Commissioner, SARS v Van Kets  JOL 28416 (WCC)
21 May 2012
Posted by: SAIT Technical
In March 2009, SARS
received a request from the Australian Tax Office ("ATO”) for information of a
person residing in South Africa in terms of the double tax agreement ("DTA”)
between South Africa and Australia.
SARS acted in terms
of the obligations of the DTA attempted to furnish the information in terms of
ss 74A and 74B of the Income Tax Act.
SARS sought an order
in the Western Cape High Court declaring that ss 74A and 74B
of the Act may be invoked by it for the purpose of obtaining information from a
taxpayer and any other person in the Republic of South Africa in respect of an
Australian taxpayer in order to comply with its obligations under a double
taxation agreement or treaty which had been concluded between South Africa and
Australia and which contained a provision for the exchange of information.
The taxpayer refused
the request for information on the basis that it was confidential. It appeared
to be common cause that the taxpayer possessed the information which ATO had
requested from SARS and that such information could hence not be obtained.
issue to be determined by the court was whether the words "any taxpayer,” used
in s74A and s74B of the Act, can be interpreted to include a person who is not
a "taxpayer” as defined in section 1 of the Act, but who, in terms of a DTA,
has been identified as someone who can provide the information pursuant to the
request made by the ATO.
sought an order declaring that section 74A and 74B of the Income Tax Act 58 of
1962 may be invoked by it for the purpose of obtaining information from Mr Kets
in order to comply with its obligations under the DTA which contained a
provision for the exchange of information.
The court held that the provisions contained in a
DTA, become part of South African domestic income tax laws. Secion
231 of the Constitution has the effect that the provision of a DTA becomes law
in South Africa once it has been Gazetted. Davis, J made the
point that the provisions of a DTA and the Act should, where possible, be
reconciled and read as one coherent whole.
The court pointed out that the purpose of the
exchange of information clause contained in the DTA is to ensure that a
resident of Australia does not escape Australian tax, which may be imposed in
respect of income accruing to that resident from a source located in South
Africa. If the DTA did not provide for an exchange of information, the ATO
would be unable to obtain information about such income, and subject that to
tax in Australia.
Davis, J reached the
conclusion that where the DTA is read, together with the provisions of the Act,
it implies that the word "taxpayer” should include not only those persons who
fall within the provisions of the Act, but also those dealt with in the DTA.
The application accordingly succeeded.