The Never-ending (Tax Return) Story
16 August 2016
Posted by: Authors: Alan Lewis and Dee Bezuidenhout,
Authors: Alan Lewis and Dee Bezuidenhout (ACBS)
This article will explore the extent to which the
South African Revenue Service is in touch with the basic provisions of the Tax
Administration Act and the rights, which it grants taxpayers, to object to
income tax assessments.
This is a true story. After the taxpayer had submitted his tax return,
in which he claimed certain expenses as deductions, which he had incurred in
his property letting business, SARS informed him that his return had been
selected for verification and that he was required to review his tax return
against his relevant material. If he found any error, he was to submit a
revised income tax return. Alternatively, if he found no error or he was unsure
what to do, he was required to submit copies of the relevant material to SARS.
The required documents included medical scheme certificates and receipts; his
travel log book and, according to the SARS notice, "any other documents
relevant to your declaration”.
This notice did not specifically instruct him to submit documentary
evidence of the expenses, which he claimed as deductions in respect of his
property rental business.
In response, the taxpayer delivered the necessary documentation, as well
as detailed spreadsheets of the expenses relating to his property rental
business. In due course he received another assessment, which simply disallowed
all of those expenses. The assessment did not provide reasons for this
Consequently, and in terms of rule 6 of the rules, which prescribe the
procedures for noting objections and appeals against assessments, (the rules)
the taxpayer requested in writing that SARS provide reasons for the decision so
that he could object to the assessment. At the same time, SARS collections
department began demanding payment of the tax debt, which was created by the
In the light of SARS persistent demand for payment of the tax debt, the
taxpayer made a written application for the postponement of his obligation to
pay the tax debt, pending the finalisation of his objection against the
When the taxpayer arrived at the SARS Randburg office, the employee who
attended to his enquiry, allegedly scoffed at his request for reasons for the
assessment, and informed him that instead he should have objected to the
assessment. However, he grudgingly accepted the request for reasons for the
assessment, and the application for the postponement of the taxpayer's
obligation to pay the assessed taxes, but told the taxpayers that "these
documents would not help you”.
Despite the delivery of the request for a postponement of the obligation
to pay the assessed taxes, SARS' collections department threatened to institute
collections proceedings against him. Consequently, he informed SARS in writing
that he intended to approach the High Court for an order directing SARS to
attend to his request for a postponement.
In reply, SARS informed him that, as he had not yet objected to the
assessment, they could not deal with his request for the postponement. However,
at the same time they also provided him with detailed written reasons for
disallowing the deduction of the expenses which he claimed. These reasons
identified each of the different expenses which SARS had disallowed, as well as
the reason for doing so.
In the light of the reasons for the assessment, the taxpayer prepared
and delivered an objection to SARS, on the basis that he had incurred the
expenses and possessed the documentary evidence to support his claim. In
addition to dealing with the merits of the matter, the objection also explained
that the objection had been delivered within the period of 30 business days,
calculated from the date of the taxpayer’s receipt of the reasons for
assessment, as prescribed by rule 7 of the rules.
Despite this explanation, SARS informed the taxpayer that his objection
was invalid because it had not been delivered within a period of 30 business
days, calculated from the date of the assessment.
The taxpayer then brought an application to the tax court, in terms of
rule 56 of the rules, in which he sought an order declaring his objection to be
valid, as well as an order directing SARS to pay his legal costs for doing so.
Within days of its receipt of this application, one of SARS’ legal
managers wrote to the taxpayer and informed him that SARS was prepared to deal
with the objection, and requested him to deliver specified supporting
The taxpayer agreed to do so, and also agreed to delay the application,
pending the final adjudication of his supporting documentation. Within a few
days of its receipt of those documents, SARS informed him that it had partially
allowed those expenses, issued the necessary reduced assessment, and had paid a
refund of approximately R41 000 into his bank account.
In the writers’ opinion, the rules, which are applicable to this matter,
are clear, and simple. A taxpayer, who is aggrieved by an assessment, is
entitled to seek written reasons for those assessments, so that he can prepare
a detailed objection, as prescribed by rule 7. This is a basic right of every
taxpayer, who receives an assessment. SARS has no right to ridicule that
request, or to refuse it, if it is made in the manner prescribed by the rules.
Similarly, the time period of 30 days, as prescribed by rule 7, in which
to note the objection, after receipt of those reasons, is clear. On these
premises, SARS decision, that the objection was invalid, is most unfortunate,
and highly questionable.
In terms of section 164(2) of the Tax Administration Act, Act Number 28
of 201, as amended ("the TAA”) a taxpayer who intends to object to an
assessment, is legally entitled to seek a postponement of that taxpayer’s
obligation to pay the disputed taxes. This remedy is not only reserved for
those taxpayers, who have indeed objected to an assessment. Consequently, SARS
apparent refusal, to consider the taxpayers request for a postponement, prior
to the delivery of his objection, is unlawful.
In the writers’ opinion, SARS treatment of the taxpayer, prior to the
receipt of the application to declare his objection to be valid, is completely
unacceptable. The taxpayer invoked his basic rights, namely requesting reasons
for SARS assessment, and requesting a postponement of his obligation to pay the
disputed taxes, which is granted to every taxpayer in terms of the TAA.
However, it appears that the relevant SARS officials did not understand or
accept, that the taxpayer indeed possessed those rights.
All tax practitioners are required to be registered member of a
recognised controlling body, and in that capacity to comply with annual
requirements regarding continued professional education. In the event that they
fail to do so, they can face disciplinary action, and even cancellation of
their membership. This legislation is not applicable to SARS employees who
The time and effort needed in order to resolve this matter was extensive
and unnecessary. This was a simple matter, in which a relatively small number
of issues were involved. It is unacceptable that taxpayers should face these
obstacles when finalising the assessment process.
It is possibly time that the rules be amended to provide that no
assessment will be valid unless it is accompanied by a detailed explanation, of
why it has been issued.
This article first appeared on the July/August 2016 edition on Tax Talk.