The Johannesburg High Court recently ordered the South African Revenue Service (SARS) to disclose all the information on which it based a decision.
Nico Theron, founder of Unicus Tax Specialists SA says the ruling is a significant victory for taxpayers.
“SARS can be held accountable for their decisions. They cannot hide behind confidentiality provisions when their decisions are taken on review.”
SARS ordered to disclose decision-making record
In the matter between Devland Cash and Carry and SARS, the tax agency invoked the confidentiality rules set out in the Tax Administration Act (TAA), which allows SARS to withhold information from taxpayers.
Devland asked the court to review a decision by SARS not to grant it a suspension of payment pending an objection and appeal. Following an audit of the wholesaler’s 2018 value-added tax (VAT) and corporate income tax returns, SARS issued additional assessments of R1,9-billion.
Devland wanted this amount to be suspended pending its objection. SARS declined the request, compelling Devland to approach the court to get insight into how SARS came to its decision. Judge Motsamai Makume granted the access and listed more than 20 items SARS had to disclose to the firm.
Taxpayer gains insight into SARS’s reasoning
“The taxpayer even asked for the risk assessment on which SARS based its decision to audit the firm,” says Theron. It also included the minutes of a meeting where the recommendation that the suspension application be declined was not approved by a SARS committee.
“This judgment allows taxpayers a granular insight into SARS’ thinking – providing them with a better opportunity to successfully review SARS decisions,” Theron adds.
The company argued that the delay in furnishing the record prejudiced it. It prevented it from making out its case to review the decision. SARS argued that disclosing information about its opinions, advice and debt collection plans would jeopardise the effectiveness of its audits.
Confidentiality cannot override taxpayer rights
Judge Motsamai Makume found that SARS’s reliance on privilege and confidentiality was without lawful merit. Makume noted that Devland was not trying to obtain another taxpayer’s information.
The section SARS relied upon was not a general secrecy provision that permitted the tax agency to withhold the record of the taxpayer’s own affairs. SARS’ interpretation of the Act inhibits taxpayers’ rights and results in an “unconstitutional interpretation”, the judge found.
The TAA expressly allows for the disclosure of taxpayer information if authorised by any other Act despite the provision. The Act also has a general override regarding SARS’s confidential information. A SARS official or former SARS official may disclose confidential information if it is required by order of the High Court.
“Even when documents are properly privileged or confidential, our Courts have consistently preferred calibrated solutions over blanket exclusion,” Makume said.
Judgment raises the bar for SARS decision-making
Theron notes that any opportunity for SARS to hide hasty bad decisions behind a smokescreen of confidentiality has now been put to an end. Taxpayers still need to approach the court when seeking access to the full decision-making record, but this judgment will ensure that SARS takes proper care when making decisions.
“This judgment serves as a warning for SARS that it will be held accountable for its decisions,” says Theron.