South African Revenue Services Hack, Watch Your Back…

Ten days ago one of my heroes in SA was meeting with his accountant. He had his browser accessing his Standard Bank account as they discussed cash flow. And, as they were looking, the R100,000 in his three bank accounts flowed out, leaving a balance of just R100 across the accounts.
Dave (not his real name of course) is normally a pretty relaxed fellow, but I think I heard his scream echo through the Oslo Fjord. And he was not the only person this has happened to during this past month.
It turns out that SARS has an exciting new way of getting your attention. SARS apparently (according to a person at Standard Bank) has a ‘lien’ on any funds in any bank account, and when SARS ‘thinks’ money is owed to it they can just take it. This applies to amounts under dispute as well, even if SARS staffers have already agreed that they have made a mistake.
I will look at the backlash of this shortly. In the meantime, Dave does not have enough cash for an ink jet refill cartridge, while SARS holds R100K of his. (Or not, depending on whose side you are on).
But worse was to come. Ten days later, and the money taken from his account has not yet been credited to the account that SARS claims might be unpaid. Dave is (as you and I would be) a tad worried that any new money going into his business bank account will also be snapped up.
Lets look at what this means to you if SARS thinks you owe money to the state. I emphasize ‘thinks’ because their calcs are often a little less precise than one might like.
Imagine what happens to all the weekend debit orders that you knew at breakfast on Friday were catered for. Only to find out on Monday morning that all twelve debit orders bounced. (Because SARS took the funds out Friday afternoon without any warning.) Your first notice would be a call from the bank at lunch on Monday, along with their very high costs for the bounces.
And, of course, the damage to your financial credibility. (To say nothing of the crowd at Diners (one bounce and your card is revoked), Telkom (phone cut off), MWEB (there goes the Internet connection), your landlord (who has that surety against your home), and your insurances.)
Lets take it a step further. Imagine that Dave had no money in his business bank account. But, Dave had an overdraft facility of, say, R100,000. The SARS vacuum would have sucked up the available cash – taking the firm into overdraft.
And then, because Dave was relying on that overdraft covering the debit orders, all his debit orders bounce. (Banks take bounces with the same equanimity your Mom displays when you fart at the dinner table in front of Gran.) And because his debit orders bounce, the bank pulls Dave’s overdraft. (Now he is R200K behind the month end bills which include salaries (and a bunch of fights with the CCMA), VAT (and the penalties for late payment), credit card payments, and so forth.)
And since Dave, like 99.9% of us has his overdraft backed by his house, the bank starts to proceed against him by calling in their surety.
The knock-on of such a huge unexpected drain, especially in this fragile economy, will close most of us. Goodbye Dave.
All because Dave thought that the amount under dispute was awaiting resolution, as it has been for the past four years because SARS usually works at the speed of treacle. In this case SARS have agreed that their initial calculation of R150K Capital Gains Tax is way off, but someone with his hand on the cherry-picker is not privy to that news.
I don’t know about you, but I think that the folk working at SARS truly have no idea what they are doing when it comes to small business.
Which reminds me, if you enter into a dispute with SARS about any outstanding monies, you MUST also ask them to delay payment of the funds they think are due. (This does not automatically happen as normal people might expect.) Without that second request, you’re expected to pay first and argue later. Quite so.
This is a heads up. If you are in a dispute with SARS, note that they are punching below the belt. And take appropriate action to protect your business.
All the best
Peter Carruthers