SARS is coming after South Africans who owe as little as R5,000

South Africans with outstanding tax debt are facing tougher collection action from the South African Revenue Service (SARS), with taxpayers owing as little as R5,000 now receiving Final Demand letters.

This comes as SARS steps up efforts to recover a tax debt book worth more than R600 billion, of which R280 billion has been identified as collectable.

SARS Commissioner Johnstone Makhubu said the tax authority is targeting the collection of R126 billion of this recoverable amount during the current year.

Speaking at the SAIT Tax Indaba 2026, Makhubu also warned taxpayers not to misuse debt-relief programmes designed to help those facing genuine financial difficulty.

Tax Consulting South Africa Partner and Head of Strategic Engagement and Compliance, Jashwin Baijoo, said SARS’ tougher approach is already being seen in practice.

This was explained during an online masterclass with André Daniels, Head of Tax Controversy and Dispute Resolution at Tax Consulting South Africa.

The pair discussed proposed changes to the Tax Administration Act and the options available to taxpayers dealing with SARS debt.

Baijoo pointed out that the revenue service is now issuing Letters of Final Demand for amounts as low as R5,000.

If the taxpayer does not settle the debt or take appropriate action, SARS can move to stronger recovery measures.

These can include third-party appointments, civil judgments and garnishee orders. In the case of companies and other juristic entities, directors and other individuals may also face personal liability in certain circumstances.

“This has become a massive collection drive, almost strike action, from SARS in the last 18 months,” Baijoo said.

Taxpayers could previously receive final demands without SARS necessarily following through immediately, even where debts ran into millions. “Those days are over,” he cautioned.

What taxpayers with SARS debt must do now

A tax debt is an amount legally owed to SARS that remains unpaid for 30 days or more. It can arise for several reasons, including mistakes, negligence, a lack of knowledge or deliberate non-payment.

Some tax debts can also remain unresolved for years. Baijoo said historical SARS audits can leave taxpayers dealing with liabilities dating back as far as 15 years.

The amount owed can increase significantly once penalties and interest are added. For example, a tax liability of R2 million could grow to R10 million over time after understatement penalties, and interest is applied.

SARS has also indicated that more than R25 billion of current tax debt is linked to administrative penalties.

Makhubu said SARS is comparing its penalty regime with those of some OECD countries to assess whether South Africa’s approach is unusually strict or broadly comparable.

Receiving a Letter of Final Demand does not mean that all options have been exhausted. A taxpayer has 10 business days to remedy the non-compliance after receiving the demand.

This could involve paying the debt to SARS, but there are also options for taxpayers who can’t settle it immediately.

A Deferral of Payment arrangement allows taxpayers to repay the liability over an agreed period. While the full debt still needs to be repaid, this can provide cash-flow relief.

A Compromise of Tax Debt can provide a larger reduction where a taxpayer can demonstrate severe financial hardship.

These arrangements can reduce the amount payable by between 10% and 60% of the tax liability. However, the taxpayer must prove that the requirements for relief have been met.

Makhubu warned that these programmes are intended for taxpayers with genuine financial difficulties and should not be used to avoid tax that is legally due.

In the Expedited Tax Debt Process introduced by SARS in 2025, almost 90% of applications were rejected because applicants could not demonstrate financial hardship.

According to Makhubu, information such as bank balances often showed that applicants could afford to pay more than they had offered.

Some taxpayers who receive a Letter of Final Demand can even lodge a dispute with SARS. However,  Daniels said taxpayers should understand the difference between disputing a tax assessment and seeking debt relief.

A dispute does not automatically remove the debt or prevent SARS from taking recovery action. However, taxpayers can request a suspension of payment while pursuing a dispute.

Daniels also advised taxpayers to request reasons from SARS where appropriate. This can help establish the basis for an assessment and assist in preparing an objection.

He warned that a weak legal argument can become a major problem because the grounds set out in an objection may limit what a taxpayer can rely on later during an appeal.