R36 billion ‘gift’ to taxpayers from SARS
The South African Revenue Service (SARS) has written off over R36 billion in taxes in the 2023/24 financial year—a show of good faith towards those who seek to regularise their tax affairs with the taxman.
According to tax experts at Tax Consulting SA, the staggering figure may come as a surprise to many, especially in the context of SARS increasingly coming down hard on individuals, trusts and wealthier taxpayers as it seeks to maximize revenue.
SARS commissioner Edward Kieswetter has made it clear that SARS wants to make non-compliance both difficult and costly for taxpayers. When read in conjunction with the laundry list of potential criminal convictions in the tax acts, even the smallest of mistakes may cost taxpayers dearly.
However, the significant amount of tax write-offs and compromises the revenue service is making is also a clear indication that it is also willing to make tax compliance easier and beneficial to taxpayers who may be holding out.
“Those who are early adopters of the correct legal compliance approach, and simply cannot afford to settle their entire tax liability in one shot, options like debt compromises and deferrals remain available,” Tax Consulting said.
SARS’ compliance measures have resulted in an increased number of the population facing hefty tax bills which they cannot afford. In light of this, the service has come to the party to offer taxpayers ways of resolving these debt cases amicably, where taxpayers qualify for relief.
“Bearing credence to the reprieve provided by SARS, the revenue collector’s 2023/24 Annual Report revealed revenue losses in the amount of R36.15 billion, which is net of reinstatements and recoveries.
“The increase in revenue losses from the prior year, is due to an increase in Compromises of Tax Debt and permanent write-offs provided by SARS.”
Compromises explained
Compromise write-offs relate to agreements with taxpayers for SARS to forgo a portion of the tax debt, provided that doing so would secure the highest net return from the recovery of debt. Temporary write-offs are the current year’s write offs that are uneconomical to pursue.
SARS confirmed in October that there were significant increases in the issuance of final demands, as well as deferred payment arrangements.
Tax Consulting said that it is self-evident that SARS’ enhanced compliance initiatives are bearing fruit in volume and getting taxpayers compliant, even though it has yielded lower returns for the revenue authority.
“SARS’ increased inclination to consider, and, where appropriate, grant tax debt relief to taxpayers who are facing true financial hardship, remains steadfast.
“This is applicable to any form of tax debt, whether it pertains to Income Tax, PAYE or VAT, for individual taxpayers, companies and trusts, and is a saving grace to many taxpayers, when handled correctly and legally in engagements with SARS,” it said.
The tax experts said that SARS follows the same protocol for any tax debt that is outstanding, including those cases which involve more nuanced sources of income, including crypto assets.
This means that the taxpayer will be sent a Letter of Demand indicating what the outstanding debt is, as well as, including a time frame in which the taxpayer must settle the debt.
“What SARS doesn’t tell the taxpayer is that the tax laws provide for various tax debt relief measures that are available, in order to provide the taxpayer relief and a feasible way forward,” they said.
Where a taxpayer does not have legal merits to pursue any form of dispute pertaining to the tax debt, but has difficulty in settling their full dues, a Compromise of Tax Debt application may be available to the taxpayer.
The compromise is aimed at aiding taxpayers to reduce their tax liability by means of a Compromise Agreement, which is entered into with SARS. Where SARS is approached correctly, and the taxpayer’s financial circumstances warrant it, a tax debt can be reduced, and the balance paid off in terms of the Compromise.
“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.”
Tax Consulting said that it remains prudent for taxpayers to regularise their tax affairs by approaching SARS before the taxman approaches them. Getting ahead of tax problems opens more opportunities to resolve them.
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