Under the original section 105 of the Tax Administration Act, 28 of 2011 (“the TAA”), taxpayers could elect to dispute a “decision” by application to the High Court for review. This was, however, amended in 2015, to make it clear that a “decision” by SARS may only be disputed per the objection and appeal procedures, provided for in the TAA.

The lesson of following due process, as promulgated in our tax legislation, was once more enforced in the recent Supreme Court of Appeal cases, United Manganese of Kalahari (Pty) Ltd v Commissioner for the South African Revenue Service (Case no 1231/2021) [2023] ZASCA 29 (24 March 2023) (“the UMK case”), and Commissioner for the South African Revenue Service v Rappa Resources (Pty) Ltd (Case no 1205/2021) [2023] ZASCA 28 (24 March 2023) (“the Rappa case”).

There is a time and place for everything, but not when it comes to adhering to the letter of the law, as contained in the TAA, which serves to clearly define the due process to be followed when a taxpayer is aggrieved by an assessment, which is to institute the formal dispute resolution process, in the prescribed manner and form.

Consistency of the TAA – Ponnan ADP Presiding

In the UMK case, the South African Revenue Service (“SARS”), issued a letter of audit to UMK. Based on the complexity of addressing the audit, SARS granted UMK an extension to address the concerns raised in the letter of audit. The audit was subsequently finalised months later, with additional assessments issued for the 2011, 2012 and 2013 years of assessment, totalling R 351 034 504.47!

UMK, rather than instituting a dispute against these assessments, opted to notify SARS of its intention to institute legal proceedings in the Gauteng Division of the High Court, Pretoria (“the Court”), to seek an order, setting aside the additional assessments, amongst other things.

The Court held, that per section 105 of the TAA, provision is made for a High Court to hear a dispute on an assessment or decision, only IF the High Court directs so. In this instance, it is common cause that no prior direction was given by the High Court, therefore, the Court lacks the necessary jurisdiction to hear a review on the merits of the additional assessment.

This stance was supported by the Rappa case, in which Ponnan ADP also presided. The only variation here was in the facts, where Rappa launched an urgent application to the Gauteng Division of the High Court, Johannesburg, to set aside the “decision” in the issuance of the additional assessments.

Taxpayers Must Play by the Rules, or Else…

From a practical perspective, we are approached by taxpayers almost daily, where they have, either due to human error or being incorrectly advised, gotten onto the wrong side of SARS, and now desperately need a way out, before they are faced with the choice of prison or poverty. What needs to be understood, is SARS has adopted a zero-tolerance approach, being consistently applied to any form of non-compliance, willful or negligent.

This “compliance standard” is applied, indiscriminately, to the average taxpayer, High Net Worth Individuals (“HNWI”), and even local celebrities, with Commissioner Kieswetter overtly stating that “we strive to balance the trade-off between taxpayer service and risk management”.

Never Too Late to be Compliant

When it comes to a dispute, being a hybridization of the law and SARS’ own protocols, its substance is steeped in tax law, which is well known for its fluidity and intricacies. Where you find yourself already on the wrong side of SARS, there is a first-mover advantage in seeking the appropriate tax advisory. This ensures that the necessary steps are taken to protect both yourself and your company from paying for the sins of ignorance or rectifying what could be chalked down to a simple human error.

However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed. Thus, the dispute process is best handled by seasoned tax attorneys, who task themselves with understanding the nuances of tax law and knowing the most strategic stance to take, capitalising on the remedies afforded by the TAA to ensure favourable outcomes. 

Written by Jashwin Baijoo, Head of Strategic Engagement & Compliance at Tax Consulting SA