The intersection between taxation and insolvency — The South African Revenue Service’s preference

Authors: Carika Fritz & Thabo Legwaila

ISSN: 1996-2177
Affiliations: Associate Professor of Law, University of the Witwatersrand; Professor of Law, University of Johannesburg
Source: South African Law Journal, Volume 138 Issue 4, p. 799-817


When a debtor’s estate is sequestrated or an insolvent company is wound up, insolvency and taxation intersect whenever the debtor or company has an outstanding tax debt. This article considers whether the South African Revenue Service should, or could, be provided with a better standing in cases of insolvency. From a comparison of the situations in South Africa, Mauritius, Australia and the United Kingdom, it is clear that South Africa’s approach of determining the order of distribution in relation to tax claims based on the type of tax is in line with the approaches of Mauritius and the United Kingdom. However, s 179 of the Tax Administration Act and ss 114 and 147(1) of the Customs and Excise Act may have an impact on a claim by the South African Revenue Service in the event of insolvency. In this respect, we argue that, in instances where a taxpayer is sequestrated or wound up due to insolvency, the Insolvency Act and the Companies Act should take precedence. Since the Insolvency Act provides for a clear order of distribution both in respect of the insolvent estates of natural persons and when an insolvent company is wound up, tax legislation in South Africa should not be used to deviate from this order of distribution.