Developments in the North Gauteng High Court
10 April 2015
Posted by: Author: PwC South Africa
Author: PwC South Africa
The ink on this article had barely dried when the North Gauteng High Court issued judgment in the matter of Ackermans Ltd v Commissioner for the South African Revenue Service Case No. 16408/2013, on 20 February 2015.
In this matter, the taxpayer sought to bring an application under PAJA for the review of a decision by SARS to issue assessments after a delay of five years from the time of the last previous correspondence between the taxpayer and SARS. The taxpayer alleged that the delay was unreasonable and procedurally unfair.
Lo and behold, SARS contested the application on the ground that the High Court did not have jurisdiction to hear the matter because the issues raised were complex matters requiring the expertise of the Tax Court.
The Court rejected the argument of SARS. Mothle J noted (at paragraph ) that section 105 of the TAA states:
A taxpayer may not dispute an assessment or ‘decision’ as described in section 104 in any court or other proceedings, except under this Chapter or by application to the High Court for review.
The Court also cited extracts from the Constitutional Court judgment in Metcash Trading Ltd v C:SARS & Another 2001 (1) SA 1108 (CC) in which Kriegler J clarified that the dispute resolution provisions in the VAT Act at that time did not exclude judicial review, stating, at paragraph :
The Act contains a tailor-made mechanism for redressing complaints about the Commissioner’s decisions, but it leaves intact all other avenues of relief.
Mothle J therefore concluded, at paragraph :
The objection by SARS that this court does not have jurisdiction to hear this application has no merit and must therefore fail.
In considering the question whether the delay was or was not unreasonable, Mothle J concluded that the dispute between the parties on the reasonableness or otherwise of the delay required oral evidence. While the Court found no rules that would prohibit it from hearing oral evidence on this issue, Mothle J concluded, at paragraph :
However, the disputed facts and issues raised in this application require, in my view, the expertise of a tax court to adjudicate. It seems to me therefore that the adjudication of the disputed facts on the allegations of misrepresentations and non-disclosure of material facts, will bring this matter to finality.
The matter has therefore been referred to the Tax Court for final adjudication.
SARS’ approach to disputes
Taxpayers involved in disputes with SARS must be understandably confused at the prospects that may face them when they get to court. In one instance, in a complex VAT matter, SARS argued that the appropriate forum is the High Court, whereas in another it argued that the Tax Court is the appropriate forum for adjudicating complex tax matters.
Should taxpayers not expect that SARS will deal with disputes on their merits rather than attempt to take fine points relating to the appropriateness of the forum? Taxpayers are entitled to fair and reasonable treatment.
Where the taxpayer elects to proceed to the High Court, SARS’ challenge to jurisdiction may indeed be justifiable, as SARS had no choice in the selection of the forum. However, where an objection is disallowed, the taxpayer’s resort is an appeal to the Tax Court. It is submitted that, where SARS disallows an objection without disputing the procedural right to object, it should be held, by its conduct, to have impliedly consented to the jurisdiction of the Tax Court.
Therefore, if it is SARS’ contention that a dispute relates to a ‘decision’ and not an assessment, SARS should make this point at the time that it disallows the objection and not attempt to ambush the taxpayer in a court of appeal.
Where does the law stand?
The Full Court in two divisions of the High Court has determined that an assessment is not immune from objection if the taxpayer’s grievance relates to an administrative action that is an integral part of the process of assessment of the taxpayer’s liability. The decisions are binding on courts in those divisions, and otherwise persuasive authority in other divisions.
The arguments that support this stance are compelling. The primary purpose of the Tax Court is to determine disputes relating to assessments. To separate an assessment from the processes leading to its issue would limit the effectiveness of the Tax Court and increase the case load in the High Court.
There remains a possibility that SARS may seek to take the decision in the ABC Case on appeal to the Supreme Court of Appeal. Should this step be undertaken, it is to be hoped that the SCA will adjudicate finally on the issue of the jurisdiction of the Tax Court where an administrative decision is integral to an assessment.
This article first appeared on pwc.co.za.