Sars’ project AmaBillions: a guide to clearing your tax debt

As Sars (South African Revenue Services) continues to enhance its Compliance Programmes by modernising its systems and integrating artificial intelligence to better identify instances of non-compliance, so too is the revenue collector bolstering the manpower behind its tax debt collections team.

In a strategic move, National Treasury has allocated additional funding to Sars’ resourcing initiatives, effectively boosting its operational capacity and reach, in outstanding tax revenue collection, introducing “Project AmaBillions”?

This increased scrutiny of taxpayer affairs and intense focus on filling the fiscal pothole emphasises the importance of taxpayers staying vigilant and ensuring their tax affairs are in order.

War Chest Distribution

It has been alluded to that the project known as “Project AmaBillions”, in the corridors of Sars, is designed to intensify Sars' tax collection efforts across a number of taxpayer segments, and through various procedural channels. If the whispers are true, taxpayers can expect a noticeable uptick in compliance enforcement, audits, and recovery actions being implemented by Sars.

While this is a positive indication and will increase tax revenue collection, it is also a signal to non-compliant taxpayers that Sars’ war on non-compliance rages on, with reinforcements inbound!

The Cavalry Will Arrive

Where an insurmountable tax debt is rightfully due to Sars, including interest & penalties piling on, it must be kept in mind that tax debt relief mechanisms exist to assist the financially constrained taxpayer. In the previous tax year alone, Sars granted relief amounting to R36.5 billion through settlements and compromises. These avenues remain open and can be highly beneficial for cash-constrained individuals or businesses.

Sars’ amicable approach to debt relief may come as a shock to taxpayers, especially in light of the revenue collector’s strategic objectives, which Commissioner Kieswetter has been driving. From these objectives, the most daunting for taxpayers is that of making non-compliance both hard and costly. 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.

For those unaware of their tax debt, or those under the impression that hiding in the shadows is the correct approach, their downfall may be signalled by a Letter of Final Demand.

Final Demands

In recent months, some taxpayers have reported receiving correspondence that appears questionable, including e-mail correspondence indicating a tax liability and providing bank details to make a payment.

As a rule of thumb, any and all correspondence received from Sars should be immediately addressed.

A Letter of Demand typically allows only 10 business days for a formal response. Taxpayers must act swiftly, making use of one of the available resolutions, which include (but are not limited to) submission of a Suspension of Payment (“SOP”) request, setting up a payment arrangement, or negotiating a Compromise of tax debt.

With a SOP being only an interim protective measure, although necessary in some instances to ensure that Sars does not attach funds from the taxpayer's bank account whilst a merit review is underway, it by no means finalizes an outstanding tax debt.

Deferral of Payment

Aside from temporarily suspending collection measures being implemented by Sars, another available option to assist taxpayers is a Deferral of Payment arrangement. A key point to note on any Deferral is that it does not speak to a significant reduction of the tax liability, but simply payment of the full amount, in monthly instalments.

Compromise of Tax Debt

Taxpayers wishing to rectify historical non-compliance using voluntarily approaching Sars, either to rectify prior under-declarations, inaccurate losses, or settle their outstanding tax debts to the revenue authority, in an attempt to ensure both current and future compliance, do have access to specific tailored solutions, from a legal standpoint.

The Compromise of Tax Debt is one such solution, and is aimed at aiding taxpayers, both individual and corporate, to reduce their tax liability by means of a Compromise Agreement, which is entered into with SARS.

This involves a permanent write-off of interest and penalties, as well as a potential reduction to the capital amount owed to Sars.

Why Legal Help Matters

It is therefore vital to verify the authenticity of any Sars communication and understand your tax liability fully. The safest course of action is to engage a qualified tax professional who can run a comprehensive diagnostic on your tax affairs and determine your compliance status.

If you are found to be non-compliant, your first and most critical line of defence should be a seasoned tax attorney. Legal representation ensures that disclosures are made under legal professional privilege—an essential safeguard in matters involving Sars.

A legal representative is best supported by a robust team comprising skilled accountants, attorneys, and negotiation experts. This multi-disciplinary approach significantly enhances the chances of securing favourable outcomes, such as tax debt write-offs or settlements.

Despite the stricter enforcement on non-compliant taxpayers, including hefty fines and stints behind bars, SARS remains committed to helping taxpayers who seek voluntary compliance, trying to make it easy. For 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 the best compliance course.

Approach SARS Before They Approach You

With this heightened focus on collections, it's crucial for anyone with unresolved tax debt to take proactive steps. If you receive a Letter of Demand from SARS, or know that you have a tax debt, but are unable to afford settling it, and do not know which way to turn, it is strongly advised that you consult a specialist tax attorney or a professional tax debt negotiation team immediately.

Delaying action could prove costly—don’t let “Project AmaBillions” take your millions!

 * Baijoo is an associate director and head of strategic engagement and compliance, and Bhayla is a tax attorney at Tax Consulting SA.

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