Big opportunity for South African taxpayers

The taxman’s significant revenue shortfall presents an opportunity for taxpayers to benefit from payment deferrals and compromises to ease their financial burden.

This is according to Latita Africa’s tax debt and accounting senior specialist, Kabelo Moutloaste, who said that this year, taxpayers find themselves in a unique position to manage their tax obligations with greater flexibility. 

Finance Minister Enoch Godongwana’s recent Medium Term Budget Policy Statement (MTBPS) revealed that the South African Revenue Service (SARS) is projected to fall short of its revenue collection target by R22.3 billion by the end of the year.

Finance Minister Enoch Godongwana said that the main budget revenue estimate has also been lowered by R31.2 billion over the next two years.

Godongwana said difficult trade-offs in all spheres of government will have to be made.

However, he said that by sticking to its debt-reducing strategy and confronting these trade-offs, the government could create the necessary conditions for a fast-growing economy that facilitates employment.

SARS’ revenue collection was hurt by several factors this year, chief among which were underperforming personal income tax collections, lower fuel levy collections, and lower import VAT collections.

“This shortfall highlights the deep financial struggles affecting both individuals and businesses across the country,” Moutloaste said.

SARS Commissioner Edward Kieswetter said economic conditions have impacted the agency as many people seek to defer or restructure their tax debts. 

“We’ve seen many people not disputing their debts. We’ve actually worked through more cases this year than last year,” he said. 

“More people are asking us for debt repayment arrangements, which also means that we will not recover debt that is due to the state because people are just experiencing hardship.” 

Moutloaste explained that, for taxpayers, the current economic climate provides a valuable opportunity. 

As the taxman looks to collect more revenue from whatever sources it can, SARS will likely be more flexible toward tax debt deferrals and compromises, allowing many to manage their financial obligations more effectively. 

For example, payment deferral arrangements help taxpayers align their payments with their cash flow, preventing immediate penalties and giving them the breathing room they need.

Moutloaste said that, for those facing significant tax debt, a compromise may be the most powerful tool available. 

A tax debt compromise is an agreement with SARS where taxpayers pay only a portion of their tax debt, with the remaining balance forgiven. 

“This option not only reduces the total debt burden but also alleviates penalties and interest, often resulting in a significantly lower amount owed to SARS,” he said. 

“In today’s tough economic climate, many taxpayers who simply cannot afford their tax debts are using this option to achieve long-term financial relief.”

In both cases, Moutloatse it is crucial to understand that the taxpayer needs to keep their current compliance in order as this may affect SARS consideration of a payment arrangement request due to continued non-compliance. 

“SARS’s openness to deferrals and compromises is certainly welcomed, but this level of cooperation is not often long-lived,” he cautioned. 

“To those taxpayers who need this relief, it is better to act sooner rather than later.” 

He said an experienced tax debt firm, preferably one with a strong legal component, could help taxpayers negotiate a compromise or deferral that meets their financial capabilities and significantly reduces their outstanding balance. 

“This can be particularly valuable for those who would otherwise struggle to repay their debt, allowing them to secure financial stability in the long term,” he said. 

“With SARS’ shortfall in revenue, taxpayers are left pondering SARS’ next move to increase collections. Now is the time to take action before this window of grace closes.”