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072 855 8106 nanika@nanikalaw.co.za

SARS intends to increase tax collection

The Finance Minister said the following in his recent mid-term budget speech, which should make every business owner who owes SARS monies nervous:

“Achieving a more inclusive South Africa relies on honest taxpayers. Without your taxes, South Africa will never succeed. Thank you to all those who have honoured their obligations. As it stands, we now expect to collect R1.37trn this year. This is R53bn, or 4%, less than we expected.”

“Through reprioritisation, the National Prosecuting Authority receives an additional R1.3bn, and the South African Revenue Service receives an additional R1bn for the next two years. These funding shifts will bolster efforts to combat corruption and improve revenue collection.” (my bold).

(Quoted from https://www.thesouthafrican.com/news/mid-term-budget-speech-quotes-eskom-e-tolls-tax-change-tito-mboweni/)

The messages that are being communicated in the media are clear: SARS intends to increase tax collection. To date under the previous SARS head tax collector, not much taxes were collected and we as business owners were grateful for that. Now that we have more efficient people in place and, given the fact that the Government is desperate for money, we can accept that the Government will turn the screw on their main source of income: businesses.

No business can afford to have debt it cannot pay

With the economy in the poor state that it is, and with the expectancy that things will get worse, no business can afford to have any debt that it struggles to pay – especially not SARS debt. Owing SARS money is too expensive as penalties and interest are very high, plus SARS has the power to simply debit your bank account which can cause serious cash flow issues that can throw a business into crisis.

Worse, SARS is communicating very clearly that they are focused on collecting taxes.

It is better to get rid of SARS debt as fast as is possible before SARS has enough momentum to really turn their collection department (which was performing very poorly to date (we are grateful) into an efficient collecting machine. So, it is a matter of taking your options sooner rather than later. We are uncertain just how aggressive SARS is going to get in the collection processes, but I think we have a pretty good idea that they are going to seriously start chasing the money pretty soon.

One does not want to run away from paying taxes and the purpose of this article is not to promote not paying taxes, but, if a business is under financial pressure and there is SARS debt that it also cannot pay, this article is trying to convey to you that if you consider getting rid of the SARS debt because you cannot pay it, then the time to do it is to do it before SARS starts seriously collecting taxes. If you don’t pay the taxes, SARS may pretty soon start focusing on your business and t can cause some problems for you.

If SARS has made an assessment and your business cannot pay the debt, then SARS will simply debit the bank account, and this can bring your business to a standstill.

How do you get rid of debt if you can’t pay it?

You liquidate the Business and start over as soon as is possible. It does not make financial sense to struggle to pay debt, because it is not viable and not a good financial decision. Money should be lived “forward” not “backward” and if you are trying to pay debt with money you don’t really have, ten you are living backward. When it comes to money, that is not a good way to work with it. Get rid of debt fast if you cannot pay it.

Will SARS not come after me in my personal capacity?

Regarding VAT, SARS cannot hold directors personally liable for the debt of the company. Read our articles on two court cases about this by following these links: Owing VAT to SARS,  Owing VAT is not theft

In the last 10 years and hundreds of liquidations later, SARS has not held any of our clients personally liable for the debt of their companies. However, with the threats made in the media about collection going to become more effective, who knows whether this may change. I don’t work for SARS, but my logic tells me that it will not change, because we need our business owners out there busy creating employment and running businesses, not being impoverished because they are held personally liable for business debt. However, it remains the best option to liquidate the company as soon as possible so that you remove all doubt and worry.

Contact us so that we can determine how we can help you to keep your business going while you get rid of debt. nanika@nanikalaw.co.za or cell 072 8558 106