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Sars abuses wide powers of debt recovery

A win for a taxpayer as third party notice issued to bank for withdrawal of funds is declared unlawful.
A Sars official claimed in her affidavit that she had ‘sent’ letters of demand, and in another paragraph said these letters are system-generated. Image: Shutterstock

SIP Project Managers (the taxpayer) vs The Commissioner for Sars (South African Revenue Service) relates to Sars’s appointment of Standard Bank as a third party agent to withdraw funds from the taxpayer’s bank account to settle a tax debt.

Except the taxpayer had received no letters of demand from Sars and, even worse, there was no tax debt.

Background

On June 30, 2019, the taxpayer was issued with an assessment that reflected a tax refund of R1.6 million. However, the taxpayer was not aware that Sars later issued an additional assessment requiring R1.2 million to be paid by November 30, 2019.

The taxpayer first became aware of this additional assessment on February 6, 2020, when Standard Bank received notification from Sars to pay R1.3 million from the taxpayer’s bank account. On that day, the taxpayer lodged an objection and requested a suspension of payment until the objection had been finalised. However, the amount had already been taken from the taxpayer’s bank account.

In terms of the Tax Administration Act (TAA), a final letter of demand must be delivered to the taxpayer at least 10 days before the issue of a third party notice.

However, according to the taxpayer, Sars had not issued any letter of demand. Not on eFiling, nor by email, post or physical delivery. The taxpayer took a screenshot of their eFiling profile showing no letter of demand, which was rendered as proof to the court.

On calling the Sars employee whose name appeared on the third party appointment letter to Standard Bank, the taxpayer was informed that Sars had sent three letters of demand. However, none of these letters of demand had been received by the taxpayer, nor had they been uploaded onto the taxpayer’s eFiling profile. The taxpayer contacted the Sars call centre, which confirmed that the letters of demand had not been loaded onto the eFiling profile.

Read: Telkom loses R3.9bn tax case

Judgment

In the judgment handed down by the High Court on April 30, 2020, the court found that:

  • The Sars official’s account of how the final demand letters were sent varies in the affidavit she deposed. In one paragraph, she claimed she “sent” the letters of demand, in another she said these are system-generated.
  • Sars could not produce an affidavit deposed by any official who had personal knowledge that the letters of demand were on the taxpayer’s eFiling profile. All that Sars could show was that the letters of demand were created on the dates reflected, but not correctly submitted to the registered user and “delivered”, per the Rules for Electronic Communications issued in terms of the TAA.
  • Sars had not delivered a letter of demand to the taxpayer. The stated letter (which Sars in any event cannot show was delivered to the taxpayer) was issued before the final due date of payment.
  • Further, there was no outstanding debt on the day that Sars issued the so-called final demand.
  • On the affidavit submitted to the court by Sars, the court found that the paragraphs regarding who actually sent the letters were all contradictory.
  • The court noted that it should have been relatively simple for Sars to furnish proof that the letter of demand appeared on the eFiling system. But Sars didn’t.
  • The third party notice issued to Standard Bank was unlawful and declared null and void.
  • Sars was ordered to repay the amount of R1.3 million to the taxpayer, together with interest, as well as the taxpayer’s costs of the application.

This matter raises worrying issues

It is imperative that Sars’s system-generated mail appears on a taxpayer’s eFiling profile, plus the taxpayer should be alerted.

The taxpayer should be alerted that Sars has raised further queries, and that an additional assessment has been raised.

The judgment only concerned the validity of the letter of demand, and the lawfulness of the third party notice. However, it appears that the period between Sars requesting further information and raising the additional assessment was extremely short.

The senior Sars official who signs the third party appointment letters should take responsibility for ensuring that letters of demand are received and signed for by the taxpayer. I have added “signed for”.

It is too easy for Sars officials to insist that letters of demand were sent. And there is no recourse.

Perhaps it is time for senior Sars officials to be taken on review when they have abused their authority.

Not every taxpayer can afford to litigate

If Sars continues to abuse its very wide powers for the recovery of tax debts then surely these should be narrowed? Not every taxpayer can afford to litigate.

Further, should the TAA be amended to allow for penalties to be imposed on Sars every time it contravenes the Act?

Perhaps Sars will then adhere to it.

Read: Sars continues fight against illicit trade

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COMMENTS   26

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…. and you would think SARS is efficient.
Probably facing a skills brain drain…. oh yes, Kieswetter did say the Zuma years backtracked the organisation

This is nothing new and has nothing to do with the Zuma years, SARS was abusing their powers even when Gordhan was commissioner. For example, they illegally added 8% to your previous years taxable income to calculate the basic amount for provisional tax. The legislation allowing for this was only passed a few years later.

Expect it to get worse. With the revenue shortfalls expected, likely to be double what they are expecting, sars will be even more leechlike than before with massive pressure from above to “take” and answer questions later….

Yes, do expect it to get worse!
Disgrace!

As I have said repeatedly, taxation is theft and SARS are specialists in their job.

“Further, should the TAA be amended to allow for penalties to be imposed on Sars every time it contravenes the Act? Perhaps Sars will then adhere to it”.

The writer misses the point. SARS’ income is in the form of tax. It is not a company for profit. As such, any penalties it suffers are paid for from TAXPAYERS’ POCKETS!

If individual SARS employees were directed by the court to pay penalties from their own pockets – well, then that might limit the errors.

SARS can pay penalties by having their budget reduced and re-allocating to other depertments in government, such as housing.

No, they really DO need money to update old technology.
Also to address BEPS – country loses a heck of a lot due to illicit outflows

Use penalties to fund the Ombud and a litigation team… Just because its our money, doesn’t mean we should be allowed to fight back and have structural cost neutral options available?

It is systemic abuse, should we not also have protections built in? Or would you only care, once your bank account is emptied without legitimate grounds for that action?

The right to unelaterally just take what it wants from bank accounts is not at all within keeping with respect for citizens.
That law must fly if SARS wants respect from the public

This “pay now argue later” thing is completely out of hand. In fact, it needs a complete overhaul with very specific guidelines. Dave King is not the representation of all taxpayers in South Africa. This case shows that SIP Project Managers did absolutely nothing wrong.

Is the transferring bank in this case also complicit in this illegal activity? Seems like Standard Bank enabled SARS to withdraw funding without the proper governance. Are they being held accountable as well?

THe law requires a taxpayer to whom one of the notices are issued to withhold the money. They have no option in the matter and there is no way for them to check that SARS has complied with the law in issuing the IT88. Standard Bank is therefore not complicit in this case.

SB should be accountable as they took the money out in terms of an invalid directive. They should and could have checked but is too much effort and they are too arrogant. Always take the easy way out when it comes to a customers money.. Try and get money from an account by valid court order and see what rigmarole the banks require.

SARS is going to become increasingly desperate as the lock-down does its intended work of destroying the private sector. All the projections of the fall in revenue collection are grotesquely optimistic. Expect more of this kind of behaviour as the authorities realize the problem is far worse than their worst nightmares.

The SARS bullies must hate the electronic age – “we posted it” is meaningless nowadays. So simple to file a notice and follow up with an email but so much easier to say “it’s in the post” and so much more satisfying to spitefully raid the taxpayer’s account!
Cheers to the courts and cheers to our watchdogs in journalism. Let’s raise a glass… oh… wait…

It’s time that enior Sars officials be ordered to pay the legal costs from their own pockets for breaking the law and abused their authority.

Given the powers at SARS’s disposal and its record of wanton and injudicious abuse of those powers, not to mention the general incompetence of its frontline staff (I have been waiting 9 months for a resolution to a problem they caused with my e-filing profile) I think ANY SARS employee that breaks the law and abuses their authority should be ordered to pay legal costs from their own pocket.

Once some arrogant clerk loses all their assets because of a R2.5m costs order, I can absolutely guarantee you that nobody else will dare as much as scratch their ear before they’ve checked it’s legal. Which is as it should be in an agency which is, in some ways, more powerful than the NPA.

About time no one is above the Law….Well done to the court ruling.

Don’t keep all your money in a transactional account. Have another account somewhere else that SARS can’t raid.

Couple of things about SARS – they can and do bank wide searches on registered taxpayers; employers are compelled to register new employees for tax purposes/tax number. They can get garnishee orders through any employee of an employer or company. Sole proprietors are in the same boat they are the employer and the employee. In my days in banking SARS had to produce a court order to remove funds from a bank account and the authorisor of the order had to have their signature certified as correct
SARS today seem to behave like the mafia – legality has nothing to do with it

Time for the long-anticipated tax boycott. If law-abiding South Africans – those of us who have always paid tax, UIF, rates, water & lights, etc. – continue to accept the government’s ongoing corruption, abuse of power, and misallocation of funds, then we deserve what happens next.

People rattle on abt Tax Boycotts but no one knows how to go abt it !!
Your employer would need to be complicit as they pay over yr PAYE : Not paying water or Elect means you wont have any and no sales outlets will sell you anything without paying the VAT :
So kindly elucidate how this tax Boycott will work ??
Many thks

So perhaps one should start with testing the legality of PAYE where the onus is on the employer to deduct and pay tax to SARS. Should it not be an employee’s choice how this is paid? Should it not be an employee’s decision how best to structure one’s income to reduce the level of personal tax?

With the change in regime at SARS, most citizens began to support SARS again but now they tuned into untouchables. You try to register a new, small business on efiling – note the business was already registered for tax – this is just to register on efiling they just indicate they are not happy with something – not specifying what, and closes the account!

This is how small businesses are terrorised by bureaucracy. In this small, one man business, The Man has to go to SARS, sit in a que and ask what is wrong, as the efiling account is now closed!
The reason – the one document was not clearly readable! NO request to resubmit the specific document – no – just close the account. You have to do everything again, without knowing what was wrong! You do not even know which document was not clear!

If this is how small business is supported I rest my case. They have just now undo all the good will I felt towards them after the regime change.

The regime never changed : it’s still the ANC.Simply diff deployees .

End of comments.

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