TAX DEBTS 101: FACTS VS FICTION

WHAT YOU NEED TO KNOW

Received a Final Demand from SARS? Where did this tax debt even come from? Is the notification really from SARS?

If you have received a call or SMS from SARS, alleging you have an outstanding tax debt, in all likelihood, this is not fraud, but SARS giving you a gentle reminder before things get out of hand and more aggressive collection measures become necessary.

In recent times we have seen a drastic spike in the number of taxpayers who are receiving these gentle reminders, and ignoring them until a formal Final Demand is received from SARS and the collection process commences.

What many taxpayers do not realise is that the longer you wait, or play ignorant, the greater your tax debt becomes, until it spirals out of control, with interest upon interest and administrative penalties, to the point where you cannot afford to pay it off, even if you want to.

Some taxpayers are of the opinion that if correspondence is received from SARS, but is not a Final Demand, they may ignore it and the tax debt will go away. Unfortunately, we have seen instances where taxpayers have received such correspondence and then not heard from SARS for years, until suddenly a Final Demand is received and the tax debt is now double, if not triple what it originally was.

In the last year or so, more specifically in light of the current COVID-19 pandemic, we have seen a significant increase in SARS using banks to collect alleged tax debts, in an attempt to recover funds, filling the deficit in the fiscus.

In order to protect yourself from SARS, 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 requesting a suspension of payment, protecting your bank balance whilst the matter is resolved. However, where things do go wrong, SARS must be engaged legally, and we generally find them utmostly 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 tax compliance.

On a level of solution-based thinking, the most appropriate solution is entirely dependant on the taxpayer’s mindset and compliance history.

It may be the case where a taxpayer is simply unable to pay off the tax debt within the 10 days as per the Final Demand, due to their funds being held in a fixed deposit or notice account, and just need a bit more time.

On the flip side, the taxpayer could very simply not be in a financial position to afford to pay off the entire tax debt and requires a reduced settlement amount, to be considered as the full and final settlement of the tax debt.

Bearing the above in mind, it must also be noted that SARS is by no means flawless, and sometimes even the all-powerful revenue authority can make a mistake with a taxpayer’s assessments, in which instance same must be brought to their attention, taking the form of a formal dispute against such assessment.

Received that Final Demand from SARS – Respond NOW.

Not sure of where the tax debt came from – Dispute NOW.

Notification received from SARS – Act NOW.

We firmly stand by the principle that compliance is always the best solution, and whatever that may require, needs to be done, not some years down the line, but NOW!

AUTHOR

Jashwin-Baijoo

Jashwin Baijoo
Tax Attorney