The days of Sars sending indebted taxpayers demand upon demand with no action are long behind us. In-line with their 2023 Strategic Objectives, Sars now wastes no time in instituting collection measures against non-compliant taxpayers; if you have a tax debt, you will soon be paid a visit by the Sheriff of the Courts, or even Sars’ own Asset Forfeiture Team!
Best case scenario, you wake up one morning to find your bank balance drained, with no prior notice, and upon questioning your bank, are informed of an ITA88 being received from Sars, which financial institutes have no power to dispute.
This may sound drastic, but Sars has reached the end of its patience with non-compliant and indebted taxpayers, who deem their tax-compliance as secondary to almost everything else in their lives. In light of the 2023 filing season being well underway, Sars is on the lookout for any taxpayer who fails to timeously submit their tax returns or settle a tax debt due to the fiscus.
Penalizing a Lack of Punctuality
As a starting point, tax return filing obligations must be met, as we all know. Where there is a failure to meet the filing season deadline, Sars will have no patience for late submission, and the monthly levying of administrative penalties will commence. These are recurring penalties, in the region of R250,00 per outstanding tax return, per month outstanding.
Whilst this may not sound like a heavy price to pay for your non-compliance, the monthly administrative penalties can quickly rack-up, where multiple returns are outstanding for an extended period of time. Practically, we have seen this climb, per below excerpt:
If this is not enough, there are also under-payment penalties which Sars impose, together with interest on both under-payment, and late payment, currently sitting at a rate of 10.5% per month. Over time this can snow-ball your original tax debt, to double, or even triple the amount being owed to the revenue authority; you are liable for the full amount!
Pay the Piper, or Else …
Don’t be like the Ostrich burying its head in the sand at the first sign of danger; you may think that you are safe as Sars have not collected against your tax debt, yet. Rest assured, Sars can see your each and every move, even those made in a foreign country.
Like all strategic movers, Sars has been biding their time, focusing on the most prevalent debts, and working their way through each and every non-compliant taxpayer, calculating interest upon interest and imposing penalties across board.
Sars has been consistently increasing the pressure of its collection measures, with final demands being sent to taxpayers for each and every debt owed to Sars. With the follow-through on non-responsiveness becoming more drastic, collection proceedings can include, but are not limited to:
- Collection of an outstanding tax debt via Third-Party Appointment, i.e., Employer, Bank, or Debtor of the taxpayer;
- Taking a civil judgement against the taxpayer, including potential credit bureau blacklisting; and
- Attachment and auction of taxpayer assets to satisfy the tax debt owed to Sars.
A word to the wise, if a final demand is received, being the start of the collection process, don’t be an Ostrich. With the fiscus low on finances, Sars are aggressively, and pro-actively pursuing collections, which start with the final demand. What this is, in substance, is a formal letter demanding full payment of your tax debt, within 10 business days, failing which, they will proceed with quick and effective collection of the debt. With the increased number of Civil Judgements taken against taxpayers in debt to Sars, it has become clear that after the 10 days have lapsed, Sars are under no obligation to notify you before acting on the threat of collection!
Extra Coin is Not Worth a Criminal Charge or Civil Judgement
Now is not the time to take risks. Sars’ approach clearly shows we are dealing with a competent revenue authority, so why risk it when compliance is evidently the preferred way forward, which Sars is willing and ready to assist all taxpayers with, as advised by Commissioner Edward Kieswetter, stating that Sars will do its best to “make it ease and seamless for taxpayers when they transact with the organization”.
This statement, when Sars is correctly legally engaged, is evidently made by a revenue authority that is steadily aligning itself with international standards and climbing back to its former prestige as one of the world’s finest.
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 bank account, from paying the price for what could be the smallest of mistakes. However, where things do go wrong, Sars must be engaged legally, and although a tough fight, we generally find them ultimately 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 amicably settle their debt with Sars.
Written by Jashwin Baijoo, Head of Strategic Engagement and Compliance at Tax Consulting SA; and Kiara Naidoo, Tax Attorney at Tax Consulting SA