As a South African tax resident, one of the scariest situations you can find yourself in is where you have a large tax debt owed to SAR, which you cannot afford. You would hope and pray that the revenue authority shows you mercy, and imagine they offer to write-off a portion of your tax debt; well, imagine no more …
Jashwin Baijoo
Head of Strategic Engagement and Compliance
We have recently seen SARS Officials reaching out directly to indebted taxpayers, offering payment arrangements in the event that the taxpayer cannot make full payment of their debt:
Like all strategic movers, SARS has found a way to alleviate the pressure on the fiscus caused by the drastic decline in Corporate Income Tax Collection, being from R77 billion in 2021, to only R49 billion at the end of 2023’s 2nd quarter.
Whilst this may come across as SARS relieving your stress, in reality, these emails are last ditch attempts by SARS to collect what they can to fill the ever-growing fiscal pothole. What you should be aware of, is where no payment attempt is made, SARS WILL hand you over to external debt collectors!
Receiving a “Notice of Intention – Handover to External Debt Collectors” may come as a surprise to indebted taxpayers, however this is not the first time SARS has outsourced its debt collections.
It was further confirmed by SARS, at the 10th Annual Tax Indaba, hosted by the South African Institution of Taxation, that theses Notices have yielded good collections. From a market perspective, this is most likely based purely on taxpayer fear of being handed over.
From SARS’ comments on the Indaba discussion, titled “SARS Debt Collection”, as facilitated by Keith Engel, CEO of SAIT, the procedure would be handing over to external collectors, where SARS has hit a stone wall on collecting.
When faced with an insurmountable tax debt problem, there are pro-active steps which can be taken to prevent not just the handover to debt collectors, but also to protect your bank balance from a SARS attachment!
We have seen, in select cases, some empathy shown by the revenue authority, where a large tax debt has snowballed and become wholly unaffordable to the taxpayer. In most instances this is, either due to interest and penalties having mounted, or an adverse shift in financial circumstances.
Taxpayers wishing to rectify historical non-compliance by means of voluntarily approaching SARS, either to rectify prior under-declarations, inaccurate losses, or settle their outstanding tax debts to the revenue authority, in an attempt to ensure both current and future compliance, do have access to specific tailored 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, 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. This grants some reprieve and aids the taxpayer in regaining both peace of mind, and some financial certainty.
In order to protect both your credit record and bank balance, 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, and legal support.
This will ensure the necessary steps are taken to protect yourself, and your economic interests from falling victim to SARS’ Collections team, or even worse, being handed over for legal debt collection!
As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney. This will not only serve to safeguard your financial interests against SARS implementing collection measures, but also ensure you are correctly advised on the most appropriate, and affordable compliance strategy!
Don’t Let Your SARS Tax Debt be the Reason for an Empty Stocking this Festive...