SARS must be law­ful, rea­son­able and fair

Business Day - Business Law and Tax Review - - BUSI­NESS LAW & TAX RE­VIEW -

ma­te­rial” for the pur­poses of the “ad­min­is­tra­tion of a tax act” (de­fined in sec­tion 1, read with sec­tion 3(2), of the Tax Ad­min­is­tra­tion Act). There­fore, not only would SARS have to meet the ju­ris­dic­tional re­quire­ments of sec­tion 3(2) of the act, but must also marry the facts at hand to any one or more of the nine sub­sec­tions stip­u­lated in sec­tion 3(2) of the act. Put dif­fer­ently, if the re­quested in­for­ma­tion is for the pur­poses of the ad­min­is­tra­tion of any tax act, SARS must quote the rel­e­vant sub­sec­tion in sec­tion 3(2) of the act per­tain­ing to the def­i­ni­tion of rel­e­vant ma­te­rial that SARS re­lied on, and this must be sup­ported by the un­der­ly­ing facts and cir­cum­stances that makes SARS’ in­quiry fore­see­ably rel­e­vant with “rea­son­able speci­ficity” (as re­quired by sec­tion 46(6) of the act).

Ac­cord­ingly, for SARS to ex­er­cise its dis­cre­tion in a law­ful and pro­ce­du­rally fair man­ner (for pur­poses of sec­tions 40 and 46 of the act), it should, for ex­am­ple, demon­strate that it has screened the tax­payer’s tax re­turns and found that an in­ves­ti­ga­tion or au­dit is war­ranted; iden­ti­fied which el­e­ments of the tax re­turn need to be au­dited; and ob­tain in­for­ma­tion from rel­e­vant sources in or­der to un­der­line the is­sues rel­e­vant to the case it is cur­rently in­ves­ti­gat­ing.

If these pre­con­di­tions are not met with­out proper jus­ti­fi­ca­tion by SARS, its con­duct may prima fa­cie be un­law­ful, un­rea­son­able or pro­ce­du­rally un­fair and con­trary to the prin­ci­ple of le­gal­ity en­shrined by sec­tion 1c, read with sec­tion 2, of the Con­sti­tu­tion. As such, SARS’ con­duct could be set aside by way of re­view ap­pli­ca­tion to the high court in terms of ei­ther PAJA or the prin­ci­ple of le­gal­ity.

The tax­payer may also be en­ti­tled (in terms of sec­tion 32 of the Con­sti­tu­tion, read with the Pro­mo­tion of Ac­cess to In­for­ma­tion Act) to make a for­mal re­quest for SARS to pro­vide the re­lated in­for­ma­tion that it used to, firstly, se­lect a tax­payer for au­dit or in­ves­ti­ga­tion and, sec­ond, the in­for­ma­tion it used, which must be di­rected to the in­for­ma­tion of­fi­cer of SARS’ head of­fice in Pre­to­ria.

Depend­ing on the cir­cum­stances, the rel­e­vant tax­payer may well have just cause not to pro­vide any in­for­ma­tion to SARS un­til such time that SARS has pro­vided the re­quested in­for­ma­tion in terms of the Pro­mo­tion of Ac­cess to In­for­ma­tion Act, and this may well be grounds for SARS not to pro­ceed with a probe or au­dit.

When­ever pro­vid­ing any in­for­ma­tion (in writ­ing or orally) to SARS, the tax­payer must be mind­ful of sec­tion 57 and 72 of the Tax Ad­min­is­tra­tion Act. Th­ese sec­tions deal with a tax­payer’s con­sti­tu­tional right not to give self-in­crim­i­nat­ing ev­i­dence, and the cir­cum­stances un­der which this right could be re­stricted, and the right to a fair trial, as en­shrined in sec­tion 35(3)( j) of the Con­sti­tu­tion.

It is of ut­most im­por­tance to un­der­stand that “un­less a com­pe­tent court di­rects oth­er­wise”, any in­for­ma­tion pro­vided by a tax­payer, in a re­turn or any other cor­re­spon­dence, could be used by SARS in crim­i­nal pro­ceed­ings against the tax­payer.

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