S.Africa: Recent cases relevant to tax issues - summarised

Public Protector v South African Reserve Bank (CCT107/18) [2019] ZACC 29; 2019 (9) BCLR 1113 (CC) (22 July 2019)

The issues were whether:

(a) the test of gross negligence or bad faith was relied on;

(b) the legal requirements for awarding personal costs against a representative litigant were met;

(d) there is any basis for interfering with the costs order.

The court discussed the test for personal costs orders against representative litigants. Furthermore, important phrases such as the test for gross negligence and bad faith was also discussed.

We can use this when we try to make out an argument for punitive cost order against government officials.

Herbert N.O. and Others v Senqu Municipality and Others (CCT 308/18) [2019] ZACC 31 (22 August 2019)

The court had to confirm the High Court’s declaration of invalidity of Section 1 of the Land Affairs General Amendment Act and Section 25A of the Upgrading of Land Tenure Act.

In its judgment the court had to interpret the provisions and determine what they mean. Once this was done, it had to measure the provisions against the relevant clauses of the Constitution.

Although this case is not applicable to PAJA or Tax LawTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public..., we refer to it whenever we would like to challenge the validity and constitutionality of legislation, especially certain provisions of the TAA.

President of the Republic of South Africa v Democratic Alliance and Others (CCT159/18) [2019] ZACC 35 (18 September 2019)

This case is interesting because it deals with 2 questions:

Can the decision of the President of the Republic of South Africa to appoint and dismiss a Minister and his Deputy be reviewed and set aside?
Is the President under a rule 53 of the Uniform Rules of Courtobligation to disclose the reasons for relieving Cabinet Ministers and their Deputies of their duties or should the arguably raw political character of that decision perhaps exempt her from doing so?

Although this case is not really applicable to our line of work, it might be interesting to read.

Gordhan v Malema and Another (EQJHB 5/2019) [2019] ZAEQC 5 (31 October 2019)

This case dealt with utterances made by Malema against Gordhan and the Court had to decide whether it contravenes Section 10 of the Equality Act. Interestingly, the court found that the attack/utterances was personal in nature only.

This is not applicable to our line of work, but might be interesting to read if you want to stay updated with the political developments in SA.

BMW South Africa (Pty) Ltd v 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... (1156/2018) [2019] ZASCA 107 (6 September 2019)

The question at the centre of this appeal is whether payments totalling R6 795 540 made by BMWSA to tax consulting firms KPMG, Price Waterhouse Coopers and Raffray Tax ConsultantsA Tax Advisor is a professional who provides specialised advice to individuals, businesses, and organisations on various tax-related matters. They play a crucial role in guiding clients through complex tax laws and ensuring compliance with the latest regulations while identifying opportunities for tax efficiency. Tax Advisors must stay updated on legislative changes and understand the impact of international tax treaties,... CC (the firms) in relation to services rendered to expatriate employees in respect of their domestic tax obligations, constitute a taxable benefit and consequently forms part of gross incomeGross Income is a comprehensive term used to define the total income received by an individual or entity before any deductions, exemptions, or allowances. The concept is central to the calculation of taxable income across different tax jurisdictions. It encompasses a broad range of income sources, such as wages, salaries, business income, dividends, interest, rental income, and other forms of... in respect of which the employees are liable to taxation.

Simply put, the question is whether the payments to the firms fall within the ambit of the definition of ‘gross income’ in s 1(i) 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 (the Act), read with paragraphs 2(e) or (h) of the Seventh Schedule thereto.

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... v Atlas Copco South Africa (Pty) Ltd (834/2018) [2019] ZASCA 124 (27 September 2019)

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 (the Act) requires opening and closing trading stock to be taken into account when determining taxable incomeThe tax base is a fundamental concept in taxation, representing the total amount of economic activity or assets upon which a tax is levied. It is the foundation upon which governments calculate the amount of tax owed, based on factors like income, property value, sales, or corporate profits. Understanding the tax base is essential for tax professionals, businesses, and policymakers,... derived from carrying on any trade in any year of assessment. Section 22(1) of the Act is concerned with the value of trading stock held and not disposed of at the end of the relevant year of assessment, which is determined with reference to the diminution thereof.

Sections 22(1)(a) and (b) of the Act prescribe the basis upon which taxpayers are to value trading stock at the beginning and end of each year of assessment.

This appeal 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... (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...), against a judgment of the Tax Court, Johannesburg (Opperman J, sitting with assessors), turns on the interpretation and application of those provisions.

The dispute relates to whether the value of the taxpayer’s trading stock had diminished, entitling 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 make a just and reasonable allowance under s 22(1)(a) of the Act.

ARTICLES

Of the recent articles published, I think the following might be very interesting. I still want to read through them and I will report to you once done.

Fritz, C and Van Zyl, SP ‘The issue of prescription in tax – CSARS v CharTrade’ (2019) 82.3 THRHR 511.
Moosa, F ‘Does 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 apply extraterritorially? A constitutional perspective’ (2019) 34.2 ITJ.
Van der Walt, JJ ‘Prejudice’ (2019) 33.4 TPCP
Palmer, G ‘Imposing penalties – more on understatements’ (2019) 33.5 TPCP.
Silke, J ‘Readily apparent errors – review of undisputed administrative decisions’ (2019) 33.5 TPCP

*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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