Our two worst nightmares are owing SARS money and being pursued by debt collectors. These nightmares are fusing into one as SARS have contracted debt collectors to recover amounts due to SARS that are older than four years.
Why would SARS use debt collectors?
Some commentators have expressed surprise that SARS would take such a step as they are amongst the best debt collectors around. They have legal remedies such as issuing effective emolument orders to employers to divert part of their employees’ salaries to SARS. In fact, they can go further and have more powers than any debt collecting agency.
Revenue authorities have not always been successful when outsourcing collections – a case in point is the United States where they have twice tried outsourcing and each time have withdrawn as costs exceeded the amount of revenue collected.
There is a significant degree of confidentiality required. Legislation restricts the information that can be divulged to third parties and legal specialists have questioned if it is lawful to disclose taxpayer information to debt collectors. The debt collection agencies have been sworn to secrecy and face potential criminal charges if they violate their oath.
Finally, SARS is paying a percentage of the recoveries to the collection agencies. It is not public knowledge what the percentage will be, but it is estimated that it will cost SARS about R1.5 billion to collect R15 billion of outstanding tax. This estimated 10% cost seems high when taking into account the above-mentioned factors.
SARS has begun this process by appointing three debt collection agencies to collect the outstanding amount of R15 billion. The agencies are required to contact relevant taxpayers stating:
- That their tax debt has been handed over to the agency,
- The amount owed and any outstanding tax returns.
Thereafter, the agency will commence with the collection process.
If you are contacted, here’s what to do
- Speak to your accountants – they are well qualified to give professional advice.
- Beware of scams! There are already many scams relating to SARS and this will definitely attract the scammers. Make sure callers are genuine – for example, they should know your tax number and the amount you owe. You can easily verify this on your eFiling account, also check the collectors are genuine by phoning the SARS Contact Centre at 0800 00 7277 (0800 00 SARS). Most importantly, whatever you do check the account you are paying into is a genuine SARS account.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)