Estimated Assessments: From Exception To Cash-Cow Grabbing Norm?

Estimated Assessments: From Exception To Cash-Cow Grabbing Norm?

• 20 August 2025
• Tax Administration
• Nico Theron

SARS can, in terms of section 95(1)(b) of the Tax Administration Act, 2011 (TAA) raise an assessment based on an estimate if the taxpayer submits information to SARS that is either incorrect or inadequate.

How SARS often prepare these estimates is by comparing deposits into the taxpayer’s bank account to turnover declared on the tax return (to use corporate income tax as an example). If the deposits are higher, they will typically propose to tax the difference. They will propose this even though it is trite that the sum of deposits in a bank account will seldomly yield the same number as turnover. This much, frankly, is ridiculously obvious to anybody with a basic understanding of commerce and accounting.

So obvious that it might sound absurd that this sort of approach is even allowed. That is, until you consider that the assessment is ultimately based on an estimate. It is not required to be based on perfect logic, and it is not required to be accurate. It is an estimate based on information available.  

When SARS estimates a taxpayer’s tax bill like this (i.e. by comparing bank statements to turnover), the onus is on the taxpayer to prove, on a deposit-by-deposit basis, why the difference is not taxable.[1] 

Now, depending on the information that was provided to SARS during the course of the audit, this is something that a SARS auditor can reasonably be expected to figure out themselves to a large extent. For example, if the bank account statement states that the taxpayer received R30 million from a large commercial bank with the description – ‘BFN Mortgage’ (for example) and the loan is duly recorded in the annual financial statements as a long-term liability, interest bearing with fixed terms of repayment, one would expect an auditor not to propose to tax that R30 million without more. Indeed, one might reasonably expect an auditor to raise questions about that deposit to check if the deposit is what it purports to be.

But that, you see, will require time and effort. It’s much easier and quicker to just add up total deposits, subtract the total from turnover and raise an estimated assessment/ propose one and leave it to the taxpayer to do what the auditor could, fact dependent, reasonably have been expected to do. You see, in this way, the taxpayer does most of the audit work themselves. Convenient indeed.

Is that fair?

Let’s start by looking at the wording of section 95. Section 95 tells us that SARS can raise an estimated assessment if the taxpayer:

• Failed to submit a return;
• Failed to submit relevant material after multiple requests by SARS; or
• Submitted a return or relevant material that is inaccurate or inadequate.

The subjectivity issue

The trouble with the third bullet above, is the apparent subjective nature of its parameters, i.e. “inaccurate return/information” or “inadequate return/information”. Who determines when it is inaccurate or inadequate?

If, for example, the taxpayer submits detailed information, but the SARS auditor does not understand it. Is the information inaccurate? Perhaps not. Is it inadequate? Well, perhaps, for that auditor but perhaps not for the next one.

If, for example, the taxpayer submits detailed relevant material but the answers the auditor is looking for is not immediately obvious from the information provided. Is the information provided inadequate? Perhaps for auditor A but not for auditor B.

SARS is vested with the power to decide when they act on the basis of incorrect or inadequate information. The apparent subjectivity of the parameters for such estimated assessments arguably make the provision, in my view at least, subject to abuse.

The provision can, hypothetically speaking, be relied on when an accurate assessment is objectively speaking possible (and in due time) but, subjectively, the auditor is either too lazy to do the work to get to an accurate assessment (or has too much work) or too incompetent, and reverts to an easy way out – section 95 and shift the workload to the taxpayer. 

The balancing act

At the same time, however, one can also argue that there is a need for a provision like this. It is not inconceivable that a taxpayer may obstruct an auditor from raising/timeously raising an assessment by providing incorrect or inadequate information. But then, SARS has far reaching powers to get accurate and adequate information elsewhere which it might need to raise an accurate assessment.

Given SARS is, according to the court in the Pretoria East Motors case,[2] required to have proper grounds for an additional assessment (which will include an estimated additional assessment), one would think that SARS ought to not easily revert to section 95.

But then, the wording of the section is clear. If a taxpayer fails to file a return, does not respond to requests or submits incorrect or inadequate information/returns then SARS can estimate. Simple as that? Yes, but only if the assessment is required by way of a guess[3] because the return is not filed or there is no response or the response/return is incorrect or inadequate. The fact that, for example, a taxpayer does not respond to multiple requests for relevant material does not mean the assessment is only possible by way of a guess.

It is submitted that preference should always be given to accurate assessments over estimated assessments. Stated differently, estimated assessments should be the exception, not the norm. This much is arguably also borne out by the fact that the opening words of section 95 refers to SARS being able to raise estimates of the other types of assessments provided for in the TAA.  Estimated assessments are not in and of themselves a type of assessment but rather an original, additional, reduced or jeoporady assessment that is simply based on an estimate. It is therefore, in my view, clear that accurate assessments are to be preferred and that estimated assessments only be raised as a last resort and not simply if the taxpayer failed to file a return, failed to respond to multiple requests or submits information or a return that is inadequate or incorrect.

Estimated assessments are the norm?

It is common knowledge that SARS is under increasing pressure to collect more. With limited resources, it makes logical sense that resources be used more effectively in order to reach collection targets (or better still, to exceed collection targets). If, for example, doing a quick add and subtract calculation to raise a couple of hundred million rands in assessments is possible and it is highly cost effective, I can understand, from a business perspective, that estimated assessments might be used as cash-cow grabbing norm.  Indeed, we are seeing an increase in estimated assessments.

But then, when you are an organ of state, like SARS, you must act within the four corners of your empowering provisions. If section 95 is to be used as a last resort (or in the exception) to raise assessments and not the norm, as I submit should be the case, then I wonder how many estimated assessments are raised, not because reliance on section 95 is a last resort to protect the fiscus but because its effective and convenient?  

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[1] CSARS v M (A5036/2023) [2023] ZAGPJHC (06 July 2023)). Whilst the onus will firstly be on SARS to prove the assessment is reasonable, suffice it to say that there is a difference between “reasonable” and “accurate” and the former is much easier to prove than the latter.  Further still, basing a taxpayer’s defence solely on the grounds that SARS won’t be able to discharge their onus of proving the estimate reasonable is often too risky, resulting in taxpayers taking a more prudent approach and dealing with the deposits on a line by line basis.   

[2] CSARS v Pretoria East Motors (Pty) Ltd, 76 SATC 293.

[3] Not a complete guess (see Africa Cash and Carry (Pty) Ltd v CSARS, 82 SATC 73).

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