A tax debt typically stems from negligence, although in some cases it can result from intentional non-payment or other compliance infringements. Understanding how a tax debt arises is key to managing it effectively. Some common causes include:
- Administrative penalties for late or non-submission of tax returns
- Estimated assessments due to failure to file tax returns
- Filing tax returns without payment
- Partial payment of tax liability, or unpaid interest and penalties
The Tax Administration Act (TAA), Section 234, outlines various acts of non-compliance that SARS considers criminal offenses. These include wilful actions or failures to act, which can lead to fines or imprisonment of up to two years. Section 235 goes further, addressing tax evasion and fraudulent refunds, which can result in up to five years of imprisonment.
Navigating High-Value SARS Tax Debt
When dealing with complex or high-value SARS tax debt, one of the most crucial decisions is selecting a representative who can offer legal professional privilege for all sensitive information. This ensures that any confidential discussions remain protected during the process.
SARS’ Collection Methods
SARS’ Debt Management Team, often in conjunction with the SARS Asset Forfeiture Team or the Sheriff of the Court, has a range of tools at their disposal for collecting outstanding tax debt. These include:
- Collection via third-party appointments (employers, banks, debtors)
- Issuing a judgment and blacklisting with credit bureaus
- Seizing and auctioning off assets
- Repatriating offshore interests
- Forced liquidation or sequestration of the taxpayer’s estate
However, taxpayers have options. If you’ve received a Letter of Demand from SARS and intend to dispute the tax liability, you can request a Suspension of Payment through a tax attorney. This automatically halts collection efforts while the dispute is in progress.
Tax Debt Resolution Options
Even when a legal objection is not possible, relief measures exist. The Compromise of Tax Debt (“the Compromise”) allows taxpayers to negotiate a reduction of their liability through a Compromise Agreement with SARS. If approached correctly and if financial circumstances warrant, the tax debt can be reduced, with the remaining balance paid according to agreed terms.
For taxpayers facing significant tax debt, especially in the millions, SARS can be aggressive in its collection efforts. Having an experienced tax attorney, skilled in trial advocacy, provides a significant advantage in legal negotiations and document submission. Moreover, following the proper legal channels under the TAA ensures that SARS cannot withdraw funds from your bank account without consent.
Additionally, Section 256(3) of the TAA allows taxpayers who have successfully entered into a Deferral of Payment or Compromise Agreement to apply for a compliant TCS pin, even if they still owe taxes.
Ultimately, achieving total tax compliance—whether through resolving errors or negotiating settlements—should be the primary goal.
