South African Taxpayers Gain Upper Hand in Recent Legal Battles Against SARS

South African taxpayers have recently triumphed in several prominent legal cases against the South African Revenue Service (SARS), challenging the agency's approach to tax collection. Legal experts suggest these victories indicate a possible trend of SARS exceeding its authority.

According to Darren Britz, Partner and Head of Legal at Tax Consulting SA, recent judgments, especially a well-written one from the South Gauteng High Court, are pivotal for gauging the current state of the South African tax environment. In a landmark case, the appellant—a discretionary trust—contended SARS' additional tax assessment for the 2012 tax year. Successfully appealing to the High Court, the trust demonstrated that the Tax Court Rules did not prevent new grounds of objection.

This important win for the taxpayer is one among several against the tax authority. SARS' legal defeat against Coronation, an asset manager, saw the Constitutional Court ruling in its disfavor. Another significant case involved Capitec Bank, where the Constitutional Court declared that SARS had erred in disallowing an objection in full, emphasizing that the tax collector should not seek more than what is lawfully owed.

Britz has raised concerns about the current SARS Commissioner, Edward Kieswetter, and his reaction to these repeated legal losses. Notably, the involvement of the Constitutional Court in tax disputes was once deemed an unlikely scenario. The increasing rigidity of SARS' position on various matters is another worrying trend highlighted by Britz. He also points to concerns about SARS' use of delay tactics, reminiscent of those used in commercial litigation, possibly obstructing the resolution of tax disputes.

Critics have called for SARS to be held accountable through independent oversight, a step that the National Treasury has not yet pursued. Although the Tax Ombud reviews SARS' performance, it lacks the legal power to enforce accountability. Britz recommends a communication strategy from SARS to illustrate their efforts against tax evasion and assure the public that they are working to collect only lawful taxes.

The series of legal losses faced by SARS could signify a robust tax system and act as a deterrent against overreaching collection methods. Still, Britz warns that a legacy where SARS is seen as attempting to over-collect would be detrimental to its reputation. He suggests that the reflection of a healthy tax system by many tax specialists and academics speaks to the long-term fairness in governance and oversight of tax collection in South Africa.