, to deserving and compliant taxpayers, evidencing a competent revenue authority, drawing a clear distinction between the compliant and non-compliant taxpayer.

Shocking Tax Debt Stats, Parliament Shows its Support for SARS

What is of greater interest, in his parliamentary Q&A session which took place on Monday 16 May 2022, Finance Minister Enoch Godongwana, presented statistics reflecting approximately 3000 taxpayers, both individuals and corporations, owing approximately R192-billion in unpaid taxes, including interest and penalties. While this figure is substantial, it is noteworthy that the vast majority of this tax debt, relating to individual taxpayers, being around 68%, is owed by just over 70 individuals. 

On the corporation front, from the around 2 500 entities indebted to SARS, only 500 of them, account for approximately 76% of the total corporate tax debt.

This is odd, as SARS has in the recent months, greatly increased the pressure of its collection measures, with final demands (“the demand”) being sent to taxpayers for as little as R5 300.00, something which was previously unheard of.

The follow-through on these demands has also become more drastic, with taxpayers ignoring the demand, as they previously would, and waking up one morning with a large hole in their bank balance, or even being unable to pay their employees for the month.

It must be emphasized that this is known as a 3rd party appointment and is expressly provided for as a collection measure in the demand. It is not fraud, nor a bank error which the taxpayer may think they can rectify but is SARS exercising their increased collection powers.

A Level of Solution-Based Thinking

For the compliant taxpayer, SARS has evidenced their ability to provide efficient taxpayer service, however, when it comes to even a trace of non-compliance, the revenue authority has taken a firm, no-nonsense stance, with little to no lenience shown.

Taxpayers wishing to rectify historical non-compliance by means of voluntarily approaching SARS, either to disclose previously undisclosed information, or settle their outstanding debts to the revenue authority, in an attempt to ensure both current and future compliance, do have access to various solutions, from a legal standpoint.

The Compromise of Tax Debt is one such solution, and is aimed at aiding taxpayers, both individual and corporate, to reduce their tax liability by means of a Compromise Agreement (“the Agreement”), which is entered into with SARS.

The result of entering into the Agreement, is having your tax liability greatly reduced, to an amount which is affordable to the taxpayer, granting a much-needed reprieve and aiding the taxpayer on the road to recovery.

The Best Strategy to Remedying Non-Compliance

In order to protect yourself from possible jail-time, it remains the best strategy that you always ensure compliance. 

Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory, ensuring the necessary steps are taken to protect both yourself and your company, from paying for the sins of ignorance, or rectifying what could be chalked down to a simple human error. However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed.

As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures, but also being specialists in their own right, the taxpayer will be correctly advised on the most appropriate solution to ensure their compliance, both historically, and currently.

Written by Jashwin Baijoo, Legal Manager, Africa Tax and Compliance at Tax Consulting SA