By: Darren Britz
The South Gauteng High Court upheld an appeal in a judgement against the South African Revenue Service (Sars), on August 27, 2024, in the matter of TALT vs The Commissioner for The South African Revenue Services. Anyone dealing with Sars, South African tax, or who wants to know the temperature of the South African tax environment, would find this well-written judgement useful.
It is not clear whether Commissioner Kieswetter is concerned about his losing streak against taxpayers in the court systems. There has been an unprecedented loss ratio recently, and it is concerning that the Constitutional Court has had to step in, which was unthinkable a couple of years ago.
The Commissioner lost the Coronation Investment Management SA (Pty) Limited v Commissioner for the South African Revenue Service matter, which many tax specialists and academics feel is reflective of a healthy tax system, and where aggressive tax planning must be challenged. It will be interesting to see whether the National Treasury steps in to change the law after the Coronation case.
More damning for the Commissioner is the decision of Capitec Bank Limited v Commissioner for the South African Revenue Service, where the Constitutional Court expressly stated in paragraph 94: “This judgment concludes that Sars should not have disallowed the objection in full. Sars, as an organ of state subject to the Constitution, should not seek to exact tax which is not due and payable.”
As a large tax practice, we note that there is a definite hardening of Sars’ stance on matters. The most concerning ones are those where there is a delay on the part of Sars in resolving a matter, and a taxpayer cannot move forward without a Sars decision on a matter. Also concerning is Sars using the extensive powers granted to them under the Act to use classic delay tactics normally found in commercial litigation.
There have been calls for Sars to be subject to independent oversight, but National Treasury has not actively moved forward hereon. The Tax Ombud may report on Sars successes, but they do not have any legal mandate to hold Sars accountable.
The position remains that the Commissioner must find the correct balance, which was well explained by the Supreme Court of Appeal in Commissioner for The South African Revenue Service v Free State Development Corporation, stating in paragraph 47 –
“In appropriate circumstances, a court will carefully scrutinise the substance of a particular transaction to establish its true nature. The amendment will permit the true issue between the parties to be ventilated. [Pienaar Brothers (Pty) Ltd v Commissioner for the South African Revenue Service [2017] 4 All SA 175 (GP) para 41]. This basic principle of tax law is underscored by section 143(1) of the TAA, which provides that ‘Sars has a duty “to assess and collect tax according to the laws enacted by Parliament and not to forgo a tax which is properly chargeable and payable.” This principle must also relate to the corollary – Sars’ obligation not to levy taxes which are not payable in terms of the law.’ This could be the situation if the amendment was not granted.”
It would be to the benefit of South Africa to receive better communication from Sars on the hard work they do to combat tax evasion. Many South Africans pay their dues, but there is a segment of society which wonders whether Sars works equally hard to collect tax from everyone.
This requires a balance, with greater communication from Sars on what initiatives they are taking to prevent the levying of tax not due, which is now a confirmed problem, from the High Court to the Constitutional Court level.
The Commissioner is but one man, and with an incredible responsibility, but a legacy of Sars attempting to collect more than its dues would be an unfair reflection.
* Britz is a partner and head of legal at Tax Consulting SA.
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