TAXMAN’S letters freeze bank accounts
Those who play hard-to-get with the taxman will probably tell you how their money was frozen or almost frozen by the simple letter demanding taxes
Well, I must be honest and state that this is not the taxman’s normal practice but when a taxpayer shows signs of wilful default in paying taxes. For example, there are tough guys in town who will switch mobile numbers when creditors call whilst some simply don’t answer. And of course, there are those who will block you, if they can but then some will answer and give you a hundred and one promises. If the taxman sees that you are playing such nice games, he simply writes a letter to your bank and your money will be frozen; just like that. This is what is called a garnishee order, in legalese. We will discuss this 1 or 2 page letter that is so powerful and can literally leave you broke. In this article, words importing the masculine shall be deemed to include the feminine.
THIS POWERFUL LETTER
Well, the tax laws are there to be obeyed without compulsion from the taxman but the reality is that this is not always what happens on the ground. Some taxpayers may find themselves not fulfilling their tax payment obligations due to various reasons and on top of that, fail to negotiate payment terms with the taxman. This therefore simply means that such taxpayers will have uncleared tax bills and the taxman will be waiting anxiously to bag his part of the taxes. When tax debts become almost impossible to collect from the taxpayer himself, the taxman then thinks of other ways of effecting collection and that is when a garnishee order comes in.
Below are the key features
of a garnishee order:
Enforceable at law: Garnishee orders are issued through arrangements referred to as appointment of tax collection agents in the Tax Acts. In other words, if the taxman instructs your bank to pay him everything that comes through your account, he will be acting within the confines of the law.
You can’t hide: Your bank cannot refuse to effect the instruction issued on it by BURS. In as much as your stop-orders and supplier cheques may bounce because of the garnishee order, the bank cannot refuse to effect such order as it becomes personally liable for the taxes in question. Technically, when the taxman places a garnishee order on your bank account, consider your money gone. You may have to make other arrangements with your other creditors. So, you may run but you can’t hide.
Debt of first preference: When you owe taxes, you should know that the tax debt is supreme over all other debts that you may owe. This is still the case even if a taxpayer is liquidating or is insolvent; any payments to creditors must be done after paying the taxman. Therefore, tax debts are supreme than all other debts.
Record tainted: BURS, just like any other creditor, considers persons who only pay because garnishee orders were placed on their affairs as adverse payers and this will certainly hurt your credit score and complicate your ability to access credit in the future.
AVOID THIS LETTER
Well, if I was to give you a word of advice, I would say never ignore the taxman to the extent that you find yourself with garnishee orders. This is the last thing you would want as it puts you under the high risk taxpayers in BURS’ risk profiling. Further, if such information becomes public, it may cause irreparable reputational damage to your organisation or personal image. The negative consequences are way too much. My suggestion would be that you arrange a payment plan with the taxman and avoid all the hassles that come with a garnishee order. Whilst I have concentrated on the garnishee orders that are placed on your bank account, the taxman can also place such orders with anyone who owes you money such as your client or any of your debtors.
Well folks, I hope that was insightful. As Yours Truly says goodbye, remember to pay to Caesar what belongs to him. If you want to join our Tax Whatsapp group, send me a text on the cell number below.
Jonathan Hore is a Managing Tax Consultant at Aupracon Tax Specialists and feedback on this article can be relayed to firstname.lastname@example.org or 7181 5836.