At the recent 10th Annual Tax Indaba, hosted by the South African Institute of Taxation, an interesting discussion was held on “SARS Debt Collection”, as facilitated by Keith Engel, CEO of SAIT. Leading experts in the tax and finance fields, Jashwin Baijoo (Head of Strategic Engagement and Compliance at Tax Consulting South Africa) and Tarryn Atkinson (Head: Tax Advisory, Technology and Enablement at FirstRand group), shared their views on how the banks are used to collect tax debts, and how taxpayers should approach SARS where cash-constrained, to resolve their tax debt woes.
From this discussion, it is evident that once SARS issues a 3rd party appointment to the bank (ITA88), the bank has no grounds to dispute the attachment of funds and must adhere to the 3rd party notice. Failure to do so would place the liability for payment of the debt on the bank, which is something no financial institute will accept, regardless of how many times you have taken your Private Banker out for lunch!
The same principle is followed where your employer receives a garnishee order against your salary. The key difference here is that only a portion of your monthly income will be deducted, in comparison to the ITA88, which could deplete your life savings in a moment, and literally break your bank!
From a practice management perspective, an exponential spike in SARS’ strong follow through on Notices of Final Demand has been seen in the last 12 months, including not just garnishee orders and 3rd party attachments through the bank, but also issuing of Civil Judgement against indebted taxpayers.
There are ways to survive SARS’ Tax Debt Collection tactics in instances where taxpayers owe SARS a large debt, which is not in dispute, and simply do not have the financial means to settle this. We have seen many instances where unaffordability, either due to interest and penalties having snowballed beyond affordability, or life having delivered some hard knocks, has been considered by the revenue authority.
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 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, 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.
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, ensuring the necessary steps are taken to protect yourself, and your economic interests from falling victim to SARS’ Collections team, spurred on by the tax-base shrinkage. 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. This will not only serve to safeguard the taxpayer against SARS implementing collection measures, but also ensure the taxpayer being correctly advised on the most appropriate, and affordable compliance strategy!
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