ANDRIES MYBURGH AND SIMON WEBER: Revisiting the prospect of taking Sars to court

A recent opinion piece in Business Times advised against taking the SA Revenue Service (Sars) to court (“Taking Sars to court is a risky business”, April 14). Referencing statistics from a year’s worth of judgments in tax-related matters, it highlighted Sars’ notable success rate in legal battles against taxpayers, as well as the substantial costs involved in litigation.

While these points are relevant and practical considerations, they should not overshadow the fundamental rights enshrined in the constitution. Nor should they detract from the merits of a particular case, which must be considered in light of the specific circumstances and available evidence. 

Section 34 of the constitution guarantees “access to courts”, ensuring that “everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum”. The Constitutional Court emphasised the importance of this right in a tax context more than 20 years ago in Metcash Trading Limited v Sars.  

Similarly, the Supreme Court of Appeal confirmed in Sars v Pretoria East Motors that the tax authority is “obliged” to “engage the taxpayer in an administratively fair manner”. Like other organs of state, Sars is ultimately accountable to the constitution, and there is no valid reason its administrative actions should be exempt from the court’s scrutiny.  

At the start of the first engagement with Sars, which typically begins with the initiation of a tax audit, it is not only prudent but strongly advisable for a taxpayer to evaluate all possible options. This evaluation may include considering whether the taxpayer should make concessions or explore the possibility of a settlement at a later stage. It is also equally important to assess the possibility of a dispute arising and the appropriateness of going to court if the circumstances of the particular matter justify such a course. After all, if you want peace, you should be prepared to go to war.  

An appeal to the Tax Court is a legitimate recourse available to taxpayers who believe their case has merit under the law. While chapter 9 of the Tax Administration Act provides a specialised dispute resolution process for certain tax matters, taxpayers also have access to “alternative remedies”. Review applications and applications for declaratory relief may be viable options for addressing tax-related disputes in certain specific circumstances.

Again, the decision to pursue such an “alternative remedy” should be considered as an important part of the taxpayer’s overall strategy. Although the right to pursue alternative remedies has recently been restricted by the Supreme Court of Appeal, a significant legal battle is looming in the Constitutional Court on this very issue, highlighting its affect on taxpayers’ constitutional rights.   

Litigation should not be dismissed outright simply because of Sars’ ostensible success rate in disputes with taxpayers. Instead, each case should be assessed on its own merits. If the law supports the taxpayer’s argument, and pursuing a legal challenge is in the taxpayer’s best interest, it is not only appropriate but necessary to challenge Sars in court.  

The time and costs associated with taking Sars to court, though potentially significant, are an investment in asserting rights and challenging divergences that could otherwise lead to unjust outcomes. As the Constitutional Court underscored recently in Capitec Bank v Sars (in which Capitec was partially successful): “Sars, as an organ of state subject to the constitution, should not seek to exact tax which is not due and payable.”  

Make no mistake, Sars is a formidable and well-equipped opponent. It is understandable then to caution against the risks and costs of legal proceedings. But one must also remember the fundamental rights afforded by the constitution. The rights to lawful, reasonable and procedurally fair administrative action, a fair trial and access to courts are paramount. Taxpayers and their advisers should consider all avenues, including challenging Sars in court when they believe justice and the correct application of the law are on their side.

There are several recent examples where taxpayers were successful against Sars in court, including instances where cost orders were made against Sars. Simply dismissing the option of challenging Sars in court, even in appropriate circumstances, is not in the best interests of taxpayers, society at large, or Sars itself.  

• The authors are tax executives at ENS Africa.