SARS is coming after these taxpayers for R513 billion
The South African Revenue Service (SARS) noted that it would intensify its efforts to recover over half a trillion rand from taxpayers, particularly on VAT and PAYE.
SARS sounded the alarm at the 12th annual Tax Indaba over a staggering R513 billion in unpaid taxes owed to the fiscus.
Deputy Commissioner Johnstone Makhubu said the number highlighted critical concerns about fiscal health and recovery strategies, with SARS under pressure to meet a revised R1.986 trillion revenue target for 2025/26.
“This R513 billion is the amount we opened the financial year with on 1 April. It had grown from around R415 billion, which was the closing balance in the prior year,” Makhubu explained.
According to Makhubu, the sharp increase is largely driven by two main tax categories: VAT and Pay-As-You-Earn (PAYE). “You would appreciate these are trust monies,” he said.
“PAYE is collected by employers on behalf of the tax administration, and VAT is the second largest portion of outstanding debt we see in our books.”
The figure includes not only capital amounts but also penalties and interest.
“As a tax administration, we do levy quite hefty penalties where we suspect there is fraud or gross under-declaration,” Makhubu noted.
To recover the money, SARS has adopted a multi-pronged approach. “We have brought in about 15 external debt collectors,” he said.
“Our theory is that when debt becomes quite aged, it is difficult to collect. So we’ve outsourced a portion of this where we believe the debt is potentially complex and aged.”
Additionally, SARS is using extra funding allocated by the finance minister to recruit more internal resources and tighten its enforcement strategy.
“We are finding that this debt is no longer as easy to collect, so we need to move up the compliance value chain,” he said.
“That means moving beyond third-party appointments and actually seeking civil judgments as well as writs of execution, especially where taxpayers are not cooperating. Where we don’t sense cooperation, we will intensify the legal instruments we have in law.”
Some entities set up purely to defraud the fiscus
At the same time, Makhubu stressed that SARS is open to working with taxpayers who engage in good faith.
“However, there are taxpayers who ignore us or blatantly don’t comply,” he said. In those cases, he warned that the revenue service will intensify its legal enforcement.
When it comes to writing off uncollectable debt, SARS also follows a strict process. “The Tax Administration Act makes provisions under what circumstances you can either temporarily or permanently write off debt,” Makhubu explained.
“One of the guiding principles is whether the debt is economical to pursue. There are instances where the amount you spend chasing the debt is greater than the debt itself.”
Last year, SARS wrote off about R36 billion in tax debt. These are cases where either the company was liquidated, the estate was wound up, or the entity no longer legally exists.
Makhubu said that in some instances, entities were set up purely to defraud the fiscus. In those cases, SARS pursued the directors’ personal liabilities.
However, if directors are deceased or have fled the country, SARS may consider a temporary write-off until movement allows it to reactivate collection. Makhubu added that SARS has stringent governance processes in place.
“Any debt considered for write-off goes through internal governance committees, and the Auditor-General and the Ministry of Finance are notified annually of any write-offs or compromises,” Makhubu said.
The challenge, however, is balancing fiscal prudence with fairness. “We are very clear that when we consider potential write-offs, we are not driving behaviour that may lead to deterioration in compliance levels,” he said.
“In some cases, before a write-off is approved, we insist that civil judgments and writs of execution are pursued against directors.”
“That talks to piercing the corporate veil, but it means debt may stay longer in our books while we pursue it.”
Makhubu acknowledged that some taxpayers deliberately use delay tactics, dragging out legal processes so the debt ages further.
“But from a prudence point of view, we have always insisted that, at a minimum, directors who perpetrated the debt against the fiscus must be personally held liable. That in itself becomes a legal challenge, as they often resist using every resource they have.”
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