An enquiry into the constitutionality of the ‘pay now, argue later’ principle and the appointment of a third party on behalf of the taxpayer for tax purposes under the Tax Administration Act.
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Date
2020
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Abstract
Prior to 2012, the tax collection practices known as ‘pay now, argue later’ and ‘agent
appointment’ respectively were contained in Value Added Tax and Income tax legislation
and have been the cause of many disputes between the taxpayer and the revenue collector
over the years. These collection practices have sparked much controversy among the legal
scholars for the longest time. When the Tax Administration Act came into operation in 2012,
it still made provision for a number of controversial summary collection procedures including
the ones referred to above. This was probably due to the court decision in Metcash Trading
Limited v Commissioner for SARS 2001 (1) BCLR 1(CC) which upheld ‘pay now, argue later
rule’ and the decision in Hindry v Nedcor Bank 1999 (2) All SA 38 (W) in which the court
found in favour of ‘agent appointment’ rule. These decisions were made in the context of
VAT legislation, a system in which there is a much narrower scope for a genuine dispute of
tax liability, as it is a self-assessment system as opposed to income tax where tax is paid on
the basis of what is assessed by the Commissioner to be due to SARS.
As a result of these cases and the subsequent enactment of the Tax Administration Act, there
has been an overwhelming level of confusion as to the constitutionality of these collection
procedures in the context of income tax. Accordingly the desire to conduct this study was
triggered by need to contribute to an attempt to achieve clarity as to whether these court
decisions should be applied. In addition, the study contains a comparative analysis of the
implementation of the same procedures in other selected jurisdictions.
It will be established that SARS’s conduct in exercising its statutory powers more often than
not is in conflict with the taxpayers’ rights. Often the remedies are limited and place the
taxpayer in an inconvenient situation as they are not directly related to tax. There is an urgent
need for affordable and effective relief to which taxpayers can resort instead of litigation the
cost of which is rather exorbitant.
Description
Masters Degree. University of KwaZulu-Natal, Durban.