The vision of a “A Smart Modern SARS with unquestionable integrity admired by all” – profound words shared by Dr Johnstone Makhubu, SARS Commissioner, at the 13th Annual Tax Indaba.
Jashwin Baijoo
Partner and Head of Strategic Engagement and Compliance
Admitted Attorney, LLB, LLM (Tax)
Beyond words, SARS’ actions have more than echoed this sentiment, making clear to the world, that political power, fame, and money, cannot keep non-compliant taxpayers off SARS’ radar.
With many successful, targeted compliance & collection initiatives under its belt, including criminal prosecution, SARS’ scope most recently targets Vusimuzi “Cat” Matlala.
Matlala, already a focal point for numerous investigations on fraud, corruption and money-laundering, must now too, deal with the taxman, on a R14,2 million bill racked up under his company, Medicare24 Tshwane.
With SARS now in the mix, the potential for imposing personal liability on Matlala becomes very real, and that too, simply by SARS’ statutory powers enshrined in the tax laws.
Prosecution via Personal Liability
With SARS’ enhanced non-compliance detection capabilities and a sharp focus on both past and future non-compliance, correct tax and legal guidance has never been more critical. The most prudent approach to be taken, is to heed SARS’ warning that non-compliance will be both hard and costly for the offending taxpayer, with the tax laws offering up a laundry list of criminal offences for tax non-compliance, which in Matlala’s case, will bolster up his already impressive rap-sheet.
For the average business owner, and even the big wigs, a common misconception is that a company’s debts cannot be imputed to directors / shareholders, or other persons who directly or indirectly have control over the business’s financial affairs.
To clear this up – the imputation of personal liability, is already enshrined in our tax laws. This would be triggered and apply to any person who controls or is regularly involved in the management of the overall financial affairs of the company, where the person’s negligence or fraud resulted in the failure by the company to pay its tax debts.
Upon activation, lawful collection steps include freezing of personal assets and 3rd party appointments to any person / institution holdings fund, or owing funds, to the offending taxpayer.
The tax laws do not specifically presuppose the existence of formal responsibility in respect of the finances of the company. They instead merely require that a person exercise a degree of control over or regular involvement with its overall financial affairs.
Specifically, the ambit of section 180 of the Tax Administration Act, 28 of 2011, therefore, also relates to those persons who exerted a form of pre-emptive or informal control over the financial affairs of the company, which may include shareholders, directors and other persons who were factually involved.
Contravention of tax laws not only tarnishes an individual or company’s reputation but can also result in hefty financial penalties, legal repercussions, and potential incarceration.
SARS Modernization 3.0 – The Expanding Use of Third-Party Financial Data
Under the leadership of prior Commissioner Kieswetter, SARS has been steadily rebuilding its institutional capacity and investing heavily in digital modernisation. Continuing the legacy, Commissioner Makhubu emphasizes:
“The future of tax administration is not people versus technology, but it is people and technology working together to make compliance easier, services faster, and enforcement more precise. Technology must strengthen human capability, not replace it.”
In practical terms, this means SARS is increasingly integrating vast streams of third-party financial data into its compliance ecosystem. Financial institutions, employers, medical schemes, investment platforms and other reporting entities provide structured data to SARS, enabling the revenue authority to compare taxpayer declarations against independently sourced financial information.
Risk profiling models can identify taxpayers who may have understated income or claimed inappropriate deductions and once flagged, these cases can move quickly from automated engagement to enforcement through robust historical audits, or directly to Civil Judgement against the offending taxpayer where more amicable collection attempts have been ignored.
Where Data and Debt Collection Meet
The connection between these developments and Project AmaBillions is increasingly clear. A modern, data integrated revenue authority does not rely on chance discovery. It relies on information.
Identifying undisputed tax debts begets SARS identifying taxpayer assets (both local and offshore), verifying financial activity through supplied data and coordinating enforcement action across both civil judgments and third-party appointments.
Collectively, this forms part of SARS’ modern debt collection, reshaping how SARS engages with taxpayers. The revenue authority now engages taxpayers through a range of digital platforms, including SMS notifications, online portal alerts and even messaging services such as WhatsApp.
While these messages may feel informal compared to traditional letters of demand, they form part of a deliberate strategy to ensure taxpayers cannot plausibly claim to have missed important compliance notifications and nudge taxpayers towards compliance.
Enhancing Voluntary Compliance Through Technology and Trust
Where you find yourself, or your business, as in the case of Medicare24, staring down the barrel of SARS’ collections cannon, it is imperative to ensure a timeous response to SARS, with all correct supporting documentation. If you fail at this first hurdle, and you have made an incorrect disclosure to SARS, you will feel the walls closing in when those Additional Assessments are raised, or Final Demands received for overdue tax debts.
The nail in the coffin, in the case of an Audit, is always the Understatement Penalties, capping at a bank-breaking 200% of the capital taxes due! Keep in mind, SARS are empowered to open an Audit on historic tax submissions, which, at the time, may have slipped through the cracks.
In instances of non-compliance with tax laws, legal professional privilege is a must, especially where SARS have suspicion of, or have already detected current/historic non-compliance, or “risk(s)”.
As a rule of thumb, all correspondence received from SARS should be holistically addressed by a by a strong multi-faceted tax, legal, and financial team, especially those which are time sensitive, noting repercussions where the response dates are not met.
Law abiding taxpayers who seek to address their tax debts are able to remedy their non-compliance and save their businesses by playing open cards with SARS. Enlisting the help of a strong multi-faceted tax, legal, and financial team – the “A-Team”, will assist businesses to navigate the intricacies of the tax debt relief mechanisms, and simultaneously stave off bankruptcy. It is vital that taxpayers take action sooner rather than later, before SARS comes knocking.
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