(c) South Africa Institute of Chartered Accountants. Contact SAICA for permission to reproduce this article., Tax

The Tax Administration Act: the administrative umpire for unreasonable delays by SARS

Sometimes it just doesn’t seem fair. Punitive measures against taxpayers are swift and stressful. What many taxpayers don’t know, is that the Tax Administration Act (TAA) has the role of administrative umpire, ensuring that SARS, too, plays fair. SARS needs to be efficient, economic and effective; act impartially, fairly, equitably and without bias. And no, SARS may not be slow-footed causing unreasonable delays.

The South African Revenue Service (SARS), as part of a move to boost its revenue collection, is reportedly looking to nail 300 000 companies with penalties for failure to submit corporate income tax returns.
It is therefore important to know your rights and how to deal with unreasonable delays, and in this article, I give an overview of the rules, the penalties and the route to justice when SARS are totally out of line.

Statutory rules go both ways

The Tax Administration Act (TAA) is vocal about the sanctions when taxpayers fail to adhere to statutory obligations timeously. The sanctions are punitive, and in some instances, criminal liability may even follow. On the other hand, the Act is unfortunately reticent about sanctions that follow when SARS officials fail to perform their function diligently and without delay. The problem is, delays on the part of SARS happen all the time. The frustration is made worse by the fact that remedies available to members of the public often fall outside the scope of the Act itself.

SARS tightens the screws

The pressure is on … SARS is tightening the screws in terms of tax collection and compliance. According to the former Finance Minister, Nhlanhla Nene, a lack of trust in SARS has led to a reduction in tax compliance. Regardless of the cause, the result is the same – a substantial tax shortfall of R49 billion this year. The deficit needs to be rectified and more and more taxpayers, regardless of whether they are compliant, are going to be put under the microscope. The number of tax audits is expected to increase dramatically. SARS cannot approach tax compliance willy-nilly, though. There are strict administrative regulations − some of which are specifically about unreasonable delays.

SARS’ obligations to perform their functions diligently and without delay is embedded in a number of administrative regulations including the Constitution, the SARS Act, the Promotion of Administrative Justice Act (PAJA), the TAA and Common Law:

  • Section 195 of the Constitution requires SARS (or any public official) to, inter alia, perform its functions with a high standard of professional ethics; act in an efficient, economic and effective manner; and act impartially, fairly, equitably and without bias.
  • Section 4(2) of the SARS Act gives further effect to these principles. It is a mandatory provision, requiring SARS to comply with section 195 of the Constitution.
  • Section 33 of the Constitution also requires SARS to act in a manner that is reasonable, procedurally fair and lawful.
  • PAJA ensures that section 33 of the Constitution happens. It provides the public with a remedy to approach a High Court in instances where delays are unreasonable.
  • In cases where SARS takes longer than a period of 90 days to make a decision or adjudicate an application, an objection or an appeal, a taxpayer can invoke section 6(2)(g) of PAJA. This entails:

  • o Approaching the High Court for relief
    o Compelling a government official to perform its functions within a time period as required by an Act, or within a reasonable period of time as required by the common law. A reasonable period of time in terms of the common law is deemed to be 90 days.

As a taxpayer, your eyes are probably glazing over just reading the laws and available remedies for disputes with SARS. It’s not surprising that taxpayers are rarely able or equipped to challenge SARS. The good news is that there are tax experts who are able to navigate through this maze of administrative channels and assist you.

Alternative channels for unreasonable delays

Remedies for unreasonable delays are not only contained in the provisions and principles of Administrative Justice. They are also contained in the Rules and Regulations promulgated under the TAA.

As an example, the rules specifically require SARS to adjudicate and decide upon an objection within 60 days, and an appeal must be accepted or rejected for alternative dispute resolution (ADR) within 30 days. There are numerous rules that similarly set out certain time periods that need to be adhered to by SARS.

What’s good for the goose, is good for the gander

The rules ensure that both the taxpayer and SARS play fair. Rule 56 of the TAA makes provision for either SARS or a taxpayer failing to comply with a time period or obligation prescribed under the rules. The non-defaulting party can apply to the Tax Court for default judgment against the defaulting party. Simply put, delays by either SARS or the taxpayer can be referred to the Tax Court.

The effect of this rule is that if there is an unreasonable delay, a failure to perform its function within the time period set out by the rules, SARS can be called out. In this instance, via dispute resolution proceedings, the taxpayer can ask that only the original tax assessment is applied and that any additional assessments be adjusted accordingly by way of Rule 56 proceedings.

Remedies for the taxpayer

Dr Daniel N Erasmus, international tax expert, says: ‘The question remains that, should they fail to do so, what remedies are available to the taxpayer?’ Some of these are:

Mandamus

Mandamus is from the Latin ‘We command’, which is exactly what happens. It is a judicial remedy in the form of an order from a superior court to any government, subordinate court, corporation, or public authority.

The Tax Ombud

Taxpayers can also lay complaints with the Tax Ombud (a second umpire) in cases where delays are unreasonable. The Tax Ombud may assume jurisdiction over matters that are procedural, such as unreasonable delays.

Experts holding your hand

‘Taxpayers should be aware of their rights and remedies in instances where there are unreasonable delays on SARS’ part,’ says Melanie le Roux, MD of GreatSoft Financial Services, ‘especially where such delays can cause ongoing prejudice, and in some cases even damages. Be sure to consult a tax expert to advise you on the remedies at your disposal.’

Before it’s game, set and match. Against you.

If delays are part of a tax audit or any dispute resulting from such an audit, tax risk insurance provides access to experts in constitutional and tax law. They will know all the avenues open to you in accordance with rules and administrative regulations around tax audits.

Schalk Pieterse is a tax expert and lawyer specialising in administrative law, tax law and constitutional law.

This article was originally published in ASA.