Update: This media release refers to a judgment in the Gauteng High Court on 31 August 2020, reported as Cart Blanche Marketing CC and two others v Commissioner for SARS, Case No: 26244/2015. The original media release incorrectly referred to Carte Blanche, instead of Cart Blanche Marketing CC.
4 September 2020: The South African Revenue Service (SARS) warmly welcomes the court’s decision of 31 August 2020, which ruled in its favour in the matter involving Cart Blanche Marketing CC and two others v Commissioner for SARS (Case No: 26244/2015). SARS has over the years witnessed an increase in the number of administrative challenges to its actions. Such a legal challenge on an administrative matter delays the progress of an audit, sometimes for years, which is often the purpose of such an administrative or collateral challenge.
The case of Cart Blanche is an embodiment of such a determined effort to thwart SARS from carrying out its work lawfully. The important principle in this case was whether a decision to audit was an administrative action. If a decision to audit is an administrative act, then that decision is reviewable in terms of the Promotion of Administrative Justice Act or principle of legality. If that were the case, SARS would have had to demonstrate that the decision to audit is rational and justifiable. This would have to take place before the actual audit engagement.
At the heart of the dispute, is the taxpayers’ non-compliance with the Customs and Excise Act. This led SARS to expand its scope of investigation to include a risk assessment on the taxpayer’s compliance with Value Added Tax (VAT) and Income Tax. This process established that there were discrepancies in the turnovers declared by the taxpayers and their customs declarations. This led to the taxpayers being selected for audit. The taxpayers elected not to participate in the audit nor provide any of the requested information as they contended their tax affairs were in order and that the decision to audit them was unlawful. SARS continued with an audit and brought its findings to the taxpayers.
Subsequently, the taxpayers launched a review application in the High Court in April 2015. The taxpayers requested the court to review and set aside the Commissioner’s decision to audit the taxpayers, arguing that the decision was unlawful for being arbitrary and irrational and done for ulterior motives and in bad faith. SARS opposed the application on the basis that a decision to audit the taxpayer is not subject to review as it is not a reviewable administration action under the principle of legality.
The High Court Gauteng concurred with SARS in its judgment, which was delivered on 31 August 2020. The court found that to select a taxpayer for an audit, does not adversely affect a taxpayer’s rights. An audit by SARS is merely the start of an investigation and the initiation thereof is not subject to review, as the decision is incomplete.
This landmark decision, following a similar judgment in the Eastern Cape High Court in 2016, represents a major victory for SARS. It communicates a clear and unequivocal message that SARS will not be deterred in taking lawful actions that are derived from and are consistent with the relevant legislation.
Furthermore, it conveys an unambiguous message that SARS has the capacity to detect and make it costly for non-compliant taxpayers who opt to use our courts to frustrate and delay legitimate and lawful action. Despite years of determined efforts to denude the organisation of its capacity to combat illicit and unlawful activities, SARS is committed to leave no stone unturned in seeking and punishing those that wilfully transgress the law and engage in criminal malfeasance to deprive the fiscus of legitimate resources.
SARS aims to provide the necessary clarity and certainty to compliant and honest taxpayers, and to make it easy and seamless for them to comply with their legal obligations. In the same vein, SARS will make it hard and costly to non-compliant taxpayers who are intentionally committing a crime. The same message should go to tax preparers who cross the line by aiding and abetting tax evasion. The crime of tax evasion ranks in the same category as that of those who engage in PPE corruption, and must be dealt with sternly and decisively. SARS will do its part to stop any descent into lawlessness.
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