Taxpayers are often aggrieved by SARS’ assessments and decisions. The Tax Administration Act, 2011 (“TAA”) provides a mechanism for taxpayers to raise these grievances through a process referred to as objection and appeal. The objection and appeal process is to a large extent, an internal process, meaning that SARS itself has to listen to these grievances and decide whether to change their assessment or decision. Failing a decision by SARS to change the assessment or decision, the taxpayer has recourse to the Tax Court. The objection and appeal process can be perceived as time-consuming and perhaps even costly. This is especially the case where SARS’ assessment or decision is believed to have been unlawfully issued for whatever reason.
Several taxpayers have tried to bypass this internal objection and appeal process where SARS’ assessment is believed to have been unlawfully issued, by approaching the High Court directly. Logically, this approach seems sensible – after all, why should the taxpayer have to engage with SARS through this internal process if the assessment is unlawful? Stated differently, why should the taxpayer engage with SARS on the correctness or otherwise of the assessment in terms of the underlying tax act, through the objection and appeal process, when the assessment or decision is unlawful for want of compliance with other statutory obligations?
Historically, before certain amendments were made to the TAA, the Courts have held that if the taxpayer’s grievance turns only on a point of law, then the taxpayer is not obligated to engage SARS through the internal objection and appeal process and can, in fact, approach the High Court directly.[1] In fact, in at least two notable recent judgments[2] the court seemed to have maintained this approach, even post-2015 amendments to the TAA.
However, the Supreme Court of Appeal[3] changed this position having regard to, amongst others, certain amendments made to the TAA in 2015. These statutory amendments effectively interfered with the inherent jurisdiction of the High Court and limited its jurisdiction to hear and decide tax disputes in exceptional circumstances only. The SCA held that taxpayers whose grievance with an assessment turns only on a point of law cannot, without more, bypass the internal objection and appeal process and approach the High Court directly. From my reading, the reasoning, of the SCA’s judgment in that matter is that the Tax Court can in any event hear and decide taxpayer’s grievances with an assessment or decision where that grievance relates to the lawfulness of the assessments. There is then nothing exceptional about a dispute turning only on a point of law and that therefore taxpayers cannot approach the High Court directly on such matters.
Interestingly, the Tax Court[4] earlier held that the taxpayer in that case (taxpayer A) cannot launch a legality review in the Tax Court and directed taxpayer A to the High Court for the High Court to hear and decide its complaints about the legality of SARS’ assessments – granted this was after the judgment in ABSA[5] and before the judgment in Rappa[6]). Then, in the High Court, the High Court held that it could not entertain taxpayer’s A dispute because of the legislative interference with its inherent jurisdiction in 2015.
So what now? Does this mean that there is no court who can hear and decide complaints about the lawfulness of SARS’ assessments? Is SARS then free to disregard its obligations to comply with the law because there is no court who can hold SARS to account for certain legal breaches? Absolutely not!
The reason for this conclusion is slightly nuanced and requires some explanation. The position, for the moment at least and as far as I see it, is indeed that taxpayers cannot approach the High Court directly purely on a point of law[7] as the Tax Court can indeed hear and decide these matters. In the ITC 1956 judgement, the facts in front of the Tax Court were that the taxpayer launched a legality review directly in the Tax Court. It did not first object and appeal and then approach the Tax Court on the issue of the legality of SARS’ assessment. The Tax Court is a creature of statute and the types of applications it can hear do not allow the Tax Court to entertain such applications.
That does not mean the Tax Court cannot decide issues turning on the legality of SARS’ assessments. It can,[8] but seemingly only if the taxpayer reaches the Tax Court after following the internal process of objection and appeal.
It appears then that taxpayers who take issue with the legality of SARS’ assessment ought to, for the moment at least, raise exactly that as a basis for their grievance with SARS’ assessment in the objection and appeal process. Then, where such a case eventually reaches the Tax Court, the Tax Court should be able to decide such an issue, as was exactly the case in the ITC1921[9]. The keen reader might ask: does the very fact of submitting an objection not, by necessary implication, somehow condone any alleged unlawfulness of the assessment? After all, if the assessment is unlawful then there can lie no objection to it because it does not exist? I do not think so. Section 104 of the TAA allows taxpayers to challenge any assessment, on a grievance of any kind.[10] If the submission of an objection based on the lawfulness of the assessment were to mean that taxpayers are effectively condoning breaches by SARS of the law, then the legislature would not have drafted section 104 in such wide terms. Further still, I doubt that a taxpayer can condone a breach of the law. Surely, the question cannot be whether a taxpayer accepts non-compliance with the law but rather whether, objectively considered, there was a breach of the law.
The position then as it stands, appears to be that taxpayers wishing to challenge an assessment or decision on a point of law must do so through the objection and appeal process and eventually then in the Tax Court. Is that fair and just? Perhaps. Perhaps not. Should the Tax Court rules and TAA be updated to allow for direct access to the Tax Court (without having to go through the internal process of objection and appeal first) on points of law? Maybe. As I see it, until the current position changes, questions like “fairness” of the current position and whether amendments are required to the TAA and the Tax Court rules serve largely to illicit academic debate. In the meantime, those of us who deal with tax disputes will have to “play it as it lies”.
[1] Metcash Trading Ltd v CSARS, 63 SATC 13.
[2] Absa Bank Limited and Another v Commissioner for the South African Revenue Service (2019/21825) [2021] ZAGPPHC 127; 2021 (3) SA 513 (GP) (11 March 2021); A Way to Explore v Commissioner for South African Revenue Services (23896/17) [2017] ZAGPPHC 541 (23 August 2017).
[3] Commissioner for the South African Revenue Service v Rappa Resources (Pty) Ltd (1205/2021) [2023] ZASCA 28; 2023 (4) SA 488 (SCA); 85 SATC 517 (24 March 2023).
[4] ITC 1956 (84 SATC 321).
[5] Ibid n 2.
[6] Ibid, n 3.
[7] Ibid n 3. See also Erasmus v Commissioner for the South African Revenue Service (9706/21) [2023] ZAWCHC 127 (18 August 2023).
[8] South Atlantic Jazz Festival v CSARS 2015 (6) SA 78 (WCC), Wingate-Pearse v CSARS (29208/15) [2019] ZAGPJHC
[9] 81 SATC 373.
[10] Ibid n 3, at paragraph 12.
