Do SARS officials actually know the law they are asked to apply?

Most taxpayers are familiar with the claim by the South African Revenue Service (“SARS”) that they are “at your service”, which claim is well published, especially during the annual filing season.

In the light of a matter, in which I was recently consulted, I again wondered if this was the experience of South African taxpayers.

The facts of the matter are simple. The taxpayer's public officer had been prevented for a number of years, from accessing the taxpayer's profile, on SARS e-filing system, due to a payment dispute with a service provider, who refused to release that access to him.

 After a great deal of effort by a new tax practitioner, the public officer gained access to that system and was able to file a number of outstanding value-added tax returns and pay the outstanding value-added tax.

Due to the fact that the various payments were made after the relevant deadlines, the taxpayer's statement of account in due course reflected various late payment penalties and interest.

After receiving legal advice, the public officer instructed his tax practitioner to request a remission of those penalties, on the basis that he had been refused access to the e-filing profile, for a number of years, and also that SARS had failed to issue the necessary penalty assessments, as required by Section 214 of the Tax Administration Act (“Act”).

SARS' response to the request for a remission is startling, to say the least. SARS alleged that the request for remission was invalid, because it did not comply with unspecified sections of the Act. Furthermore, the response identified numerous tax periods, in respect of which SARS alleged that “the request for remission could not be presented to the penalty committee, as the capital amount had not been paid”. 

In my opinion, there are a number of difficulties with SARS response. Firstly, it does not refer to the particular sections of the Act, on which SARS relies for its allegation that the request is invalid. There is indeed no section of the Act, which grants SARS the discretion, to deem such a request to be invalid. 

Secondly, and possibly most importantly, SARS simply ignores the taxpayer's allegation that SARS has failed to issue the necessary penalty assessment, as prescribed by Section 214 of the Act.

Thirdly, the response fails to acknowledge that the taxpayer had indeed paid all of the outstanding value-added tax, as reflected in the various returns, together with interest. Consequently, SARS reference to capital amounts allegedly unpaid, is very confusing.

In the light of the grounds, advanced by the taxpayer for its request for a remission, it appears that SARS failed to read the request and simply chose any reason to arrive at its decision.

The Act confirms that, where SARS decides not to remit a penalty, the taxpayer is entitled to object to that decision. However, in this case, SARS has chosen to declare the request invalid, instead of deciding not to remit the penalty. Consequently, the taxpayer cannot invoke the objection procedure to challenge SARS' decision that the request is invalid. 

Instead, the taxpayer must now approach the magistrate's court, by way of motion proceedings, to seek a review and the setting aside of SARS decision, in terms of the Promotion of Administrative Justice Act, on the grounds that SARS has failed to apply the law, in the alternative, that SARS decision is irrational, in the light of the facts of the taxpayers request.

Once again, the taxpayer must incur further legal costs, to enforce its rights, because SARS cannot deal correctly with a simple request for the remission of a penalty. In my opinion, SARS is clearly not “at this taxpayers service” ...

To add insult to injury, SARS has instituted collection proceedings, to collect the alleged debt, from the taxpayer's bank account.

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