SARS must be lawful, reasonable and fair
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.