Taxman’s search and seizure approach at issue
It would be more reasonable to have the need for such action certified by a third party
THE power of search and seizure is one of the powers granted to the Commissioner of the South African Revenue Service (SARS) in order to enforce, among other things, the Income Tax Act, 1962, and the Value-Added Tax Act, 1991, effectively.
The search and seizure provisions are contained in section 74D of the Income Tax Act and an almost exact replica of this section is found in section 57D of the VAT Act. These provisions authorise SARS to enter and search any premises and any person present on the premises for any information, documents or things that may afford evidence as to the non-compliance by any taxpayer with his obligations and to seize any such information, documents or things without prior notice and at any time.
The SARS is, however, not at liberty to conduct such a search and seizure operation. The basic principle that forms the basis of this power of the Commissioner under both the Income Tax Act and the VAT Act is that a warrant must first be obtained from a judge.
The previous search and seizure provisions, that is the previous section 74(3) of the Income Tax Act and section 57(1) of the VAT Act, did not make provision for a warrant. SARS was allowed to authorise and conduct a search and seizure operation itself.
It seems, however, that these sections were not sustainable in our new constitutional era and the legislature repealed those provisions and introduced the new section 74D into the Income Tax Act and section 57D into the VAT Act in 1996.
The search and seizure provisions of these two acts were reconsidered recently and new provisions are introduced by the Tax Administration Bill. The drafting of the Tax Administration Bill was announced in the 2005 budget review as a project “to incorporate into one piece of legislation certain generic administrative provisions, which are currently duplicated in controversial “without a warrant” search and seizure provisions.
A senior SARS official is authorised under the bill to conduct a search and seizure operation in certain circumstances without a warrant. Such a search and seizure may be conducted if the person consents in writing or if the senior SARS official on reasonable grounds is satisfied that:
There may be an imminent removal or destruction of relevant material likely to be found on the premises;
If SARS applies for a search warrant, it will be issued; and
The delay in obtaining a warrant would defeat the object of the search and seizure.
Even though this may seem a radical new provision, the circumstances under which such an operation may be carried out are strict. In the draft explanatory memorandum on the Draft Tax Administration Bill (2009), the SARS says the following on the search and seizure provisions without a warrant:
“This power should assist in addressing the problem of tax evaders who, upon approach by SARS, waste no time to destroy all records and evidence of their fraudulent activities and details of income derived.”
It could be argued that the provisions are in breach of the constitutional right to privacy, but it must be remembered that constitutional rights can also be limited to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom. Our courts have previously found that “instant” warrantless powers are unconstitutional. This is when a power to conduct a search and seizure without a warrant is granted without the option of a warrant.
However, where an act provides for the general requirement of a warrant to conduct a search and seizure operation and only allows for a warrantless operation in certain exceptional circumstances, this has been found to be constitutional by our courts.
It seems that taxpayers in good standing with the SARS should not fear this new power of the Commissioner to carry out a search and seizure without a warrant. One of the requirements in the Tax Administration Bill that must be met before such an operation may be conducted is that there must be reasonable grounds that if SARS applies for a search warrant, a search warrant will be issued. A warrant may only be issued by a judge if satisfied that there are reasonable grounds to believe that a person failed to comply with an obligation imposed under a tax act, or committed a tax offence. The difficulty that arises is that the SARS is required to determine objectively the reasonableness of its own view of the matter. Difficulties can always arise when a party involved in a dispute and not sufficiently detached from that matter has to evaluate the reasonableness of its own point of view. One would like to see a more objective oversight from a third party to determine whether grounds exist for this invasion of privacy.