Taxpayers in South Africa need to play by the rules – or else

The South African Revenue Service (SARS) has adopted a zero-tolerance approach to non-compliance and has been consistently applying the law, whether it be to a willful or negligent taxpayers.

Tax experts from Tax Consulting SA said that the high standard of compliance is applied indiscriminately to the average taxpayer, high net-worth individuals and even local celebrities, with the commissioner of SARS, Edward Kieswetter, stating that the entity strives to balance the trade-off between taxpayer service and risk management.

As a result, when a taxpayer finds themselves on the wrong side of SARS, it is best to play by the rules in terms of procedure.

According to Tax Consulting SA, there is an advantage to being the first-mover 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,” said Tax Consulting SA.

“However, where things do go wrong, SARS must be engaged legally, and we generally find the utmost agreeable where a correct tax strategy is followed.”

One of the most common situations where a taxpayer might have to play ball with SARS is when a taxpayer elects to dispute a “decision” by application to the High Court for review.

Through a recent amendment to the Tax Administration Act, the government has made it clear that a “decision” by SARS may only be disputed per the objection and appeal procedures provided in the TAA.

A recent lesson on the importance of following due process as stated in tax legislation was enforced in the recent Supreme Court of Appeal case of United Manganese of Kalahari v Commissioner for SARS (The UMK case) as well as the Commissioner for the SARS v Rappa Resources (the Rappa case).

Tax Consulting SA said that 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 Tax Administration Act.


In the UMK case, 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 2011, 2012 and 2013 years of assessment, totalling R351 million,” said the legal firm.

Rather than instituting a dispute against these assessments, UMK opted to notify SARS of its intention to institute legal proceedings in the Gauteng High Court – seeking an order setting aside the additional assessments, amongst other things.

The Court held that per section 105 of the TAA, a 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,” said the legal firm.

According to Tax Consulting SA, this stance was supported by the Rappa case.

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

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