The R70 Million Assessment
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- Case Study
Estimated Assessment of R70 Million Raised Against a Security Guard
- Client: Confidential - security guard, monthly income approximately R20,000
- Matter: SARS estimated assessment dispute, spanning three tax years
- Duration: Ongoing - S105 High Court application and independent forensic investigation under consideration
- Provison: Section 104, Tax Administration Act - notice of objection window lapsed
The Challenge
A taxpayer works as a security guard, earning a monthly 20k. Then unexpectedly SARS assessed him for R70m (yes, R70000000) over three tax years. Upon investigation, the taxpayer was adamant that he never earned R70m in his whole life. “If I earned that type of money I would not work as a security guard.” Because the tax years dated back to the Covid era, the window period for a notice of objection in terms of S104 of the Tax Administration Act (TAA) had lapsed. A request for an extension was denied. All avenues of communication were barred, save for emails on the SARS pcc-link for tax practitioners, which went unanswered.
The Investigation
A meeting was arranged with SARS at branch level. The revenue authority requested bank statements, which the taxpayer provided regarding his single Capitec bank account, which cost him R700 for the printouts over three years.
- Upon further investigation, the taxpayer said he received a payout from the Road Accident Fund (RAF) of around R3m after he was involved in an accident with a taxi. His mother confirmed this and said that she received the payouts as he was a minor at the time, whereupon the amounts were deposited in her son's bank account.
- Another meeting was held. SARS undertook to escalate the matter to auditor level. Once again, no feedback was received, but a contact person was identified in one email.
- On advice from the contact person, a high-level meeting with top SARS auditors was held at the SARS Head Office in Brooklyn, Pretoria. At the meeting, SARS auditors presented evidence that three bank accounts were openend by the taxpayer in his name. The taxpayer denied that he ever opened these accounts. The SARS auditors remained unmoved, but it transpired that these accounts could be linked to the account of the attorney managing the RAF payouts.
- A written confirmation was thereafter obtained from the attorney that they opened the accounts to pool together all RAF payouts destined for their clients to obtain a higher interest rate. In practice, the accounts linked to the taxpayer were opened with his name to make the necessary distributions, but within the parameters of the overall account. All the accounts linked to him have since been closed and no RAF payments are made at present.
- All the necessary evidence was provided to SARS, including statements of the relevant bank accounts, which provided details of the payouts to the taxpayer. There was no evidence that he ever had access to the attorney's bank accounts or opened them in his name.
The Results
Despite further efforts to address this matter, which included numerous meetings between the SARS officials and the taxpayer’s mother, SARS remains unmoved. SARS officials have privately admitted that they are in error, but the outstanding debt has still not been written down, and to this day remains on the taxpayer’s eFiling profile. The official view is that he must first pay the outstanding amount before it can be addressed.
Further avenues to address this Kafkaesque reality for the taxpayer include considering a S105 application to the High Court whereby a request may be made for a renewed assessment by SARS. This may be too expensive for the taxpayer.
A forensic investigation by an independent and impartial third party is also being considered. The findings will be presented to SARS with a request for a reduced assessment and debt write-down.
- SARS officials have privately acknowledged the error
- The R70 million debt remains unwritten and still reflects on the taxpayer's eFiling profile
- A Section 105 High Court application and an independent forensic investigation are under consideration