The revenue authority’s recently published monthly collection data showed R95 billion in outstanding taxes being collected for the 12-month period ending March 2025. Although an impressive and unprecedented collection windfall, a staggering R422,6 billion in undisputed tax debts, remains outstanding as at the end of May 2025!
Spending Taxpayer Money, to Collect Taxpayer Money
In its pursuit of making non-compliance hard and costly, and chasing South Africa’s largest ever tax revenue collection pay-day, SARS has taken the idiom of “you have to spend money, to make money”, to a whole other level.
Through an additional expenditure allocation of R7,5 billion over the Medium-Term, SARS has on-boarded around 1,700 new resources, from matriculants, to seasoned tax and compliance experts.
Sounds a lot like Survivor, or better yet, the Hunger Games – only the strong will survive…but no, the intention behind this strategic move, is to spend a few billion, to collect Amabillions; R20 to R50 billion more, per year, to be precise.
With a current debt book totaling over R530 billion, SARS’ assertive collection efforts do serve the best interests of the South African economy, even if the taxpayer’s finding themselves with a Civil Judgement against their names, do not think so.
SARS’ debt book is currently comprised of all tax types, including personal and corporate income tax, as well as value-added tax and unpaid payroll taxes. This includes taxpayers who willfully avoid or evade the payment of their taxes, which amounts are well within their means to settle, and who should not be surprised when SARS empties out their bank accounts.
But what happens to those individuals, or small businesses, who, due to unforeseen circumstances, simply cannot afford to settle their tax debt to SARS? Whether it be more time needed (monthly instalments), or interest & penalties having snowballed the debt well beyond affordability and some financial reprieve is needed, there are legal tax debt relief mechanisms available!
A Reprieve for the Financially Aggrieved
- Compromise of Tax Debt
Where a taxpayer is truly experiencing financial hardship, they may qualify for a compromise of tax debt. This is where the taxpayer, who cannot afford to settle the entire amount, approaches SARS and asks for a write-off of interest and penalties which have been attributed to the capital amount owed. The taxpayer then offers to settle (in part or in full) the capital amount owed to SARS, either by lumpsum or instalment payments. This proposal, when accepted by SARS, must be reduced to writing.
The biggest attraction to a compromise is the write-off of interest and penalties, which is a life jacket afforded to taxpayers that are genuinely experiencing financial hardship but wish to settle their debt and remain compliant moving forward.
It is also important to note that a compromise can be applied to any form of tax debt and across all tax types, be it income tax, VAT or PAYE, and regardless of whether it is for an individual, trust or company. There is relief available to all taxpayers who qualify for the compromise of tax debt.
- Payment Arrangements with SARS (Deferral of Payment)
Taxpayers that do not satisfy the requirements for a compromise but cannot afford to settle a tax debt in a lump sum payment, still have the option to apply and enter into a payment arrangement with SARS, which is known as a deferral of payment. This is where the taxpayer applies to SARS, subject to certain conditions, for a payment agreement in which the taxpayer can settle the outstanding amount over monthly instalment payments over time.
This is an attractive option to many taxpayers, as it lessens the burden and reduces a large number that is expected to be settled immediately, to one that is manageable and paid in monthly instalments which are convenient to the taxpayer and SARS.
Be Proactive – Not Reactive
To protect yourself from SARS, ensuring compliance remains the best strategy. 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 balance from paying the price for what could be the smallest of mistakes. However, where things do go wrong, SARS must be engaged legally on all fronts.
As a rule of thumb, all correspondence received from SARS should be immediately addressed by a qualified tax specialist or tax attorney, which will serve to safeguard taxpayers against SARS implementing collection measures. It is recommended that a request for compromise or payment arrangement, be made in a proactive manner, even before a Letter of Final Demand is received, rather than waiting for SARS to come knocking at your door.
Through these carefully negotiated solutions, there is the possibility of a fresh start a fair and balanced outcome that recognises the taxpayer’s situation and provides the breathing room necessary to regain financial stability, whilst ensuring tax compliance this 2025 tax return filing season!
