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Zawya
a day ago
- Business
- Zawya
South Africa: Sars battles $29bln tax debt with tougher enforcement and tech-driven strategies
The size and growth of Sars' staggering R513bn in unpaid taxes drives home the pressing need for both stronger enforcement and taxpayer co-operation. This is according to Geo Kilian, tax attorney at Hobbs Sinclair Advisory. 'A tax debt of this magnitude is not just a number on a balance sheet — it's a direct threat to public finances and the delivery of essential services,' says Kilian. 'When over half a trillion rand is outstanding, Sars has no choice but to act decisively.' The debt, disclosed by Sars Deputy Commissioner Johnstone Makhubu at the 12th Annual Tax Indaba in Johannesburg, has grown sharply from around R415bn last year. The primary culprits are VAT and PAYE — 'trust monies' collected by businesses and employers on Sars's behalf — along with interest and penalties that can escalate significantly in cases of suspected fraud. 'VAT and PAYE are not optional extras,' Kilian notes. 'These are amounts collected in trust. When they are withheld or misappropriated, it crosses into a very serious compliance breach that Sars will pursue aggressively.' Escalating enforcement and outsourcing recovery Sars' multi-pronged plan blends traditional methods with new approaches. Portions of complex and aged debts are being outsourced to around 15 external collection agencies, while internal teams focus on high-impact recoveries. Legal action is also being intensified — moving from third-party appointments to civil judgments, writs of execution, and, where necessary, personal liability claims against directors. 'We're seeing a definite shift in tone,' says Kilian. 'Sars is moving away from leniency towards a far more assertive posture. If you're deliberately avoiding your obligations, expect to face judgments, asset seizures, and personal liability.' Still, Sars offers relief options for taxpayers in genuine distress, including compromises under Section 200 of the Tax Administration Act and structured deferrals. 'The door is open for those acting in good faith,' Kilian explains. 'If you can demonstrate hardship, there are legal mechanisms to restructure or reduce your debt. But you have to engage — ignoring the problem will only make it worse.' Balancing write-offs with deterrence While some debts are ultimately unrecoverable — such as those from liquidated companies, fraudulent entities, or deceased individuals — Sars is cautious about excessive write-offs. 'There's a fine balance,' Kilian warns. 'Write off too much, and you risk encouraging default as a strategic choice. That's why Sars is exhausting legal remedies first, even in hard-to-collect cases.' Tech targets South Africa's tax gap The agency is also betting on technology to curb future debt accumulation. Investments in AI and data analytics allow Sars to cross-reference filings and bank data in real time, identifying discrepancies without prior notice. New VAT rules for low-value e-commerce imports will also ensure that digital and cross-border transactions contribute their fair share. 'Sars is no longer just a reactive collector,' Kilian says. 'With AI-driven insights, it's moving towards proactive detection. That's a game-changer for compliance.' Recovering even part of the R513bn would significantly strengthen the fiscus. But challenges remain — from economic pressures and 'Stalingrad' litigation tactics to administrative delays. 'Compliance is ultimately a partnership between the State and taxpayers,' Kilian concludes. 'Sars can enforce and innovate, but long-term stability depends on a culture of voluntary compliance. That's the real prize.' All rights reserved. © 2022. Provided by SyndiGate Media Inc. (
IOL News
11-08-2025
- Business
- IOL News
Taxpayers owe SARS over R500 billion, warns Deputy Commissioner Johnstone Makhubu
The South African Revenue Service says taxpayers now owe the government just over R513 billion in unpaid taxes. Image: Freepik The South African Revenue Service (SARS) says taxpayers now owe the government just over R513 billion in unpaid taxes. The figure was revealed by Deputy Commissioner Johnstone Makhubu, who was speaking at the 12th annual Tax Indaba on Monday. Makhubu also warned that the ballooning tax debt poses a major concern for the fiscus but also presents opportunities for improved recovery and enforcement. "I think the growing tax debt we are sitting with around, as at the end of the financial year last year, we are sitting at around R513 billion of monies that are owed to the fiscus by taxpayers,' Makhubu said. 'And again, if you are sitting with a balance sheet like that, any shareholder will ask you: what are you doing to leverage that balance sheet? And how much of that balance sheet should you be writing off?' IOL previously reported that the revenue service announced its intention to use artificial intelligence (AI) and data analytics to help achieve the revised revenue target of R1.986 trillion in taxes for the 2025/26 financial year set by Finance Minister Enoch Godongwana earlier this year. Godongwana allocated R7.5 billion over the next three years to enhance SARS's revenue collection capabilities and modernise its systems. Makhubu added that the revenue service has not had substantial write-offs of tax debt in the past, but acknowledged that some level of write-offs may be necessary. "SARS has, over the years, not had substantial write-offs of its debt book. However, I think even if we allowed for some substantial write-offs of the debt book, we are of the view that there is still an opportunity in there, like our colleagues are telling us globally, that we can be able to leverage that". He also addressed challenges related to the rapid growth of e-commerce, adding that SARS began charging VAT on low-value goods imported through e-commerce platforms last year.
