During Finance Minister Pravin Gordhan’s budget speech on 22 February 2017, he introduced an increased dividends tax as well as a new tax bracket targeting the wealthy and trusts.

It has accordingly become more necessary than ever to ensure that any and all applicable income tax deductions are taken advantage of in order to properly manage one’s tax obligations. However, this is not always as “cut and dried” as one might imagine. The South African Revenue Service (“SARS”) clearly plans to crack the whip when it comes to collecting taxes as they attempt to reach their target of 1.266 trillion Rand for the 2018 fiscal year, with 0.482 trillion Rand thereof to be raised from personal income tax alone.

There is an ever-increasing number of people with unsustainable, large tax debts who attempt to pay these debts off as, when and if they can. However, with fines and interest on the tax debt accruing on a daily basis, any amount paid towards the satisfaction of such debt is essentially being thrown into a black hole.

So, what can be done about it?

The good news is that you can stop having sleepless nights and wondering whether you’re going to lose your house, your car or your business assets.

The Tax Administration Act, 28 of 2011 (“the Act”) provides for several helpful avenues to follow that can be made use of to effectively manage (or, in some cases, lessen) the obligation to pay the tax debt, subject to the fulfilment of certain requirements.

Briefly, these are:

  1. Section 164 of the Act, which effectively pends the obligation to pay any tax debt until such time as the taxpayer submits an objection or an appeal to SARS or until the objection has been adjudicated upon.
  2. Section 167 of the Act is used to enter into an instalment payment arrangement whereby an offer is made to SARS for repayment of a tax debt in monthly instalments.
  3. Section 200 of the Act allows the taxpayer to make a once-off, all-encompassing offer to SARS in terms of which SARS will write off a portion of the tax debt (the application sits before a committee and the committee makes decisions on a case-to-case basis).

Naturally, the abovementioned applications to SARS do not come without their pitfalls and nuances. It is therefore recommended that you approach a legal professional to conclude such applications on your behalf, taking into account relevant case law and further tax legislation.

In addition to managing the tax debt itself, it is advantageous to engage with the SARS official dealing with your matter being mindful of administrative law. In short, administrative law governs the relationship between government departments and the citizens of South Africa and ensures that the government gives effect to section 33 of the Constitution (which deals with the right to just administrative action) by dealing with citizens in a manner that is lawful, reasonable and procedurally fair.

The Promotion of Administrative Justice Act, 3 of 2000 (colloquially referred to as “PAJA”) gives further effect to section 33 of the Constitution by allowing the High Court to review the decisions of administrators (such as SARS officials) who do not act in accordance with their obligations in terms of the law. The Act sets out many legislative obligations that SARS officials must follow and, when used in conjunction with PAJA, becomes very effective in co-ordinating with the official towards a favourable outcome for the taxpayer. The caveat is that SARS is provided with powers in tax legislation that many consider to be draconian, such that in many instances the conduct undertaken by them in collecting tax debts is legally justifiable.

The aforegoing is therefore very much contingent on the facts of each individual taxpayer’s case. Should you wish to discuss either your personal or your business’ tax indebtedness (whether it relates to Income Tax, VAT, PAYE or SDL), please do not hesitate to contact
Kyle Freitag at our Cape Town offices to set up a consultation. Time may very well be of the essence.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Kyle Freitag
C & A Friedlander Inc.
The Intersection between Administrative Law and Tax Debt Management