In the recent judgment of ABSA Bank Limited and another v CSARS, the South African High Court considered whether a taxpayer is permitted to review a decision by the South African Revenue Service ("SARS") in the High Court, rather than to pursue the lengthy dispute resolution procedures provided for in the Tax Administration Act, 2011 ("TAA").
In disputes between taxpayers SARS, the principle of "pay now argue later" applies. This means that a taxpayer is required to make payment of any amount as per an assessment raised by SARS, even if it disputes the assessment (unless a formal suspension of payment is granted on application to SARS).
The TAA provides for the dispute resolution procedures in these situations. This process is generally protracted and SARS often has the benefit of already having received full or partial payment of the amount in dispute. This is on the basis that SARS does not often grant taxpayers a full suspension of payment in respect of disputed tax.
In essence, the court had to consider whether SARS' decision not to withdraw notices it issued to the taxpayer in terms of the Income Tax Act, 1962 ("ITA") and its decision to issue letters of assessment pursuant to these notices, was reviewable while the taxpayer had not exhausted its internal remedies (Chapter 9 procedures).
In finding in favour of ABSA Bank Limited ("Absa"), the court considered section 105 of the TAA, which provides that "[a] taxpayer may only dispute an assessment or 'decision' as described in section 104 in proceedings under this Chapter, unless a High Court otherwise directs". Section 104 of the TAA provides that a taxpayer may object to and appeal against "any other decision that may be objected to or appealed against under a tax Act".
The court found that the inclusion of the words "unless a High Court otherwise directs" in section 105 plainly denotes an environment for dispute resolution in which there is more than one process, and that a court has a discretion to approve a deviation from what could be called the default process in the TAA. In addition, the court could see no reason why a taxpayer may not seek approval for such deviation simultaneously in the proceedings seeking a review where an appropriate case was made. It was accepted that such appropriate circumstances requires "exceptional circumstances" in respect of which the court held that:
".the quality of exceptionality need not be exotic or rare or bizarre; rather it needs simply be, properly construed, circumstances which sensibly justify an alternative route. When a dispute is entirely a dispute about a point of law, that attribute[,] in my view, would satisfy exceptionably."
As such, the court agreed with Absa's submission that in the event that there is a pure point-of-law-dispute, a party to the dispute is entitled to approach the High Court directly, without following the dispute resolution proceedings provided for in the TAA.
The High Court's finding may thus be seen as a victory for taxpayers which could save time and resources.
It is, however, important to be aware that the court's finding must be seen in light of the specific facts. In particular, Absa's case was based purely on a point-of-law (ie, there was no factual dispute between the parties). Absa also launched proceedings in the High Court prior to any assessment being raised, requesting a review of SARS' decision not to withdraw its notices issued under section 80J of the ITA as requested by Absa in terms of section 9 of the TAA. Absa's pleadings were then amended when SARS subsequently raised assessments to include a review of such assessments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
