SARS, like taxpayers, must comply with specified time periods
Tax specialist Nico Theron explains that SARS also faces adverse consequences if they don’t comply.
By Nico Theron, Unicus Tax Specialists SA and author of Practical Guide to Handling Tax Disputes, published by LexisNexis.
Most taxpayers know that the time periods that govern objections and appeals against assessments by SARS are very strict and, indeed, are very strictly applied by SARS. For example, a taxpayer must object and appeal within a prescribed time period.
For the taxpayer, failing to comply with these time periods could have devastating consequences. The rigidity of the rules cut both ways, though – the rules also prescribe strict time periods within which SARS must do certain things.
For example, SARS must decide on an objection within 60 business days. However, when SARS does not abide by these time periods, (which, according to our experience at Unicus Tax Specialists SA and also according to the Tax Ombud Systematic Investigation Report 2020, is often the case) there are seemingly no consequences for SARS. In a recent case though, SARS arguably paid the ultimate price for their perceived nonchalant attitude towards prescribed time periods in the tax objection rules.
The case in question is the case of Candice-Jean van der Merwe v C:SARS (case no A322/2019) (“the Van der Merwe case”), which was an appeal by the taxpayer to the full bench of the Western Cape High Court against a decision by the tax court in favour of SARS.
The case in the tax court (CM v CSARS, 00035/2019) involved complex and rather interesting procedural issues which are not discussed in detail here save to state that the taxpayer’s approach in the tax court was nothing more than “an abuse of process”. The taxpayer therefore lost in the tax court. I am in respectful agreement with the judgment by the tax court in favour of SARS.
The taxpayer nevertheless succeeded on appeal in the Western Cape High Court. Why? Because, among other things, SARS did not comply with the prescribed time period in the rules, and failed to apply for condonation in consequence of such failure.
The reason why this should be such a terrible blow for SARS is that the taxpayer’s case should have been unwinnable (as confirmed in the dissenting judgment of the High Court, which I am in respectful agreement with). The only reason the taxpayer managed to pull this win off (if one follows the logic in the majority judgment), and thereby seemingly secured some R44 million reduction, is because SARS tripped over a procedural hurdle – it failed to apply for condonation for being five days late. I can only speculate as to why SARS failed to complete the simple task of applying for condonation in this case.
Two possible reasons come to mind: (a) SARS takes the view that it is simply not required to formally apply for condonation if it misses deadlines, despite it being clear from the rules that they should or (b) SARS was not required, in this particular case, to comply with any specific time period because the taxpayer did not follow due process. Whilst I suspect the latter was the reason in this particular case, suffice it here to state that, in our experience at Unicus Tax, it is not uncommon for SARS to not formally apply for condonation if it misses prescribed deadlines, almost as if it is not required to do so.
The Van der Merwe case goes to show that SARS must comply with time periods and if they don’t, they must apply for condonation (or make another appropriate application as provided for in the tax court rules) to get their non-compliance with the rules remedied. If they do not follow this process, they should indeed suffer adverse consequences, as do taxpayers where they fail to comply with the rules.
In the Van der Merwe case, the “prejudice” caused to the taxpayer in consequence of SARS’ non-compliance with the rules was only “remedied” long into the process and after having already been through a tax court procedure. This need not always be the case. The objection rules provide various remedies to taxpayers to hold SARS to account for failure to comply with the rules if the taxpayer knows:
- What SARS’ obligations are;
- What the time periods are that apply to SARS;
- What remedies are available to the taxpayer to remedy non-compliance by SARS with the rules; and
- How to use them effectively,
Any possible prejudice to the taxpayer consequent upon SARS’ failure to comply with the objection rules can be remedied, often even without ultimately resorting to litigation. In my book, Practical Guide to Handling Tax Disputes, published by LexisNexis, I discuss all of these things, including the remedies available to taxpayers to challenge an assessment or decision by SARS.
To purchase a copy of Practical Guide to Handling Tax Disputes, Click here to visit the LexisNexis online bookstore.