We all pay taxes in one way or another, but as a taxpayer, it is important to understand your rights when dealing with tax authorities, the laws applicable, and whether your constitutional rights might be affected.
One of the most common taxes paid is personal income tax. A critical aspect thereof is tax assessments, which determine the amount of tax you owe to the South African Revenue Services (“SARS”). The South African taxpayer enjoys protection provided by tax legislation, the Promotion of Administrative Justice Act (“PAJA”) and the Bill of Rights (which is the cornerstone of our South African Constitution). These laws ensure fairness, transparency, and accountability in tax administration.
Section 1 of the Tax Administration Act (“TAA”) defines a tax assessment as “the determination of the amount of a tax liability or refund, by way of self-assessment by the taxpayer or assessment by SARS”. These assessments are the decision on the amount of tax due. After this decision regarding tax liability has been made, taxpayers have the right, in terms of section 5 of PAJA, to request reasons for the decision. Should no reasons be provided to the taxpayer, the taxpayer has the right to request such reasons within 90 days from the date on which the taxpayer became aware of the decision by SARS. The Commissioner then has to deliver adequate reasons within 90 days of receiving such a request. Failure to provide such reasons will afford the taxpayer the right to judicial review. This highlights the right of the taxpayer to a procedurally fair administrative action.
Section 1 of PAJA defines “administrative action” as any decision taken, or any failure to take a decision, by
- an organ of state, when-
- exercising a power in terms of the Constitution or a provincial constitution; or
- exercising a public power or performing a public function in terms of any legislation; or
- a natural or juristic person, other than an organ of state, when exercising a public power or performing a public function in terms of an empowering provision,
which adversely affects the rights of any person and which has a direct, external legal effect… ‘
The important key components to look at are that it must involve a decision or failure thereof by an organ of state, and it must adversely affect a person’s rights.
Section 3 of PAJA establishes the principles of what procedurally fair administrative action is said. It states that it is administrative action which materially and adversely affects the rights or legitimate expectations of any person and must be procedurally fair. This must be considered in each situation, and the context must be considered.
A few examples of administrative action are set out in section 6(2) of PAJA, and when the remedy of judicial review is available to the taxpayer, are where SARS:
- Fails to follow due process in issuing an assessment;
- Fails to act fairly;
- Acts arbitrarily, biased or irrationally
- Fails to give reasons for a decision when requested or when reasons have been given, fails to prove the contrary
A practical example will be, the imposition of an unreasonable deadline to respond to queries raised by SARS and failing to respond within that deadline will result in prejudicial consequences for the taxpayer. The unreasonable deadline, and not the queries, will be a violation of taxpayers’ right to fair administrative action in terms of PAJA.
Section 7(2) of PAJA states the following:
“(2) (a) Subject to paragraph (c), no court or tribunal shall review an administrative action in terms of this Act unless any internal remedy provided for in any other law has first been exhausted.
(b) Subject to paragraph (c), a court or tribunal must, if it is not satisfied that any internal remedy referred to in paragraph (a) has been exhausted, direct that the person concerned must first exhaust such remedy before instituting proceedings in a court or tribunal for judicial review in terms of this Act.
(c) A court or tribunal may, in exceptional circumstances and on application by the person concerned, exempt such person from the obligation to exhaust any internal remedy if the court or tribunal deems it in the interest of justice. “
When a taxpayer has requested reasons in terms of the Income Tax Act 58 of 1962, received reasons for an assessment and are of the opinion that the reasons are not adequate, the first remedy is to follow the objection and appeal procedure. This forms part of the internal procedures of SARS. In terms of section 7(2) of PAJA, it is required for a taxpayer to exhaust all internal remedies first before approaching the court. However, the Constitutional Court held that it is not absolute that a person should first exhaust internal remedies before approaching the Court, and such reasoning may not be used by SARS to frustrate the process for the taxpayer.
A taxpayer has the right to legal representation, as set out in section 3(3) of PAJA, and it would be wise to consult with an expert to assist in these circumstances, as these types of matters can become complex.
It is clear that PAJA plays a crucial role in the protection of taxpayers’ rights against organs of state including SARS. It ensures that any administrative action is reasonable, fair and within the law.
As a taxpayer, it is important to be aware of the remedies available and to understand which remedy is right to use in your circumstances. This ensures unnecessary delays and possible frustration with the system. Furthermore, having an understanding of these remedies is important to ensure that the taxpayers’ rights are protected, procedures are fair and prevent abuse of power by SARS.
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
