In line with the strategic objective of making compliance easy, and in some instances seamless, the South African Revenue Service (“SARS”) has afforded taxpayers the assistance of obtaining compliance, even when they are unable to fully service their tax debts. This avenue of reprieve is available by means of the tax debt relief solutions contained in the Tax Administration Act, 28 of 2011 (“TAA”).
It is important to note, that these relief solutions are only accessible to the financially constrained taxpayer, and in instances where the taxpayer agrees with the total tax liability raised, or where a taxpayer does not have legal merits to pursue an objection but has difficulty in settling their tax debt. In such cases, a Deferral of Payment arrangement (“the Deferral”) where a tax debt is repaid in instalments, or a Compromise of Tax Debt (“the Compromise”) where a portion of a tax debt is written off, may be found to be appropriate relief.
Although both solutions are favourable to the indebted taxpayer, each has its own pros and cons, to both the taxpayer and SARS.
Do the Means, Justify the End
The key criteria for eligibility for either debt relief solutions are financial hardship of the taxpayer, coupled with if the proposed relief, results in the highest possible net return for SARS – this is weighed up against the net return which may be received, if collection measures are pursued.
Although the Deferral does buy the taxpayer much needed time to make some sort of financial recovery, it does not necessarily put the taxpayer in a more favourable tax position.
The Compromise on the other hand, has the dual function of reducing the taxpayer’s liability to bring them to a more favourable tax position, as well as has the possibility of payments being made in instalments.
In the end, total tax compliance is the ultimate goal, be it through the rectification of an error by SARS or securing a settlement which is more affordable to the taxpayer in a given instance.
The First-Mover Advantage
In order for taxpayers to remain in SARS’ “good books”, pro-actively ensuring on-going compliance remains the best strategy. Where the line has already been crossed, there is a first-mover advantage in seeking the appropriate tax advisory, ensuring the necessary steps are taken to remedy the non-compliance. 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, whilst navigating the intricacies of the tax debt relief solutions, and simultaneously staving off potential 3rd party appointments. It is vital that taxpayers act sooner rather than later before SARS comes knocking.