SciELO - Scientific Electronic Library Online

 
vol.16 número4Using a locum tenens in a private practiceThe conservation status of eagles in South African law índice de autoresíndice de assuntospesquisa de artigos
Home Pagelista alfabética de periódicos  

Serviços Personalizados

Artigo

Indicadores

Links relacionados

  • Em processo de indexaçãoCitado por Google
  • Em processo de indexaçãoSimilares em Google

Compartilhar


PER: Potchefstroomse Elektroniese Regsblad

versão On-line ISSN 1727-3781

PER vol.16 no.4 Potchefstroom Abr. 2013

 

ARTICLES

 

"Pay now, argue later" rule - before and after the Tax Administration Act

 

 

C Keulder

LLB (UP), LLM (UP). Lecturer, Mercantile Law, University of Pretoria. Email: carika.keulder@up.ac.za

 

 


SUMMARY

The South African Revenue Service (SARS) is entrusted with the duty of collecting tax on behalf of the South African government. In order to ensure effective and prompt collection of taxes, the payment of tax is not suspended pending an objection or an appeal, unless directed otherwise. This is also known as the "pay now, argue later" rule, and, for value-added tax purposes, is provided for in terms of section 36 of the Value-Added Tax Act 89 of 1991.
The "pay now, argue later" rule in terms of section 36 of the Value-Added Tax Act prima facie infringes on a taxpayer's right of access to the courts as envisaged in section 34 of the Constitution. This is due to the fact that a taxpayer is obliged to pay tax before being afforded the opportunity to challenge the assessment in a court.
In Metcash Trading Ltd v Commissioner for the South African Revenue Service, the Constitutional Court held the "pay now, argue later" rule in terms of section 36 to be constitutional. Olivier, however, does not agree with the court on several matters. Amongst the problems she indicates are that the taxpayer does not have access to the courts at the time the rule is invoked, and that the court did not consider the fact that there might be less invasive means available which would ensure that SARS's duty is balanced with the taxpayer's right of access to the courts. Guidelines were also issued which provide legal certainty regarding the factors SARS may consider in determining whether the payment of tax should be suspended or not. These guidelines also evoked some points of criticism.
Since 1 October 2012, the "pay now, argue later" rule has been applied in terms of section 164 of the Tax Administration Act 28 of 2011. The question arises whether this provision addresses the problems identified in respect of section 36 of the Value-Added Tax Act and the guidelines. In comparing these sections, only slight differences emerged. The most significant difference is that section 164(6) of the Tax Administration Act stipulates that the enforcement of tax be suspended for a period when SARS is considering a request for suspension. Section 164(6) does not provide a solution to the problems identified regarding section 36 of the Value-Added Tax Act. It is even possible that this section could give rise to further problems.
Therefore, the legislature has failed to address the imbalance between the duties of SARS and the right of a taxpayer to access the courts.

Keywords: Pay now, argue later; objections; appeal; Tax Administration Act; tax administration; taxpayers' rights; access to the courts; Constitution; tax collection; suspension of payment of tax.


 

 

1 Introduction

The levying of taxes is imperative for a government to ensure that it achieves its economic objectives1 which, amongst others, include the economic development of the country and regulating the levels of employment.2 The South African Revenue Service (SARS) is empowered to administer and collect taxes in South Africa,3 and value-added tax (VAT) is one of the forms of tax collected by SARS.4

VAT is collected by registered vendors5 on the supply of goods and services in South Africa and on the importation of goods and services to South Africa.6 VAT is therefore concerned with the consumption of goods and services in South Africa.7 In terms of the VAT system, the vendor may deduct:8

tax incurred on enterprise inputs (input tax) from the tax collected on supplies made by the enterprise (output tax).

This has the effect that a vendor acts as an agent by collecting tax on behalf of the government9 and paying the balance, being the difference between the input and output tax, over to SARS.10 This balance is calculated by means of self-assessment.11 It is, however, possible that SARS may furnish the vendor with an assessment when a taxpayer does not furnish a return as required or if SARS is not satisfied with the furnished return.12

If a taxpayer is aggrieved by an assessment issued by SARS, the taxpayer may lodge an objection to the assessment.13 The commissioner may then either alter the assessment or disallow the objection14 and inform the taxpayer of the decision.15

Thereafter, if the taxpayer is dissatisfied with the commissioner's decision, he or she may appeal against the decision.16 After an appeal is lodged, the dispute can be referred to alternative dispute resolution (ADR), the Tax Board or the Tax Court.17

Owing to SARS's duty to collect tax, it is afforded certain powers by the legislature to effect efficient and speedy collection of taxes18 and restrict the ability of taxpayers to use the objection or appeal procedures to vexatiously delay the payment of their taxes.19 One of these powers is the "pay now, argue later" rule. The "pay now, argue later" rule was provided for in terms of section 36 of the VAT Act20 and is currently provided for in terms of section 164 of the Tax Administration Act.21

In accordance with the "pay now, argue later" rule, a taxpayer who disputes the assessed amount payable to SARS will still be obliged to pay this amount - even though an objection to the assessment has been lodged. This obligation is furthermore not suspended when an appeal against a disallowance is lodged.22

If section 34 of the Constitution,23 which affords every person the right of access to court, is borne in mind, the question arises whether this rule is constitutional or not, as it seems not to allow access to the court before payment is made.24 On the other hand, if the "pay now, argue later" rule were not implemented by SARS, there would be an incentive for a taxpayer to dispute an assessment, which the taxpayer would not otherwise have done.25 This might lead to frivolous objections26 which could cause SARS and the South African government to experience dire financial constraints.

It is therefore clear that a balance between a taxpayer's rights and SARS's duty to effectively collect tax must be achieved. In the matter of Metcash Trading Ltd v Commissioner for the South African Revenue Servicei27 the Constitutional Court held that such a balance had in fact been achieved and thus declared the "pay now, argue later" rule relating to VAT to be constitutionally sound. In view of the principle of stare decisis,28 this Constitutional Court decision is binding on all courts, unless it can be shown that the court erred.29

Despite the fact that the section 36 rule has been found to be constitutionally sound, the present article argues that it poses some constitutional and other problems, and, accordingly, that there might be sufficient grounds for the courts to deviate from this precedent. The article further discusses whether the section 164 rule corrects the constitutional problems experienced with the section 36 rule.

In order to fully appreciate the section 164 rule, it is essential to discuss in detail the section 36 rule and the effect thereof. Firstly, the contextual setting of the section 36 rule is explored, and, thereafter the constitutionality of the section 36 rule is investigated. This investigation is conducted with specific reference to Metcash Trading Ltd v Commissioner for the South African Revenue Service,30 in which the courts had to deal with a constitutional attack on section 36 of the VAT Act.

After the discussion of the section 36 rule, the focus of this article will shift to the section 164 rule. Here it will be determined whether the section 164 rule addresses the problems experienced with the section 36 rule.

 

2 Section 36 rule

2.1 Content

Section 36 states that the payment of tax will not be suspended pending an objection or an appeal unless the commissioner directs otherwise.31 A taxpayer desiring suspension of the payment of tax can, however, request a suspension.32

The commissioner can deny a taxpayer's request, or revoke the decision to suspend the payment of tax, if he or she is satisfied that the objection or appeal is frivolous, is being used as a dilatory tactic or because material changes have occurred since the suspension was granted.33

It must be noted that in the event of the objection or appeal being successful an adjustment, including interest,34 will be made.35 Even though the payment of interest is to be welcomed,36 it must be pointed out that this may not prevent the taxpayer from experiencing financial ruin if he or she has to pay the assessed amount pending an appeal.37

2.2 Contextual setting

In order to appreciate the extent of the section 36 rule, the context in which the "pay now, argue later" rule is applied must be considered, as the "pay now, argue later" rule is not applied in isolation. The consequences if a taxpayer fails to pay the assessed amount pending an objection or an appeal are relevant, as SARS is afforded further powers to enforce the collection of taxes due.

If the taxpayer does not honour his or her obligation to pay tax pending an objection or an appeal against a disallowance, SARS may, firstly, implement the statement procedure as provided for in section 40(2)(a) of the VAT Act.38

In terms of this procedure, the commissioner may file a statement indicating the outstanding tax, interest or penalty payable, with the clerk or registrar of a competent court. The filing of the statement has the effect of a civil judgment,39 which enables the commissioner to obtain a writ to attach and sell property.40

Secondly, SARS may appoint a third party to act as an agent for the taxpayer. This third party would then be required to make payment of taxes from money held by the third party on behalf of the taxpayer.41

In the matter of Hindry v Nedcor Bank Ltd,42 the constitutionality of appointing a third party as an agent of a taxpayer was tested.43 Wush J44 held that the appointment of a taxpayer's agent is necessary for the speedy collection of taxes, and as a weapon of great importance to the state, and consequently declared the appointment of a taxpayer's agent constitutional.

Consequently, a taxpayer's failure to pay tax pending an objection or an appeal against a disallowance may result in SARS obtaining a civil judgment or ordering a third party to act as an agent of the taxpayer. The "pay now, argue later" rule, on its own, does not guarantee the effective collection of taxes but the enforcement procedures are such that SARS is assured of effectively collecting taxes.

The need for SARS to be able to collect taxes efficiently and effectively is freely acknowledged, but it is important that a taxpayer's constitutional rights as a taxpayer should also be considered.

2.3 A taxpayer's right of access to the courts

With the enactment of the Interim Constitution45 and the Constitution, South Africa changed from a parliamentary state46 to a constitutional state.47 As a constitutional state, where the Constitution is supreme, anyone may challenge the constitutionality of any conduct or law.48 This principle is enshrined in section 34 of the Constitution, which provides as follows:49

Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.

This section guarantees the right of access to a court or other tribunal, the right to a fair public hearing,50 and impartiality and independence by the tribunal or forum.51 Ackermann J in Bernstein v Bester52 correctly held that an object of this right was, amongst others, "the separation of the judiciary from the other arms of the state".

In Chief Lesapo v North West AgrfcuUturaU Bank,53 the court indicated that another object of section 34 is to ensure a peaceful and orderly society "without resorting to self-help". The court further elaborated by stating that "no one is entitled to take the law into her or his own hands".54

The fact that the right of access to the court protects against self-help is further supported by Cheadle, Davis and Haysom, and by Jazbhay, who are of the opinion that self-help contravenes the right of access to the courts.55 Jazbhay furthermore indicates that this concept of self-help could be described as becoming a judge in a matter to which one is a party.56

In Chief Lesapo57 the court emphasised that section 34 of the Constitution is of great importance to prevent self-help and "[a]s a result, very powerful considerations would be required for its limitation to be reasonable".58

Would SARS's duty to effect the speedy collection of tax therefore create a powerful consideration such as was envisaged by the court in Chief Lesapo This article will now deal with the constitutionality of the section 36 rule, with specific reference to Metcash Trading Ltd.59

2.4 Constitutional attack

2.4.1 General principles

It is necessary to focus briefly on some general principles relating to constitutional evaluation.

The right of access to the courts contained in the Bill of Rights is not absolute and may, in accordance with section 36 of the Constitution, be limited if the limitation is reasonable and justifiable. The application of section 36 can be divided into two stages.

Firstly, it must be proved by the applicant - in this instance, a taxpayer - that a constitutional right has been limited.60 This would require the person to show that the situation for which he or she seeks constitutional protection falls within the ambit of the particular constitutional right,61 and that the right or practice he or she wishes to challenge impedes the exercise of the protected activity.62 Only then will the court move to the second stage.

In this instance (namely that of a taxpayer), an assessed amount that has been questioned, either by way of objection or appeal, will still be due and payable and SARS's right to recover the money from the taxpayer will not be stayed. It seems that a taxpayer's right against self-help, as embodied in section 34 of the Constitution, will be restricted by the application of the section 36 rule, as SARS can enforce the statement procedure or declare a third party an agent of the taxpayer. The court will therefore be able to move on to the second stage.

The second stage examines whether the limitation is a reasonable and justifiable limitation based on the concepts of human dignity, equality and freedom.63 In order to ascertain whether or not the limitation is reasonable and justifiable, the court must consider the nature and extent of the limitation, the importance of the purpose of the limitation, as well as the relation between the limitation and the said purpose. Furthermore, the court must consider if there are less invasive means available, and must also consider the nature of the right that is being limited.64

If it is a reasonable and justifiable limitation, the impediment will be allowed. In the event that it is not reasonable and justifiable, the practice will be unconstitutional.

Section 36 of the Constitution sets out factors which the court has to take into consideration when determining if a limitation is reasonable and justifiable. These factors must not be seen as comprising a check list, but rather as part of a balancing act.65 When weighing up these factors, the following dictum must be kept in mind:66

[T]he Court places the purpose, effects and importance of the infringing legislation on one side of the scales and the nature and effect of the infringement caused by the legislation on the other.

When a court has to deal with the constitutionality of the section 36 rule, it will have to weigh the purpose, effect and importance of the "pay now, argue later" rule against the nature and effect of this rule on a person's right of access to the courts.

The purpose of the "pay now, argue later rule" is to effect the speedy collection of taxes.67 These taxes are used to improve the country's economic development and to regulate levels of employment.68 With the "pay now, argue later" rule, SARS can reduce the number of frivolous objections and guarantee that the treasury will not be prejudiced by a delay in payments.69 On the other side of the scale will be the impact of the "pay now, argue later" rule on the right of access to the courts, as the taxpayer is prima facie obliged to pay the assessed amount before approaching the court.

The Metcash Trading Ltd judgment is now discussed with these general principles in mind.

2.4.2 Metcash Trading Ltd

2.4.2.1 Facts

SARS served an assessment in the amount of R266 million, in terms of section 31(1) of the VAT Act, on the applicant.70 The applicant objected to this assessment, but the objection was disallowed by SARS.71 The applicant was also notified that, if he did not effect payment, SARS would implement its summary procedure.72

Metcash, in response, approached the High Court on an urgent basis. A consent order was granted to the effect that the applicant must lodge an application before a specific date to have sections 36, 40(2)(a) and 40(5) of the VAT Act declared contrary to sections 25(1) and 34 of the Constitution.73 SARS undertook not to enforce the summary procedure before the specific date.

2.4.2.2 Court a quo

The question before the court a quo was whether sections 36, 40(2)(a) and 40(5) of the VAT Act were in conflict with sections 25(1) and 34 of the Constitution. The applicant did not pursue any argument regarding the possible infringement of a person's right to property as contained in section 25(1) of the Constitution74 Accordingly, the court had to deal only with the effect that the sections of the VAT Act had on a person's right of access to the courts.

In her judgment Snyders J75 referred to Chief Lesapo and stipulated that the infringement of a constitutional right cannot be justified by the merits of a specific case. The test is therefore objective. Snyders J76 held that the summary procedure does infringe on a taxpayer's right of access to the courts, as SARS acts as a substitute for the court by determining every aspect of the vendor's liability and enforcement thereof. Further, she held that all interlocutory relief by the court is precluded by this section.77 She elaborated by stating that:78

[t]he prospect that an eventual successful appeal might reverse the situation is no answer to the actual infringement which endures until then.

Accordingly, the first stage of the constitutional evaluation was successful and the court moved on to examine whether the said infringement was reasonable and justifiable.

The commissioner argued that a reasonable and justifiable limitation was created for the following reasons, amongst others:

  • frivolous objections would be made to delay the payment of taxes;
  • fraudulent and dishonest tax returns would be encouraged;
  • South Africa could not afford a situation where taxpayers do not pay promptly.79

The court held that a delay in casu would not have such a big impact, considering the greater scheme of national tax.80 It was further held that the limitation of a person's right of access to the court was extensive and that, even though it might be only temporary in nature, the effect could be ominous and permanent.81 The limitation was accordingly held not to be reasonable and justifiable.

The statement procedure,82 the "pay now, argue later" rule83 and denial of the right to challenge the correctness of the assessed amount on the statement84 were consequently declared invalid in the court a quo and the matter was referred to the Constitutional Court for confirmation.85

2.4.2.3 Constitutional Court

The minister of finance and the commissioner for SARS opposed confirmation of the order granted in the court a quo.86 They argued that the limitation was reasonable and justifiable as there were adequate opportunities for a taxpayer to have a hearing on the assessment.87

Metcash supported the ruling and reasoning of Snyders J in the court a quo.88 It contended that the opportunities for a "hearing" on the assessment referred to by the respondent were insufficient, as the taxpayer was in effect compelled to pay and hope that he or she would get the money back at a later stage.89 The applicant submitted that there were less invasive means available to SARS to effect the speedy collection of taxes.90 These means included the imposition of higher interest rates, time-linked penalties and the furnishing of security.91

The court indicated that section 36(1) had two objectives, namely to ensure that the obligation of an aggrieved taxpayer to pay tax not be delayed pursuant to other remedies, and secondly that the necessary refunds be made later.92 Kriegler J therefore held that the "pay now, argue later" rule was not concerned with access to the court and contained no provision ousting the court's jurisdiction.93 He further elaborated on the functioning of the Special Tax Court and the fact that it functions like an ordinary court. The taxpayer would therefore have access to the courts by appealing to the Special Tax Court.94

The court agreed with the commissioner that, in exercising his or her discretion in terms of section 36(1) of the VAT Act, his or her conduct constitutes administrative action which would be reviewable in terms of administrative law.95 It was concluded that the court a quo had thus erred in holding that the court's jurisdiction was ousted.96 In a unanimous decision, the Constitutional Court dashed the aggrieved taxpayer's hope by refusing to declare sections 36, 40(2)(a) and 40(5) unconstitutional.97

The court therefore held the section 36 rule to be constitutional, and furthermore held that this rule constitutes administrative action. The fact that the "pay now, argue later" rule constitutes administrative action means that a taxpayer may also utilise the review procedure98 provided for by the Promotion of Administrative Justice Act99 when dissatisfied with an assessment. Since the court held the "pay now, argue later" rule to be unconstitutional, utilising the review procedure might seem to be an alternative for an aggrieved taxpayer.100

2.4.3 Constitutional probeems

Vorster101 correctly speculates that opinions may differ on the question of whether or not the judgment in Metcash Trading Ltd (CC) was correct. For the purposes of this article, two conflicting opinions are highlighted.

Croome agrees with the judgment and states that the fact that the taxpayer may approach a court on review of the matter ensures that the taxpayer has a right of access to the court.102 He is further of the opinion that section 88 of the Income Tax Act, which contains a similar provision, would also muster constitutional scrutiny.103 Williams,104 however, submits that it is not a foregone conclusion that the court would have come to the same conclusion in Metcash Trading Ltd (CC) had it been an income tax matter. This is because the court in Metcash Trading Ltd (CC) specifically drew a clear distinction between income tax and VAT and emphasised that the matter before it dealt with VAT and no other fiscal statute.105 Firstly, the court indicated that VAT liability arises continuously, unlike income tax liability, which arises once an assessment has been issued.106 Secondly, and more importantly, vendors act as collection agents on behalf of SARS;107 hence VAT is money collected that is due to the state.108 The calculation of VAT payments is therefore less complicated than that in respect of income tax.109 This means that, in the case of income tax, the scope for conflict regarding the interpretation of the statute or accounting practices is far greater.110 A dispute regarding a VAT assessment will often arise owing to adverse credibility findings by SARS.111

It is submitted that the Metcash Trading Ltd (CC) judgment was concerned only with the application of the "pay now, argue later" rule in relation to VAT and has no binding effect on other tax legislation. The considerations that influenced the court in arriving at this decision in relation to VAT would not necessarily lead to the same conclusion in relation to income tax matters.

On the other hand, unlike Croome, Olivier is of the opinion that the Constitutional Court erred on several counts in its judgment.

Firstly, she criticises Kriegler's view that the section 36 rule does not oust the jurisdiction of the court as a taxpayer may appeal to the Special Tax Court.112 She indicates that the taxpayer never argued that the jurisdiction of the court is completely excluded, but that this rule excludes the jurisdiction of the court when the rule is invoked.113

On the basis of Olivier's criticism, it is submitted that the constitutional attack on the section 36 rule lies therein that the right of access to the courts, as contained in section 34 of the Constitution, aims to prevent self-help. The court should thus have examined whether this rule, at the time it is invoked, unreasonably permits SARS to "help itself" and become the judge in its own case. The question, therefore, should not be whether the taxpayer will have access to the courts at some stage, but rather whether the taxpayer will have the opportunity to access the courts before being obliged to pay the assessed amount.

Olivier further points out that, in theory, the possible judicial review of the commissioner's discretion not to suspend a taxpayer's payment pending an appeal does allow a taxpayer access to the courts, but, according to her, the grounds of review are fairly narrow.114

It must also be borne in mind that the remedies available when a court reviews the commissioner's discretion not to suspend payment are limited. In terms of section 8 of PAJA, the court can grant an order directing the commissioner to provide reasons or reconsider the decision. However, the court does not have the power to overturn the commissioner's decision.

The value of the review procedure is further diminished when the statement procedure in terms of section 40(2)(a) of the VAT Act is invoked,115 as the taxpayer may then not challenge the correctness of the statement in legal proceedings.116,117 With reference to the review procedure, Olivier also refers to Dawood v Minister of Home Affairs; Shalabi v Minister of Home Affairs; Thomas v Minister of Home Affairs118 where it was held that:119

the exercise of a discretionary power may subsequently be successfully challenged on administrative grounds, for example that it was not reasonable, does not relieve the legislature of its constitutional obligation to promote, protect and fulfil the rights entrenched in the Bill of Rights.

Therefore, there is still a duty on the legislature to ensure that provisions are constitutional, even though a decision can be taken on review.

Olivier also submits that, in both the High Court and the Constitutional Court, it was said on behalf of the respondents that this practice was implemented in other countries.120 Snyders J, in the High Court, held that this did not persuade her that the South African provision is constitutional.121 The Constitutional Court, however, came to a different conclusion.122 It is unclear which countries served, or did not serve, as examples of this practice.123

Olivier furthermore indicates that, if legislation defined the grounds on which the commissioner would exercise his or her discretion to suspend payment pending an appeal, a person's right of access to the courts would be better protected.124

She concludes that the court did not deal with the argument raised by the applicant that there are less invasive ways to effect speedy collection of tax.125 The possibility that there are less invasive ways to for SARS to achieve its objective is one of the factors the court would have had to consider in terms of section 36 of the Constitution.

2.4.4 Post Metcash Trading Ltd (CC)

2.4.4.1 Guidelines

After the Constitutional Court judgment, SARS issued Media Release 27. This release set out the circumstances in which the commissioner may exercise his or her discretion in suspending payment pending an appeal that might be decided in favour of the taxpayer. One such example was when payment of the whole amount would cause irreversible damage if the taxpayer's appeal were successful, and where the circumstances of the matter created reasonable doubt.126

The TLSA has further clarified the "pay now, argue later" rule by amending section 88 of the Income Tax Act and section 36 of the VAT Act.127 The sections were amended to set out the factors that the commissioner may take into consideration when exercising his or her discretion to suspend a payment pending an appeal, and include the following:

  • the amount involved;
  • the taxpayer's compliance history;
  • whether the taxpayer might alienate his or her assets during the postponement of payment;
  • whether the taxpayer is able to provide adequate security for the payment of the assessed amount;
  • whether payment of the amount would cause irreparable financial hardship to the taxpayer;
  • whether there are impending sequestration or liquidation proceedings;
  • whether the taxpayer has failed to furnish requested information; and
  • whether fraud is present.128

The guidelines provided after the decision in Metcash Trading Ltd (CC) assist in ensuring some legal certainty regarding whether a taxpayer would have to pay now and argue later or whether payment should be suspended pending an appeal.129

2.4.4.2 Guideline problems

"[O]n-going confusion and misunderstandings" still persist, however, regarding the section 36 rule.130 Rood131 indicates that the commissioner is still the judge in a dispute to which he or she is a party. This means that SARS, as a party to the dispute, can decide whether the taxpayer may, for instance, possibly alienate assets and, if it is of the opinion that the taxpayer will alienate assets, can then proceed accordingly with collection proceedings.132

He furthermore indicates that it is unclear whether the fraud referred to in the amended section refers only to alleged fraud or to an actual fraud conviction. If an allegation of fraud is taken into consideration, this would be unfair, as the taxpayer will not have had the opportunity to defend himself or herself against the allegation.

The Act is furthermore silent as to the relative weight which should be attached to each of the above factors.133 Moreover, the relevance of some of the factors is questionable.134 For instance, is the fact that a large amount of tax is involved an indication that suspension of payment should be granted or refused?135 The relevance of the possibility that the payment of the amount would cause irreparable financial hardship to the taxpayer is doubted by Williams, who thinks that the payment of any amount would be reparable by a damages award.136 This might, however, not be the case when a taxpayer is rendered insolvent. The objection and appeal procedure may take a substantial amount of time, which could severely prejudice a taxpayer and even lead to the taxpayer's sequestration or liquidation.

In Mokoena v CSARS137 and Capstone, the respective courts came to entirely different conclusions on a pertinent aspect of the rule.138 In the former case the court held that while SARS is competent to demand payment of tax pending an objection or appeal based on the "pay now, argue later" rule it may not obtain judgment in the interim.139 This decision was criticised in Capstone, as the filing of a statement does not amount to a judgment.140 Binns-Ward J conceded that, even though it is not a judgment in the ordinary sense, it has the effect of a judgment, as SARS is able to obtain a writ of execution.141

It is apparent that, even though the "pay now, argue later" rule in terms of the section 36 rule was held to be constitutional and further guidelines were provided, the application of the "pay now, argue later" rule is still problematic.

With the enactment of the TAA, the "pay now, argue later" rule is provided for in terms of section 164 of the TAA. This article will now proceed to focus on the "pay now, argue later" rule in terms of the TAA, and will attempt to determine if the problems experienced with the section 36 rule are addressed by the section 164 rule.

 

3 Section 164 rule

3.1 The TAA

The legislature began drafting the TAA in 2005142 and it came into operation on 1 October 2012.143 This act aims to "provide for the effective and efficient collection of tax".144 It is therefore clear that the TAA was enacted to assist SARS in its duty to collect tax. This is achieved, amongst other ways, by "aligning the administration of the tax Acts".145

If a taxpayer is liable for the payment of tax in terms of a provision in a tax act, for instance the VAT Act, the tax administration will be done in terms of the TAA, except if the TAA is silent with regard to the administration in that instance.146

The TAA specifically deals with the situation of the payment of tax pending an objection or an appeal. Accordingly, since 1 October 2012 the "pay now, argue later" rule will be dealt with in terms of section 164 of the TAA.

3.2 Content

Section 164 of the TAA stipulates that the obligation of a taxpayer to pay tax will not be suspended pending an objection or an appeal unless a senior SARS official indicates otherwise.147 A taxpayer can request a senior SARS official to suspend the payment if the taxpayer intends to lodge an objection or an appeal against an assessment.148 The official will take into consideration the amount involved, the taxpayer's compliance history, whether the taxpayer might alienate his or her assets during the postponement of payment, the taxpayer's ability to furnish security, whether the payment pending an objection or an appeal would cause irreparable financial hardship, and if there are any imminent sequestration or liquidation proceedings pending. The official will also consider if the taxpayer has failed to furnish required information or if any fraud is involved.149

A taxpayer's request may be denied or a suspension may be revoked if the objection is frivolous or is used by the taxpayer simply to delay the payment of tax. Furthermore, the suspension can be revoked if a material change has occurred since the official decided to suspend payment.150

In terms of section 164(6), SARS is prohibited from invoking recovery proceedings for a period commencing on the day SARS receives a request for suspension, or a previously granted suspension is revoked, and ending ten business days after a notice of SARS's decision regarding suspension or revocation is issued. This means that, once the taxpayer has requested a suspension in terms of section 164(2), the enforcement proceedings151 are prohibited until ten days after SARS has delivered its decision to reject a suspension request or revoke a suspension. SARS is, however, permitted to continue with the collection procedures if it has a reasonable belief that the taxpayer may alienate assets.152

In the event that an assessment is altered by SARS in accordance with an objection or an appeal, SARS will make a due adjustment.153

Accordingly, the "pay now, argue later" rule will still be applied by SARS, but now in terms of section 164 of the TAA. The section indicates factors that a SARS official may consider in suspending the payment of tax pending an objection or an appeal. Nevertheless, the enforcement of the tax due to SARS is initially suspended until ten days after SARS has decided whether or not to suspend the payment of tax.

3.3 Contextual setting

As with the section 36 rule,154 the context in which the section 164 rule is applied is of importance. What, for instance, would the consequences be if the payment of tax pending an objection or an appeal were not suspended?

Like the section 36 rule, the section 164 rule affords SARS further powers to enforce the collection of taxes due. These powers include, amongst others, the appointment of a third party as an agent of the taxpayer155 and the statement procedure.156 Mention must also be made of the fact that section 172(2) specifically states that SARS may apply the statement procedure even though an objection or an appeal is lodged, unless a suspension has been granted.

It is, therefore, important to note that, if a taxpayer's obligation to pay tax pending an objection or an appeal is not suspended, SARS can actively take steps to enforce the collection of tax.

This leads one to ask if there are any substantive differences between the section 36 rule and the section 164 rule.

3.4 Section 36 rule v section 164 rule

Both rules provide for the practice of "pay now, argue later" and the wording of these two sections is similar. The section 164 rule deviates from the section 36 rule in only two respects.

Firstly, in terms of the section 164 rule, a senior SARS official has the authority to suspend the payment of tax, whilst with the section 36 rule only the commissioner had this authority.157

Secondly, section 164(6) of the TAA contains a unique section. In terms of this provision, SARS is prohibited from taking collection steps during the period of considering a suspension request and ten days after issuing a notice of denial or revocation of the suspension.158

It needs to be determined whether these changes in terms of section 164(6) of the TAA address the problems identified regarding the "pay now, argue later" rule in terms of section 36 of the VAT Act.159

3.5 Section 164 rule - addressing problems

In the discussion on the constitutionality of the section 36 rule, certain problems were highlighted.160 Further problems were then identified with the section 36 rule in the discussion of the problems arising after Metcash Trading Ltd.161

3.5.1 The constitutional problems

Olivier's main points of criticism levelled at the section 36 rule are, firstly, that, at the time the rule is invoked, the court's jurisdiction is excluded. The question that arises from this criticism is if SARS is unreasonably permitted to become the judge in its own case by being able to enforce its collection procedures despite an objection or an appeal being lodged.162 Secondly, Olivier indicates that there might be less invasive means available which will assist in achieving a balance between SARS's duty and the taxpayer's right of access to the courts.163

The fact that section 164(1) allows for a senior SARS official, instead of the commissioner of SARS, to suspend the payment of tax pending an objection or an appeal only has the effect that the commissioner's powers are delegated. It does not address the problem that SARS is permitted to enforce the collection of tax even though an objection or an appeal has been lodged. Furthermore, authorising a senior SARS official to consider suspending the payment does not make the procedure less invasive if the request to have the payment suspended is rejected. Therefore, the first change in terms of the "pay now, argue later" rule will not have a significant impact on a taxpayer's right of access to the courts.

The change in terms of section 164(6) of the TAA provides a taxpayer with a degree of legal certainty, because the taxpayer is guaranteed that SARS will not continue with any collection steps for a certain period, as the collection of tax is stayed for such a period. As a result, SARS will reach a decision regarding the request for suspending the payment pending an objection or an appeal as soon as possible to ensure that it can continue collecting tax rapidly.

It follows that SARS will have an incentive to reach a swift decision, namely to be able to proceed with enforcement as soon as a request for suspension is rejected. This could result in senior SARS officials not taking into account all relevant considerations164 in determining whether payment pending an objection or an appeal should be suspended. If this is indeed the case, taxpayers will be forced to take these decisions on review.165

Section 164(6) furthermore does not explore the fact that there might be less invasive means available.

It appears that the change in terms of section 164(6) of the TAA does not assist in resolving any of the problems identified previously.166

3.5.2 The guideline problems

The guidelines provided for in terms of the TLSA were also criticised. The opinion was expressed that SARS acts as a judge in a matter to which it is a party. Furthermore, the weight, meaning and relevance of some of these factors were criticised.167 The guidelines provided for in terms of the TLSA are replicated in section 164(3) of the TAA. The criticism levelled at the section 36(3) factors will therefore still obtain in respect of the section 164 rule. Accordingly, the section 164(3) rule does not address the problems identified previously.168

The TAA does, however, address the confusion that arose in Mokoena regarding whether or not SARS may proceed with the collection of tax even though an objection or an appeal has been lodged. Section 172(2) of the TAA specifically states that SARS may proceed with the statement procedure even though an objection or an appeal is lodged, provided that the obligation has not been suspended in terms of section 164 of the TAA. It is therefore confirmed that SARS may proceed with the statement procedure if the payment of tax is not suspended.

 

4 Conclusion

It was established, when examining the constitutionality of the "pay now, argue later" rule, that a balance has to be achieved between the speedy collection of taxes and the taxpayer's right to approach the court. The court held in Metcash Trading Ltd (CC) that this balance is in fact achieved and, accordingly, that the "pay now, argue later" rule is constitutional.

Two issues must, however, be kept in mind. Firstly, Metcash Trading Ltd (CC) dealt with the "pay now, argue later" rule in terms of the VAT Act. Therefore it does not create a precedent regarding income tax matters. The court still needs to determine whether the "pay now, argue later" rule in income tax matters will muster constitutional scrutiny.

Secondly, the courts will be bound by the Metcash Trading Ltd (CC) decision unless it can be shown that this decision was wrong. Numerous arguments made by Olivier may assist a taxpayer in proving that the court erred, in the Metcash Trading Ltd (CC) judgment, in declaring section 36 of the VAT Act to be constitutional.

Since 1 October 2012, the "pay now, argue later" rule has, however, been provided for in terms of section 164 of the TAA. The question that arose was whether or not the problems identified with regard to the section 36 rule would be addressed by section 164 of the TAA. Owing to the fact that the wording is fairly similar to that of section 36 of the VAT Act, the section 164 rule does not address the problems. In fact, it is possible that the new rule may lead to other problems.

It is thus submitted that the legislature has failed to make productive use of the opportunity to draft legislation that would achieve a balance between SARS's duty and a taxpayer's right of access to the courts.

 

Bibliography

Burns Administrative Law. Burns Y Administrative Law Under the 1996 Constitution 2nd ed (LexisNexis Butterworths Durban 2003)        [ Links ]

Cheadle, Davis and Haysom Constitutional Law. Cheadle MH, Davis D and Haysom N South African Constitutional Law: Bill of Rights (LexisNexis Butterworths Durban 2002)        [ Links ]

Croome 2001 Business Day Professional. Croome BJ "Paying up or arguing first" 2001 Business Day Professional 6-6        [ Links ]

Croome Taxpayer's Rights. Croome BJ Taxpayer's Rights in South Africa (Juta Cape Town 2010)        [ Links ]

Currie and De Waal Bill of Rights. Currie I and De Waal J The Bill of Rights Handbook 5th ed (Juta Cape Town 2005)        [ Links ]

Currie and Klaaren Benchbook. Currie I and Klaaren J The Promotion of Administrative Justice Act Benchbook (Siber Ink Cape Town 2001)        [ Links ]

De Ville Judicial Review. De Ville JR Judicial Review of Administrative Action in South Africa (LexisNexis Butterworths Durban 2005)        [ Links ]

Editor February 2000 Taxgram. Editor "Editorial: Successful constitutional attack on Value-Added Tax Act in High Court" February 2000 Taxgram 1-3        [ Links ]

Editor December 2000 Taxgram. Editor "Editorial: Metcash Constitutional Court judgement" December 2000 Taxgram 1-2        [ Links ]

Editor February 2001 Taxgram. Editor "Editorial: The Metcash judgment and the delicate balance between state and taxpayer" February 2001 Taxgram 1-4        [ Links ]

Hahlo and Kahn South African Legal System. Hahlo HR and Kahn E The South African Legal System and Its Background (Juta Johannesburg 1973)        [ Links ]

Muller Wealth Transfer. Muller EA Framework for Wealth Transfer Taxation in South Africa (LLD thesis UP 2010)        [ Links ]

Olivier 2001 TSAR. Olivier L "Tax collection and the Bill of Rights" 2001 TSAR 193-200        [ Links ]

Olivier and Croome Tax Administration. Olivier L and Croome BJ Tax Administration (Juta Cape Town 2010)        [ Links ]

Rood 2009 Finweek. Rood L "Pay now, argue later" 13 August 2009 Finweek 44        [ Links ]

Silke 2002 Acta Jurídica. Silke J "Taxpayers and the Constitution: a battle already lost" 2002 Acta Juridica 282-334        [ Links ]

Silver and Beneke VAT Handbook. Silver M and Beneke C Delottte VAT Handbook 7th ed (Butterworths Durban 2009)        [ Links ]

Van Schalkwyk 2004 Meditari Accountancy Research. Van Schalkwyk L "Constitutionality and the Income Tax Act - Revisited" 2004 Meditari Accountancy Research 185-195        [ Links ]

Vorster 2001 De Rebus. Vorster H "Self-help and the fiscus - Metcash Trading Ltd v the Commissioner for SARS (CC) 24-11-2000 (CCT3/00 Unreported)" January 2001 De Rebus 47-47        [ Links ]

Williams 2012 Synopsis. Williams RC "Unresolved aspects of the 'pay now later' rule" January 2012 Synopsis 4-6        [ Links ]

Woolman and Botha "Limitations". Woolman S and Botha H "Limitations" in Woolman S (eds) Constitutional Law of South Africa 2nd ed (Juta Cape Town 2007) pages?        [ Links ]

Register of legislation and rules

Constitution of the Republic of South Africa, 1996

Customs Act 90 of 1964 Income Tax Act 58 of 1962

Interim Constitution of the Republic of South Africa Act 200 of 1993

Promotion of Administrative Justice Act 3 of 2000

South African Revenue Service Act 34 of 1997

Tax Administration Act 28 of 2011

Taxation Laws Second Amendment Act 18 of 2009

Value-Added Tax Act 89 of 1991

Register of official documents

Arnold Opinion. Arnold BJ Opinion Prepared for the Commissioner for Inland Revenue (Attached as Annexure H to the Affidavit of the Commissioner for Inland Revenue in an Application to the Constitutional Court, CCT/22/96)

SARS Media Release. SARS Media Release 27 of2000

SARS Dispute Resolution. SARS: SARS Guide on Tax Dispute Resolution 2004

SARS Guide for Vendors. SARS: SARS VAT 404 - Guide for Vendors

Register of case law

Bernstein v Bester 1996 2 SA 751 (CC)

Capstone 556 (Pty) Ltd v CSARS 2011 ZAWCHC 297

Certification of the Amended Text of the Constitution of the Republic of South Africa 1996 1997 1 BCLR 1 (CC)

Chief Lesapo v North West Agricultural Bank 1999 12 BCLR 1420 (CC)

Dawood v Minister of Home Affairs; Shalabi v Minister of Home Affairs; Thomas v Minister of Home Affairs 2000 8 BCR 837 (CC)

Hindry v Nedcor Bank Ltd 1999 2 All SA 38 (W)

Metcash Trading Ltd v Commissioner for the South African Revenue Service 2002 2 SA 232 (W)

Metcash Trading Ltd v Commissioner for the South African Revenue Service and Another 2001 1 BCLR 1 (CC)

Mokoena v CSARS 2011 2 SA 556 (GSJ)

S v Bhulwana 1995 ZACC 11

S v Manamela 2000 3 SA 1 (CC)

Register of internet sources

Brincker and Louw Date Unknown www.saipa.co.za. Brincker E and Louw H Date Unknown Pay Now; Argue Later - Some Further Developments www.saipa.co.za/articles/173315/pay-now-argue-later-some-further-developments [date of use 22 Mar 2012]        [ Links ]

Croome 2011 www.bericcroome.com. Croome BJ 2011 Payment of Tax During an Objection Regulated www.bericcroome.com/2011/03/payment-of-tax-during-objection.html [date of use 22 Jul 2011]        [ Links ]

Daya and Gers 2011 www.ens.co.za. Daya L and Gers C 2011 SARS Clarifies the ... www.ens.co.za/news/news_article.asp?iID=187&iType=4 [date of use 22 Mar 2012]        [ Links ]

Edward Nathan Sonnenbergs 2009 www.saica.co.za. Edward Nathan Sonnenbergs 2009 Pay Now, Argue Later www.saica.co.za/integritax/2009/1795_Pay_now_argue_later.htm [date of use 22 March 2012]        [ Links ]

Goldberg De Villiers 2012 www.goldbergdevilliers.co.za. Goldberg De Villiers 2012 Pay Now, Argue Later - SARS 1, Tax Payers 2 www.goldbergdevilliers.co.za/news_articles.asp?NewsID=13 [date of use 22 Mar 2012]        [ Links ]

Jazbhay 2000 www.legalcity.net. Jazbhay SA 2000 The Lesapo Judgment: Defining the Constitutional Principle Against Self-help www.legalcity.net/Index.cfm?fuseaction=MAGAZINE.article&ArticleID=5840 [date of use 25 Jun 2012]        [ Links ]

Magolego 2009 www.polity.org.za. Magolego M 2009 Pay Now, Argue Later - SARS Shed Some Light for Taxpayer's Benefit www.polity.org.za/article/pay-now-argue-later-sars-shed-some-light-for-the-taxpayers-benefit-2009-11-17 [date of use 2 Mar 2010]        [ Links ]

Moodley Date Unknown nattymoodley.com. Moodley M Date Unknown Pay Now, Argue Later nattymoodley.com/tax.htm [date of use 2 Mar 2010]        [ Links ]

Mukuwane Date Unknown www.belldewar.co.za. Mukuwane L Date Unknown Pay Now and Argue Later www.belldewar.co.za/pay-now-and-argue-later [date of use 22 Mar 2012]        [ Links ]

Pato and Spira 2009 www.saica.co.za. Pato T and Spira J 2009 Relief For Taxpayers: "Pay Now, Argue Later Rule Clarified www.saica.co.za/News/NewsArticlesandPressmediareleases/tabid/695/itemid/1867/language/en-US/Default.aspx [date of use 2 Mar 2011]        [ Links ]

Sapa 2011 mybroadband.co.za Sapa 2011 Law Clarifies "Pay Now, Argue Later Rule: SARS mybroadband.co.za/vb/content.php/2231-Law-clarifies-pay-now-argue-later-rule [date of use 22 Mar 2012]        [ Links ]

SARS Date Unknown www.sars.gov.za. SARS Date Unknown "Pay Now, Argue Later Principle Clarified www.sars.gov.za/home.asp [date of use 17 Mar 2011]        [ Links ]

SARS 2011 www.sars.gov.za. SARS March 2011 The Interest Rate - Table 1 www.sars.gov.za [date of use 18 Jan 2012]        [ Links ]

Temkin 2012 www.businessday.co.za. Temkin S 2012 "Pay Now, Argue Later" Tax Issue Clarified www.businessday.co.za/Content.aspx?id=134342 [date of use 22 Mar 2012]        [ Links ]

Tsikwe and Schultz 2011 www.saica.co.za. Tsikwe B and Schultz T 2011 Taxpayers May be at Risk With New " Pay Now, Argue Later" Rule www.saica.co.za/About/Regions/SAICAUnitedKingdom/UKMediaCenter/ArticlesandPressReleases/tabid/1405/itemid /2824/language/en-ZA/Default.aspx [date of use 22 Mar 2012]        [ Links ]

Vanek 2012 www.moneywebtax.co.za. Vanek M 2012 Big Tax Changes You Should be Aware Of www.moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page1/page34677?oid=71806&sn=Detail&pid=1 [date of use 22 Mar 2012]        [ Links ]

List of abbreviations/acronyms

ADR Alternative dispute resolution

ASA Accountancy SA

CC Constitutional Court

SARS South African Revenue Service

TAA Tax Administration Act 28 of 2011

TLSA Taxation Laws Second Amendment Act 18 of 2009

TSAR Tydskrif vir die Suid-Afrikaanse Reg

VAT Value-added tax

VAT Act Value-Added Tax Act 89 of 1991

 

 

1 Croome Taxpayer's Rights 1.
2 Croome Taxpayer's Rights 3.
3 Sections 3 and 4 of the South African Revenue Service Act 34 of 1997.
4 Silver and Beneke VAT Handbook 3. Even though the "pay now, argue later" rule relates to all forms of tax, the focus in this article will be on VAT, because the application of the "pay now, argue later" rule is similar irrespective of the form of tax.
5 Silver and Beneke VAT Handbook 13. S 1 of the Value-Added Tax Act 89 of 1991 (hereafter "the VAT Act") indicates that a "vendor" is a person registered or obliged to be registered. S 23 of the VAT Act furthermore indicates that a person must register, or is obliged to register, when the total value of the taxable supplies made by a person who is carrying on an enterprise, exceeded R1 million during the 12-month period ending that month or where there are reasonable grounds for supposing that the taxable supplies will exceed R1 million in the next 12 months. See also Silver and Beneke VAT Handbook 157.
6 Section 7 of the VAT Act.
7 SARS Guide for Vendors 8.
8 SARS Guide for Vendors 9. See Silver and Beneke VAT Handbook 15 for a discussion on input and output tax.
9 SARS Guide for Vendors 8.
10 SARS Guide for Vendors 55.
11 Silver and Beneke VAT Handbook 205.
12 Sections 31(1)(a) and (b) of the VAT Act. S 31(1) stipulates other circumstances when SARS can issue an assessment. For the purposes of this article s 31(1)(a) and (b) are of relevance.
13 Section 32(b) of the VAT Act.
14 Section 31(4) of the VAT Act.
15 Section 31(4) of the VAT Act.
16 Section 33(1) of the VAT Act. S 33(1) furthermore states that time periods prescribed in s 107A relating to appeals will also apply to appeals in terms of the VAT Act.
17 See s 33, 33A of the VAT Act and SARS Dispute Resouution 13.
18 Muller Weatth Transfer 63.
19 Capstone 556 (Pty) Ltd v CSARS 2011 ZAWCHC 297 para 9 - hereafter "Capstone".
20 Hereafter referred to as "the section 36 rule".
21 Tax Administration Act 28 of 2011 - hereafter "the TAA".
22 Section 105 of the TAA, which was promulgated on 4 July 2012, provides that the "pay now, argue later" rule is applicable to an objection to an assessment and the lodging of an appeal against the disallowance of an objection. The Act will come into operation on a date to be determined by the president by proclamation in the Government Gazette, as indicated in s 272 of the Act. See Pato and Spira 2009 www.saica.co.za on the amendments of s 88 of the Income Tax Act 58 of 1962, which section is similar to s 36 of the VAT Act.
23 Constitution of the Repubic of South Africa, 1996 - hereafter "the Constitution.
24 See 2.4.2 herein.
25 Arnold Opinion.
26 Arnold Opinion.
27 Metcash Trading Ltd v Commissioner for the South African Revenue Service 2001 1 BCLR 1 (CC) - hereafter "Metcash Trading Ltd (CC)".
28 See Hahlo and Kahn South African Legal System 213 for a discussion regarding the authority given to past judgments.
29 Certification of the Amended Text of the Constitution of the Republic of South Africa 1996 1997 1 BCLR 1 (CC) para 8.
30 Metcash Trading Ltd v Commissioner for the South African Revenue Service 2002 2 SA 232 (W) -hereafter "Metcash Trading Ltd(W)".
31 Section 36(1) of the VAT Act.
32 Section 36(2) of the VAT Act. See 2.4.4.1 herein regarding factors that the commissioner may consider in deciding whether to grant a suspension or not. These factors were inserted by way of the Taxation Laws Second Amendment Act 18 of 2009 - hereafter "the TLSA".
33 Section 36(4) of the VAT Act.
34 See SARS 2011 www.sars.gov.za regarding the interest rates.
35 Section 36(5) of the VAT Act. In these circumstances, SARS will issue a revised assessment.
36 Temkin 2012 www.businessday.co.za.
37 Tsikwe and Schultz 2011 www.saica.co.za.
38 Section 91(1)(a) of the Income Tax Act 58 of 1962 and s 114(1)(a)(ii) of the Customs Act 90 of 1964 contain a similar provision.
39 Section 40(2)(a) of the VAT Act. See Brincker and Louw Date Unknown www.saipa.co.za and Silke 2002 Acta Juridica 282-334, 293, regarding the filing of a statement by SARS.
40 Capstone para 37. In Metcash Trading Ltd (CC) 1138, the court held the statement procedure to be constitutional, as the execution of the civil judgment necessitates the intervention of court officials. Accordingly a taxpayer's right of access to the courts remains intact.
41 Section 47 of the VAT Act.
42 Hindry v Nedcor Bank Ltd 1999 2 All SA 38 (W) - hereafter "Hindry. See Silke 2002 Acta Juridica 304, and Olivier and Croome Tax Administration 233, for a further discussion of the Hindry decision.
43 The Hindry decision dealt with the appointment of a taxpayer's agent in terms of s 99 of the Income Tax Act 58 of 1962. The wording of s 99 of the Income Tax Act 58 of 1962 and s 47 of the VAT Act is similar, however.
44 Hindry 63. See Van Schalkwyk 2004 Meditari Accountancy Research 185, 195.
45 Interim Constitution of the Repubiic of South Africa Act 200 of 1993.
46 In a parliamentary state, parliament has the power to enact any law, whilst no one, including the courts, has the authority to challenge the law. See Currie and De Waal Bill of Rights 3.
47 See Currie and De Waal Bill of Rights 11.
48 Currie and De Waal Bill of Rights 704. S 1(c) of the Constitution confirms that South Africa is a constitutional state, as it indicates that South Africa is founded on the supremacy of the Constitution.
49 Section 34 of the Constitution.
50 The right ensures that "due process" is followed. See Currie and De Waal Bill of Rights 704. This right can also be linked to the right to administrative justice enshrined in s 33 of the Constitution.
51 Currie and De Waal Bill of Rights 704.
52 Bernstein v Bester 1996 2 SA 751 (CC) 804.
53 Chief Lesapo v North West Agricultural Bank 1999 12 BCLR 1420 (CC) 1429 - hereafter "Chief Lesapo".
54 Chief Lesapo 1436.
55 Cheadle, Davis and Haysom Constitutional Law 620; Jazbhay 2000 www.legalcity.net.
56 Jazbhay 2000 www.legalcity.net.
57 Chief Lesapo 1429.
58 The reasonable limitation indicated by the court refers to the fact that, in terms of s 36 of the Constttution, a right may be limited if the limitation is reasonable. See 2.4.1 herein.
59 Metcash Trading Ltd (W) and Metcash Trading Ltd (CC).
60 Woolman and Botha "Limitations" 34-4.
61 Woolman and Botha "Limitations" 34-4.
62 Woolman and Botha "Limitations" 34-5.
63 Section 36(1) of the Constitution.
64 Section 36(1)(a)-(e) of the Constitution.
65 S v Manamela 2000 3 SA 1 (CC) 19.
66 S v Bhulwana 1995 ZACC 11.
67 Muller Weatth Transfer63.
68 Croome Taxpayer's Rights 3.
69 Metcash Trading Ltd (CC) 29.
70 Metcash Trading Ltd(w) 320. This amount included penalties, additional tax and interest.
71 Metcash Trading Ltd (W) 321.
72 As contained in s 40(2) of the VAT Act. S 91(1) of the Income Tax Act 58 of 1962 contains a similar provision. The statement procedure forms part of the summary procedure. See 2.2 herein for a discussion of the statement procedure.
73 Metcash Trading Ltd (W). For the purposes of this article, the focus is on the "pay now, argue later" rule contained in s 36 of the VAT Act.
74 Metcash Trading Ltd (W) 322.
75 Metcash Trading Ltd (W) 322.
76 Metcash Trading Ltd (W) 327.
77 Metcash Trading Ltd (W) 327.
78 Metcash Trading Ltd (W) 327.
79 Metcash Trading Ltd (W) 327.
80 Metcash Trading Ltd (W) 328.
81 Metcash Trading Ltd (W) 328.
82 Section 40(2) of the VAT Act.
83 Section 36 of the VAT Act.
84 Section 40(5) of the VAT Act.
85 Metcash Trading Ltd (W) 330. In terms of s 167(5) of the Constitution, the Constitutional Court has to confirm an order declaring legislation invalid before the order comes into effect. See also Editor February 2000 Taxgram 1-3; Silke 2002 Acta Juridica 310; Olivier 2001 TSAR 194; Vorster 2001 De Rebus 47-47; Moodley Date Unknown nattymoodley.com; Olivier and Croome Tax Administration 223.
86 Metcash Trading Ltd (CC) 6.
87 Metcash Trading Ltd (CC) 6. These opportunities would entail the following: an objection to the assessment; requesting an extension to pay from the commissioner; if the commissioner refuses said extension, taking the matter on review by a relevant court; as well as appealing to the Special Tax Court.
88 Metcash Trading Ltd (CC) 7.
89 Metcash Trading Ltd (CC) 7.
90 Metcash Trading Ltd (CC) 7.
91 Metcash Trading Ltd (W) 329.
92 Metcash Trading Ltd (CC) 7.
93 Metcash Trading Ltd (CC) 18. See 4.2.4 herein for criticism of this point of view.
94 Metcash Trading Ltd (CC) 25. See 4.2.4 herein for criticism regarding Kriegler's decision relating to the court's jurisdiction being ousted.
95 Metcash Trading Ltd(CC) 21. See Burns Administrative Law 19; Currie and Klaaren Benchbook4; and De Ville Judicial Review 38 for a discussion of "administrative action".
96 Metcash Trading Ltd (CC) 22.
97 Metcash Trading Ltd (CC) 33. See also Editor December 2000 Taxgram 1-2; Editor February 2001 Taxgram 1-4.
98 Moodley Date Unknown nattymoodley.com.
99 Promotion of Administrative Justice Act 3 of 2000 - hereafter "PAJA".
100 See 2.4.3 herein, where Olivier indicates that the fact that review proceedings are an option does not mean that a provision can be constitutional.
101 Vorster 2001 De Rebus 47.
102 Croome Taxpayer's Rights 40.
103 Croome Taxpayer's Rights 226. See also Croome 2001 Business Day Professional 6-6.
104 Williams 2012 Synopsis 4-4.
105 Metcash Trading Ltd (CC) 9, 10, 13. See also Olivier and Croome Tax Administration 224.
106 Metcash Trading Ltd (CC) 9.
107 See 1 herein.
108 Metcash Trading Ltd (CC) 10.
109 Metcash Trading Ltd (CC) 13. See 1 herein for an explanation of the VAT calculation.
110 Metcash Trading Ltd (CC) 13. See also Williams 2012 Synopsis 4-5.
111 Metcash Trading Ltd (CC) 13.
112 Metcash Trading Ltd (CC) 18, 25. See also 4.2.3 herein.
113 Olivier 2001 TSAR 196.
114 Olivier 2001 TSAR 197. Unfortunately, it is not clear to the present writer what the basis of this statement by Olivier is.
115 See 2.2 herein regarding the statement procedure.
116 Section 40(5) of the VAT Act.
117 Olivier 2001 TSAR 198. See also Metcash Trading Ltd (CC) 27 where the court discussed the limitation of the nature of the relief afforded to the taxpayer due to s 40(5) of the VAT Act.
118 Dawood v Minister of Home Affairs; Shalabi v Minister of Home Affairs; Thomas v Minister of Home Affairs 2000 8 BCR 837 (CC); Olivier 2001 TSAR 197.
119 Dawood v Minister of Home Affairs; Shalabi v Minister of Home Affairs; Thomas v Minister of Home Affairs 2000 8 BCR 837 (CC) para 48.
120 Metcash Trading Ltd (W) 329 and Metcash Trading Ltd (CC) 30.
121 Metcash Trading Ltd (W) 329.
122 Metcash Trading Ltd (CC) 30.
123 Olivier 2001 TSAR 199.
124 Olivier 2001 TSAR 199. See 2.4.4.1 herein for a discussion on the guidelines used by the commissioner when exercising his or her discretion in terms of the "pay now, argue later" rule.
125 Olivier 2001 TSAR 199. This is one of the aspects the court has to take into consideration when weighing up rights in terms of s 36 of the Constitution. See 2.4.1 herein.
126 See SARS Media Release.
127 See Magolego 2009 www.polity.org.za.
128 Section 88 of the Income Tax Act 58 of 1962 and s 36 of the VAT Act. See also SARS Date Unknown www.sars.gov.za; Pato and Spira 2009 www.saica.co.za; Croome 2011 www.bericcroome.com; Edward Nathan Sonnenbergs 2009 www.saica.co.za; Goldberg De Villiers 2012 www.goldbergdevilliers.co.za; Mukuwane Date Unknown www.belldewar.co.za; Daya and Gers 2011 www.ens.co.za; Sapa 2011 mybroadband.co.za; and Williams 2012 Synopsis 6.
129 See 2.4.3 herein where Olivier indicates that a taxpayer's rights would be better protected if the grounds on which the commissioner may decide to suspend payment pending an appeal or an objection were identified.
130 Williams 2012 Synopsis 5.
131 Rood 2009 Finweek 44.
132 Rood 2009 Finweek 44.
133 Williams 2012 Synopsis 6.
134 Williams 2012 Synopsis 6.
135 Williams 2012 Synopsis 6.
136 Williams 2012 Synopsis 6.
137 Mokoena v CSARS 2011 2 SA 556 (GSJ) - hereafter "Mokoena".
138 Williams 2012 Synopsis 5.
139 Mokoena 559. The "judgment" referred to here is the filing of a statement in terms of s 40(2)(a) of the VAT Act. See 2.2 herein for a discussion of the statement procedure.
140 Capstone 297 para 37.
141 Capstone 297 para 37.
142 Vanek 2012 www.moneywebtax.co.za.
143 In terms of s 272 of the TAA, the president determined, by means of Proc 51 in GG 35687, that the TAA, except for certain provisions, would come into operation on 1 October 2012.
144 Section 2 of the TAA.
145 Section 2(a) of the TAA.
146 Sections 4(1) and 4(2) of the TAA. If the TAA is silent with regard to the administration in a specific instance, the provisions of the relevant tax act will apply.
147 Section 164(1) of the TAA.
148 Section 164(2) of the TAA.
149 Section 164(3) of the TAA. These factors mirror the guidelines enacted in terms of the TLSA. See 2.4.4.1 herein.
150 Section 164(5) of the TAA.
151 These enforcement proceedings can include, amongst others, the statement procedure and the appointment of a taxpayer's agent.
152 Section 164(6) of the TAA.
153 Section 164(7) of the TAA.
154 See 2.1 herein.
155 Section 179 of the TAA. This section is similar to the s 47 procedure in terms of the VAT Act. See 2.2 herein for a brief discussion of this procedure.
156 Section 172 of the TAA. This section is similar to the s 40(2)(a) procedure in terms of the VAT Act. See 2.2 herein for a brief discussion of this procedure.
157 See 2.1 and 3.2 herein.
158 Except if SARS believes that the taxpayer might alienate assets. See 3.2 herein and Vanek 2012 www.moneywebtax.co.za.
159 See 2.4.3 and 2.4.4.2 herein.
160 See 2.4.3 herein.
161 See 2.4.4.2 herein.
162 See 2.4.3 herein.
163 See 2.4.3 herein.
164 In terms of s 6(e)(iii), this will constitute a ground for judicial review in terms of PAJA.
165 See s 8 of PAJA and 2.4.2.4 herein for the remedies available when a matter is taken on review.
166 See 2.4.2.4 herein.
167 See 2.4.4.2 herein.
168 See 2.4.4.2 herein.