Tax compliance in South Africa: SARS's authority to limit travel

It is well within the powers of the South African Revenue Services (Sars) to limit a taxpayer’s right to travel outside the Republic. A section in the Tax Administration Act (TAA) has a provision whereby a senior Sars official can even require “the taxpayer to surrender his or her passport to Sars”.

Sars invoking certain provisions of the TAA to fulfil its mandate of collecting revenue due to the fiscus serves as a stern warning to non-compliant South African taxpayers—including expatriates, businesspeople, and those who have underestimated Sars. They may find their lives suddenly disrupted as Sars rightfully throws the book at them.

Yes, Sars can stop you from travelling abroad

There is a common misconception among wealthy tax dodgers that they will just pack up and leave if Sars finds them. Especially South Africans abroad, including expatriates who left long ago but are still tax residents in South Africa because they have not formally cut ties with Sars, feel a false sense of being able to operate with impunity.

But Sars is not sitting back and is on record that it has the legal authority to discharge its work of collecting all taxes due to the state in an efficient and effective manner: including imposing a travel restriction when deemed necessary. With no passport, you cannot go anywhere before you have paid your taxes.

Sars can terminate a foreigner from conducting business in South Africa

The TAA also allows for a senior Sars official to follow a process and withdraw a taxpayer’s authorisation to conduct business in the Republic of South Africa. Foreigners are extremely welcome guests in South Africa, provided they follow our rules, including paying their taxes. Where they discard their obligations, Sars has the powers to close their business, with a knock-on effect on any Work or Residency Visas they may hold, as well as their ability to have a South African bank account.

Sars can stop even a South African business from trading

The powers vested in a senior Sars official to “require the taxpayer to cease trading” have significant implications for any business. This underlines that non-compliance when it comes to your tax obligations is not an option.

Is this Constitutional?

When taxpayers are hit by these orders, they have a choice between compliance, seeking court relief, or facing a range of legal consequences. The High Court in Pretoria recently ruled that these provisions in the Tax Administration Act are constitutional.

The court also found that the limitations imposed on the taxpayer’s rights were reasonable and justifiable in an open and democratic society, given the importance of tax collection for public interest.

Following the ruling, Sars said: “This precedent-setting decision reaffirms Sars’ legal authority to discharge its work of collecting all revenue due to the state efficiently and effectively. Importantly, the court reiterated that the provisions that allow Sars to determine third-party liability, repatriation of foreign assets, and restrictions of travel are lawful and constitutional.”

Taxpayers should play it safe

There is no option for Sars other than to collect more money, given the fiscal pressures. This means that taxpayers who have been non-compliant or not conservative with their taxes have limited time to act.

If you have not declared fully, make use of a first-mover advantage to get your taxes in order. If you owe Sars money, make timely payment arrangements. A key is legal privilege, and dealing with experienced tax professionals in getting your taxes in order and managing it proactively is the best way forward.

* Baijoo is the associate director and head of strategic engagement and compliance and Abdoll is the legal manager of cross-border taxation at Tax Consulting SA.

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