By RC Williams (PWC Tax Synopsis June 2012)
In Zikhulise Cleaning Maintenance and Transport CC v CSARS  ZAGPPHC 91, a decision handed down by the North Gauteng High Court on 29 May 2012, Wright AJ declared, in relation to SARS's summary withdrawal of the taxpayer's tax clearance certificate, that SARS's decision to invalidate or cancel the Tax Clearance Certificate in issue (which apparently stated that it was valid for a calendar year) "shall be of no force or effect”; that the tax clearance certificate was "deemed to be valid and current” pending the taxpayer's application to court for relief in terms of the Promotion of Administrative Justice Act and "permitting the applicant to rely on the Tax Certificate” pending the outcome of that application for relief.
The judgment is lacking in detail
The judgement is sparse. The critical passage reads as follows:"Whether the decision is reviewable, viathe Promotion of Administrative JusticeAct 3 of 2000 or through the principle of legality, is not something I need decide.The applicant was entitled to reasonable notice of SARS' intention to call the certificate into question and anopportunity to put its case to SARS.”The judgment gives no indication ofthe arguments and counterargumentsput to the court by SARS and the taxpayer, respectively.
Is the refusal or cancellation ofa tax clearance certificate "administrative action”?
It is far from clear whether therefusal or cancellation of a taxclearance certificate constitutes "administrative action” as envisagedin the Promotion of Administrative Justice Act and is consequently subject to judicial review, for it isarguable that the refusal to issue orcancellation of a certificate, in and of itself, does not meet the requirementthat it "adversely affects the rights ofany person” – which is a precondition for relief under that Act.
The judgment is explicit in leaving open the question whether SARS's withdrawal of a tax clearance certificate constitutes "administrative action”, as defined in the Promotion of Administrative Justice Act 3 of 2000. Nonetheless, says the judgment:
"The applicant was entitled to reasonable notice of SARS' intention to call the certificate into question and an opportunity to put its case to SARS”.
No authority is cited for this proposition, and it must be inferred that it is based either on common law principles relating to the audialteram partem principle or on the constitutional right to fair administrative action. No text or decided case is cited in the judgment in support of the application of these principles in the circumstances of this case.
It is trite that "administrative action”, as defined in PAJA, can betaken on judicial review in terms of that Act and can be set aside if it was unfair, arbitrary, capricious or irrational.
Tax clearance certificates are vital to taxpayers who tender for government contracts
The issues raised in this case are of great importance to taxpayers who tender for government business and are consequently required to submit tax-clearance certificates with their tender application. Such clearance certificates attest to the fact that the taxpayer is up to date with the lodgement of tax returns and that no tax is outstanding. The certificate states the period for which it is valid.The withholding or revocation of a tax clearance certificate of course has a serious impact on the business of such taxpayers.
Curiously, the Income Tax Act makesno provision for the issuing of tax clearance certificates and they are issued by SARS purely as a matter of practice.
A taxpayer is entitled to advance notice of SARS's intention to cancel a tax clearance certificate
In this particular case, SARS had, apparently furnished the taxpayer with reasons for the cancellation of the tax clearance certificate, albeit (apparently) subsequent to the cancellation.
That, in the view of the court, was not sufficient – it was held that SARS ought to have given the taxpayer prior notice and the opportunity of responding and advancing grounds on which the certificate ought not to
The scope of SARS's actions that may be affected by this judgment
Given the importance of the issue ast o range of proposed actions by SARS vis-a-vis taxpayers of which advance notice must now (arguably) be given with an opportunity to make representations, it is regrettable that this judgment is so sparse. However, the relief that was granted was of an interim nature, pending the institution of an application for judicial review of the withdrawal of the tax clearance certificate, and it is to be expected that the relevant issues will be fully canvassed in that application.