This article first appeared in Business Day

Antonia Nicoloudakis - Head of International Tax, PKF Octagon

The most successful taxpayers aren’t reactive — they’re strategic. But there’s a crucial difference between being strategic and being reckless.

Failing to pay outstanding undisputed tax debt is neither a strategy nor a short-term fix — it’s a high-risk business decision that can spiral into financial and even criminal consequences.

Similarly, where there is disputed tax debt, it is important to deal with the dispute and the request for suspension of payment within the required timeframes.

The True Price of Non-Compliance

Once the tax filing deadline passes, so does leniency. The South African Revenue Service (SARS) imposes steep penalties for unpaid tax debt — including a 10% late-payment penalty, ongoing monthly administrative penalties, and understatement penalties of between 10% and 200% of any shortfall. Interest accrues on every overdue Rand.

What many don’t realise is that non-payment isn’t just costly — it’s criminal, unless there is a valid dispute and suspension of payment in place.

Section 234 of the Tax Administration Act (TAA) addresses the criminal offences relating to non-compliance. Specifically, under Section 234(2)(d) and 234(2)(k), it is an offence to wilfully or negligently fail, to submit a tax return or document to SARS as required by the TAA, or to wilfully fail to withhold and pay taxes due. These offences can trigger prosecution and even imprisonment.

SARS Is Turning Up the Heat

SARS has stepped up its enforcement capacity — not just through audits, but through third-party debt collection.

In the 2024/25 financial year alone, SARS recovered approximately R94 billion in outstanding tax debt where the tax claimed was not in dispute. This trend will only intensify as SARS invests in data analytics and real-time third-party verification systems. It was proposed in the 2025 Budget that R3 billion will be allocated to build tech and AI infrastructure aiming to recover an estimated amount of R20 – R50 billion in tax debt. Twenty-one external collection agencies were appointed following the RFP 45/2021 advertised tender to speed up the debt collection process and taxpayers must ensure they are compliant so as not to have SARS knocking at their door in the future. The collection process is impersonal and rather ruthless when court action is involved.

For taxpayers — individual or corporate — this means the window to act proactively is closing fast.

SARS has the legal backing to enforce the pay-now-argue-later principle and without a proper suspension and dispute in place, the damage to the company and its credit rating by not acting timeously can be catastrophic.

Strategic Steps to Contain the Damage

If you suspect or know you have tax debt, the first step is to verify your balance via eFiling, the SARS MobiApp, or by sending an SMS to 47277.

Then, act quickly. The following options are available — but only before enforcement begins:

1. Pay in full within seven days of receiving the demand.
2. Apply for an instalment payment arrangement (Section 167 & 168 of the TAA) — with valid financial evidence showing you’re unable to pay in full.
3. Request a debt compromise (Sections 200–202 of the TAA), which allows SARS to settle for a portion of the debt if it secures the highest possible recovery and supports sound tax administration.
4. Dispute the assessment —The taxpayer may apply for a suspension of payment during the dispute process (Section 164 of the TAA) but note that interest continues to accrue.

When You Don’t Act — SARS Will

Failure to engage SARS proactively opens the door to harsh enforcement measures, including:

• Collection from third parties (Section 179 of the TAA)
• Civil judgments and asset attachment
• Director or member liability
• Sequestration or liquidation
• Preservation of assets pending recovery

These are not hypothetical threats. SARS has been increasingly exercising these powers — particularly where non-payment appears wilful.

Please note that where the tax is in dispute, one must still consider payment in certain circumstances to avoid interest when there is doubt over the success of the objection.. Legitimate processes are available to suspend debt and we suggest speaking to your tax adviser to ensure that the suspension of tax debt is put in place timeously.

Please also be aware that Debt Compromise provisions in Chapter 14, under Part D of the TAA may be considered under certain circumstances. This is an essential provision as taxpayers who owe tax debt may often find it difficult to settle their debt due to financial challenges. SARS is aware of this and recently met with the industry to explore various ways to assist taxpayers in paying their debts to the fiscus. Key features of the initiative include an expedited compromise process for non-disputed tax debts older than 12 months. Another is the exclusion of entities subject to specific legal processes (such as liquidations, estates, and business rescue cases), companies that have been deregistered, cases subject to criminal investigation and audit, as well as cases within the write-off process. We would advise speaking to PKF tax specialists if considering these options, as they can guide taxpayer clients on the requirements for a debt compromise.

Proactivity Is the Only Strategy That Works

Tax compliance is not just about meeting deadlines; it’s about protecting your financial integrity and reputation.

A strategic taxpayer knows their numbers, engages SARS early, and seeks expert guidance before penalties, interest, or prosecution take hold.

At PKF our approach is simple: help clients stay ahead of risk — not react to it.

Because when it comes to tax debt, doing nothing isn’t a delay tactic.

It’s a decision — and one that could cost far more than the original bill.

Taxpayers need to make a decision about a dispute, a payment plan or a settlement within the short deadlines set out in the TAA. The longer the debt is not dealt with, the harder it will be to resolve the matter.