South Gauteng High Court Rules Against SARS on Illegitimate Tax Collections

In a notable legal triumph for taxpayers, the South Gauteng High Court delivered a judgment against the South African Revenue Service (SARS), establishing a precedent against the collection of undue taxes. The verdict, dated 27 August 2024, involved the case TALT vs The Commissioner for The South African Revenue Services, stressing the necessity for SARS to adhere strictly to the tax laws enacted by Parliament.

The ruling reflects broader concerns surrounding SARS's performance, characterized recently by a series of court defeats, including the Coronation Investment Management SA (Pty) Limited matter, a case emblematic of a healthier and more accountable tax system. Tax specialists view these losses positively, as they ensure a check against aggressive tax planning. Nonetheless, the repercussions of the Coronation case could incite legislative changes by the National Treasury.

A paramount case stirring controversy is Capitec Bank Limited v Commissioner for the South African Revenue Service, wherein the Constitutional Court concisely stated that SARS should not disallow objections nor collect taxes that are not rightfully owed. Decisions like this have ignited debates about the need for independent oversight of SARS and its robust powers provided under the Tax Administration Act.

There is evidence of a hardening stance from SARS, with worrying issues arising from delayed resolutions and the use of delay tactics akin to those in commercial litigation—a behavior uncharacteristic for a tax authority and harmful to taxpayers awaiting decisions.

The Tax Ombud, despite reporting on SARS's successes, lacks the legal mandate to enforce accountability. This gap calls for the National Treasury to potentially step in and grant more independent oversight, ensuring SARS's compliance with legal standards and obligations.

The call is clear—SARS must maintain a balance between rigorous tax collection and respecting taxpayers' rights. The Free State Development Corporation case highlighted the same, underscoring the need for appropriate scrutiny and the avoidance of unwarranted tax levies.

What South Africa needs now, more than ever, is ameliorated communication from SARS. They should not only convey their anti-tax evasion efforts but also reassure the population that no one is unfairly targeted or spared in the tax collection process. Such transparency would help alleviate concerns about the agency's intentions and practices.

As the steward of a significant national responsibility, Commissioner Kieswetter, and SARS as a whole, must conscientiously navigate these issues to safeguard taxpayer rights and prevent tax collection overreach. This judgment may well catalyze a turning point, promoting a fairer reflection on SARS's legacy and methods.