- The South African Revenue Service (SARS) is enforcing a strict zero-tolerance policy on tax compliance, applying equally to average taxpayers, high net-worth individuals, and local celebrities.
- Tax Consulting SA emphasizes the importance of taxpayers adhering to proper procedures when engaging with SARS, and proactively seeking tax advisory services to avoid the consequences of ignorance or human error.
- Two recent Supreme Court of Appeal cases, the UMK case and the Rappa case, highlight the importance of following the Tax Administration Act’s legal processes in tax disputes, with the courts ruling that the proper objection and appeal procedures must be followed.
The South African Revenue Service (SARS) has recently reinforced its commitment to a strict zero-tolerance policy when it comes to tax compliance, whether the taxpayer in question is willful or negligent. Tax Consulting SA, a group of tax experts, has emphasized that this high standard of compliance is being applied indiscriminately across the board, affecting average taxpayers, high net-worth individuals, and even local celebrities. Edward Kieswetter, the Commissioner of SARS, has made it clear that the agency’s goal is to strike a balance between providing taxpayer services and managing risks.
Given the current climate, it is crucial for taxpayers who find themselves at odds with SARS to adhere to the proper procedures and play by the rules. Tax Consulting SA advises that being proactive in seeking appropriate tax advisory services can be advantageous, as it ensures that the necessary steps are taken to protect both individuals and their companies from the consequences of ignorance or human error. The tax experts also note that if things do go wrong, it is essential to engage with SARS legally and follow a correct tax strategy to resolve the issue agreeably.
One common situation where taxpayers may need to cooperate with SARS is when they elect to dispute a “decision” by applying for a High Court review. A recent amendment to the Tax Administration Act (TAA) stipulates that a “decision” by SARS may only be disputed through the objection and appeal procedures outlined in the TAA. Two recent Supreme Court of Appeal cases, United Manganese of Kalahari v Commissioner for SARS (The UMK case) and Commissioner for the SARS v Rappa Resources (the Rappa case), have underscored the importance of adhering to the proper legal processes in tax disputes.
In the UMK case, SARS issued a letter of audit to United Manganese of Kalahari (UMK), which was granted an extension to address the concerns raised in the audit letter due to its complexity. After the audit was finalized, additional assessments were issued for the years 2011, 2012, and 2013, totaling R351 million. Instead of disputing these assessments, UMK chose to notify SARS of its intention to pursue legal proceedings in the Gauteng High Court to set aside the additional assessments. However, the Court ruled that, according to section 105 of the TAA, a High Court can only hear a dispute on an assessment or decision if directed to do so. In this case, no prior direction was given by the High Court, meaning the court lacked the jurisdiction to hear a review on the merits of the additional assessments.
Tax Consulting SA has pointed out that the Rappa case supported this stance, with the only difference being the specific facts of the case. In the Rappa case, Rappa Resources launched an urgent application to the Gauteng Division of the High Court in Johannesburg to set aside the “decision” in the issuance of the additional assessments. Tax Consulting SA has concluded that there is a time and place for everything, but when it comes to following the letter of the law as set out in the Tax Administration Act, there can be no deviation from due process.