Challenging SARS audits in light of the Constitution by Prof. Dr. Daniel N. Erasmus

1A-FINAL-PHD-THESIS-submitted-as-at-30-Nov-2013 Download

ABSTRACT

This thesis deals with the relevant law up to 30 September 2012, but the principles are still relevant to the Tax AdministrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... Act, 2011.

This thesis analyses the inter-relationship in particular between ss 1(c), 33, 41(1), 195(1) and 237 of the Constitution of the Republic of South Africa (‘the Constitution’) (collectively referred to as ‘constitutional obligations’); s 4(2) of the South African Revenue ServiceThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... Act 34 of 1997 (‘SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... Act’); the Promotion of Administrative Justice Act 3 of 2000 (‘PAJA’); and a decision by the Commissioner for the South African Revenue ServiceThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... (‘the Commissioner’ or ‘SARS’, as the case may be) to exercise his powers under ss 74A and 74B of the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act 58 of 1962 (‘ss 74A and 74B of the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act’) by requiring taxpayers to produce or provide information, documents and things at the commencement of an inquiry or audit of taxpayers, and concludes that such a decision constitutes ‘administrative action’ as defined in s 1 of PAJA, or, alternatively is subject to the constitutional principle of legality. This conclusion is reached on the basis that such a decision, of an administrative nature made, or leading to a further decision proposed to be made, or required to be made, to issue revised assessments will:

have been taken by an organ of State exercising a public power in terms of legislation;
involve the exercise of a discretionary power, where SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... determines whether and in what circumstances it will require a taxpayer to provide information, documents and things;
adversely affect taxpayers’ rights, and has a direct, external legal effect. The fact that the power in question is preliminary and investigative, and that its exercise does not in itself determine whether any tax, penalties and interest is payable, does not detract from the impending conclusion usually made by the same SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... officials that tax, penalties and interest will most likely become payable following from the preliminary investigation. The decision imposes on taxpayers an obligation to do something (to produce or provide information, documents and things) which, but for the exercise of that power, taxpayers would not in law be obliged to do, due to taxpayers’ privacy rights in terms of s 14 of the Constitution, and entitling them to expect SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... to abide by its constitutional obligations. A failure by taxpayers to comply exposes them to criminal prosecution under s 75(1)(b) of the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act. Furthermore, the power exercised by SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... is not subject to the normal objection and appeal processes in the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act, limiting the opportunity for taxpayers to challenge such a decision in terms of the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act.

Lastly, there is no relevant exclusion in the definition of ‘administrative action’ that removes this type of decision from that definition in PAJA.

*For clarity, the term Double Tax TreatyA Double Taxation AgreementA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... (DTAA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and...), also known as a Double TaxationDouble Taxation occurs when the same income or financial transaction is taxed twice, typically in different jurisdictions. It can arise in two primary contexts: economic double taxation, where the same income is taxed twice in the hands of different taxpayers, and juridical double taxation, where the same taxpayer is taxed on the same income in more than one country. Double... Treaty (or a Tax TreatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and...), is an international

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