Print Page   |   Report Abuse
News & Press: TaxTalk

Common Myths Regarding “Pay Now, Argue Later”

03 June 2016   (0 Comments)
Posted by: Author: Lucia Hlongwane
Share |

Author: Lucia Hlongwane (EY)

Despite amendments to S163(3) of the TAA and the Metcash case, "pay now, argue later” is not in all instances irrefutable. 

Since last year January, when the number of factors that SARS is required for take into account when considering an application to suspend the "pay now, argue later” principle was reduced from eight to five, it seems to have had an effect on the mind set of taxpayers seeking to suspend the "pay now, argue later” principle. 

In many people’s minds, it has created the impression that the taxpayer now carries a greater evidential burden when it comes to successfully proving that SARS should suspend the principle. However, these changes should not cause taxpayers to think that they have no option but to pay, pending finalisation of the dispute. "Pay now, argue later” is not set in stone and many misconceptions exist regarding the burden of proof required to successfully appeal against pay now argue later. 

For instance, although it is indeed in the taxpayer’s best interest to address all five factors stipulated in section 163(3) of the TAA, this does not necessarily mean that the taxpayer must show that they comply with all these factors in order to successfully discharge the onus of proof. In addition, no one factor is more important than the other.

Every case must be judged on its own merits, and while a particular factor might carry a lot of weight in certain circumstances, it might not be so relevant in another. Take the "compliance history of a taxpayer” or the requirement regarding "the prima facie involvement of fraud in the origin of the matter”, SARS cannot rely on the fact that the taxpayer has filed a return differently from SARS’ own interpretation of how the return should have been filed to draw judgement. Nor can SARS rely on the benefit of hindsight to decide on the compliance history of the taxpayer. A compliant taxpayer is not necessarily a taxpayer that files returns in line with SARS’ internal views as this view might ultimately, as shown by case law, be proven to be incorrect. A taxpayer is required to take reasonable steps to ensure that the filing position they have taken is supported by external advice. The percentage of penalties levied as a result of incorrect filing is likely to be less punitive when an external opinion is available.

Similarly the allegation of fraud, as opposed to misrepresentation or non-disclosure of material facts, is a very serious allegation and if successfully proven, lends itself to tax evasion and criminal activities. This takes the matter in a different direction completely. The taxpayer must thus take seriously any communication from SARS starting with correspondence during the audit leading to the letter of findings. Again, the fact that the taxpayer has taken a different interpretation in filing returns does not make the taxpayer fraudulent per se. An intention to defraud the tax authorities must be apparent from the facts and the onus of proof must be successfully discharged. The test here is different from a taxpayer’s endeavours to be tax efficient.   

While irreparable hardship to the taxpayer will be weighed against the prejudice that SARS’ would suffer should the money not be collected (which can only be financial if one thinks about it), for the taxpayer irreparable hardship is not only measured in financial terms. All other commercial reasons which are likely to have an adverse effect on the taxpayer’s business must be considered. 

Finally, the fact that the taxpayer has tendered adequate security is not an overriding factor to sway the matter in the taxpayer’s favour. It is but one of the factors to be taken into account. It is important to note that the taxpayer does not have to tender security. The test is merely whether she has and whether that satisfies SARS. 

SARS is a creature of statute and must operate within the parameters of the enabling statute. It is not only the taxpayer that is bound by the provisions of the Act. Any ultra vires action by SARS officials must be challenged. The exercise of the discretion granted by section 164(3) constitutes an administrative action, which is legally required to be lawful, reasonable and procedurally fair. If considered unfair or unjust, such decision can be taken on review to the courts. SARS must be found to have acted reasonably when it  exercised its discretion and should SARS be found lacking in this regard, the matter will be referred back to SARS for a reasonable decision taking into account all the facts of the case. 

In this regard, it is important to note that section 164 (3) factors are not exhaustive and any other matter may be taken into account in deciding whether or not to suspend payment pending the conclusion of the matter. 

Given the prominence of the ‘pay now, argue later’ principle after the Metcash case, an incorrect view has been prevalent about taxpayers being under an obligation to always discharge the amount of the assessment, even if  they hold a strong, informed  belief that the merits of the case warrants a delay of the payment. Metcash was decided on the facts relevant only to it and each subsequent case has to be judged on its own merits too. From the taxpayer’s side, an assessment of the merits of the case and the likelihood of success is always important to ensure that the objection and appeal process is not used frivolously but legitimately. From SARS’ side, it is unreasonable to insist on pre-payment of the disputed amount where it is clear from the facts that a real possibility exists that the assessed amounts are inflated or out of touch with commercial reality and that the taxpayer has a reasonable chance of succeeding in the matter. 

Please click here to complete quiz. 

This article first appeared on the May/June 2016 edition on Tax Talk.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

Membership Management Software Powered by®  ::  Legal