SARS intensifies tax collection efforts

The South African Revenue Service (SARS) is sending a clear message in a media statement released on 18 October 2024 that it will leave no stone unturned in its pursuit of unpaid taxes. The recent High Court ruling against businessman Roux Shabangu and his linked entities reaffirms SARS’ aggressive stance on tax collection, warning all taxpayers that non-compliance will not be tolerated.

For years, Shabangu, who holds business interests in the construction and property sectors, evaded SARS’ attempts to collect outstanding taxes dating back to 2019. However, the High Court’s decision has held him and his entities accountable, marking a significant victory for SARS as it continues to ramp up its efforts to collect what is owed to the country’s fiscus, says Jay Manikus, Chief Executive Officer and Tax Debt Specialist at Latita Africa.

Focus on Discretionary Trusts
One of the most significant outcomes of the Shabangu case is SARS’ increased focus on discretionary trusts. While legally sound and commonly used for estate planning, trusts have been under scrutiny for their potential role in tax evasion.

Manikus warns that taxpayers who have placed assets in discretionary trusts must ensure that these structures and entities are fully compliant with tax regulations. SARS is paying particular attention to trusts, and those who attempt to use them to evade taxes should expect to face the full force of the law.

No More Hiding Behind Corporate Structures
The Shabangu case demonstrates that SARS is willing to “pierce the corporate veil” to ensure tax debts are paid. Shabangu and his family used their trust, Majestic Silver 275 (Pty) Ltd, and other business entities to protect assets and delay payment. However, SARS prevailed after years of attempts to avoid paying tax, including filing for voluntary business rescue to place a moratorium on legal proceedings, explains Manikus.

SARS secured a provisional Preservation Order in February 2023, later confirmed in April 2024. This allowed the revenue authority to take control of Shabangu’s assets and appoint a Curator Bonis to manage them. This ensured his family’s trust and businesses could not hide assets from the taxman. This ruling signals to all taxpayers that SARS is committed to cutting through corporate complexities and will hold individuals accountable if they attempt to hide behind business structures to avoid tax obligations.

Managing Tax Debt Is Critical – Before SARS Comes Knocking
As stated in the SARS media release, SARS Commissioner Edward Kieswetter said that “the results of the above applications serve as examples of SARS’ resolve to pierce through the corporate veil in its efforts to fulfil its legislative mandate to collect all money due to the country’s fiscus. Significantly, the sequestration order granted against the Trust is particularly important as it highlights SARS’ ongoing efforts to enforce tax compliance against discretionary Trusts, which have been commonly utilised to evade taxes. SARS will not waiver from its path to pursue all without fear, favour or prejudice. I hope this application will deter all who intend to follow this route.”

For individuals and businesses with outstanding tax debt, SARS’s message is blaring: You should manage your tax obligations now before SARS takes action. Tax debt compliance is no longer optional. SARS has proven it has the legal tools and the willpower to apply them in full force.

The Road Ahead for Non-Compliant Taxpayers
The Shabangu case warns all taxpayers that if they owe taxes, they cannot hide from SARS. Proactively managing tax debt is critical to avoid the severe consequences that can follow non-compliance, including liquidation and sequestration. This case also highlights SARS’ growing focus on discretionary trusts, which are now firmly in the tax authority’s crosshairs.

For individuals and businesses alike, the time to act is now. Manikus advises to ensure that your tax affairs are in order, that your trusts are compliant, and that any outstanding debts are managed before SARS comes knocking. In this new era of heightened tax enforcement, there is no longer any hiding from the taxman.