Pretoria, Friday 16 October 2020 – The South African Revenue Service welcomes the judgment delivered this week by a Full Bench of the Gauteng Division of the High Court that confirms the obligation of an individual taxpayer to be vigilant about the contents of their income tax return.
The High Court also found that taxpayers must clearly state all the grounds of a dispute with SARS at the objection stage.
In a matter involving the estate of a deceased taxpayer, two fundamental issues were decided by the Full Bench. First was the appropriate level of penalties to be applied if a taxpayer failed to disclose the proceeds of a share-option and second whether the taxpayer could introduce a new ground for a dispute (in this case, concerning interest) at the Appeal stage of a dispute.
The Full Bench confirmed that an individual taxpayer has an obligation to be vigilant when filing a tax return and that penalties are appropriate when a taxpayer falls short of this duty.
In this case SARS argued that this obligation to be vigilant is proportional to the commercial aptitude of the taxpayer, and the court confirmed the penalties imposed. The taxpayer sought to dispute the imposition of interest on provisional tax at the appeal stage of the dispute process, and the Full Bench confirmed that the taxpayer ought to have raised this at the objection stage.
The High Court judgment also dealt with the pre-litigation engagement between SARS and the taxpayer, which resulted in a substantial reduction in the additional tax imposed.
SARS Commissioner Mr Edward Kieswetter said SARS affirms its position to attempt to resolve a legitimate dispute before litigating. However, in this process, SARS is obliged to maintain consistency in how all taxpayers are treated and to not deviate from a clear and certain legal standard.
He added: “SARS is committed to resolving disputes as efficiently and as cost-effectively as is possible, and the Alternative Dispute Resolution (ADR) process is intended to reach such a resolution and limit unnecessary litigation. The ADR process can only work if both SARS and the taxpayer approach the process with a willingness to act proactively and in the spirit of resolution.”
Mr Kieswetter said “our preference would always be to find amicable resolutions to disputes. But if such resolution is not possible, we respect the right of taxpayers to approach the courts. We will always respect this process as allowed in law.”