Taxpayers should be aware that if you have outstanding tax debt, SARS has the power to reach into your bank account and take the outstanding funds by instructing your bank, as its agent, sometimes even without notifying you.
Chances of this happening increase especially where the end of the tax year is approaching and where SARS is below budget.
In fact, the Tax Administration Act (“TAA”) provides that SARS may notify any third party to pay any money it holds on your behalf to SARS. Failure to comply makes the bank (or even your employer) personally liable for your debt.
SARS is kind compared to the French
The French Revenue Authority is particularly known for having piloted this tactic. In France, even if the Revenue Authority had no basis to collect, you will be held liable for the legal fees if there is some fault on your part, such as not responding to notices or not having kept your taxpayer particulars up to date.
Taxpayers are especially annoyed if SARS acted on a false tax debt or if proper procedure was not observed. SARS is required to adhere to the procedure prescribed by the TAA, which imposes procedural requirements onto them; for example, to send final demand ten business days before it proceeds with collection.
Alarmingly, however, there are cases where SARS have withdrawn funds from taxpayers’ accounts without them being notified. Whether this is a result of deficient communication from SARS or a flagrant disregard for the prescribed tax procedure, is not relevant, as the withdrawal can be reversed either way.
No head in the sand
Taxpayers must be alert when it comes to any attempts from SARS to communicate with them, as ignorance of the legal process will be to your detriment. Almost always the biggest mistake taxpayers make is ignoring their tax status, perhaps hoping the problem will go away.
Here are some useful tips:
Regardless of any assurances by your tax practitioner or friend who has been doing your taxes, draw a “statement of account” from your SARS e-filing profile. If the statement shows an outstanding debt, albeit erroneously, you must act immediately.
Where you have objected against an assessment, this does not suspend the SARS collection process. You must always do a separate suspension of payment request and this must contain the correct motivation.
Even where there was an obvious mistake on SARS’ part, incorrectly claiming that you owe taxes, or where a SARS official has assured you that the mistake will be rectified, this simply does not legally bind them to solve your problem. The debt collection department of SARS is a separate business unit, with its own objectives. It is removed from normal tax assessments and will pursue any outstanding debts if no suspension is in place.
The strong collection powers of SARS must be placed in perspective that the law must protect society to ensure that everyone pays its taxes, and defaulters must effectively be dealt with. Unfortunately, the innocent taxpayer may also get the treatment under these harsh provisions, but as tax is ultimately a function of law, in these instances there is always a legal recourse.
Author: Jean du Toit, Attorney at Tax Consulting SA