Case note: ‘Semantic Gyrations’ – When are Naartjies Oranges? Beneath the Surface of Absa Bank Limited v CSars

• Author: Pidduck, T.
• DOI: https://doi.org/10.47348/SAMLJ/v33/i3a6
• Published date: 16 May 2022
• Date: 16 May 2022
• Pages: 470-495

Case Note

‘SEMANTIC GYRATIONS’ – WHEN ARE

NAARTJIES ORANGES? BENEATH THE

SURFACE OF ABSA BANK LIMITED v CSARS

TERESA PIDDUCK

University of Pretoria, Department of Taxation

SUMARIE SWANEPOEL

University of Pretoria, Department of Taxation

IINTRODUCTION

‘A semantic gyration cannot turn a Naartjie into an orange,’ postulates

Sutherland ADJP, who delivered the judgment in the Gauteng High

Court in Absa Bank Limited & another v CSARS ((2021) JDR 0403 (GP)

para 36). Sometimes, in haste, however, you may mistake an orange for a

naartjie, and a second look may be warranted.

Taxpayer rights and tax avoidance are both highly debated topics in

tax law. The Absa case addressed both by dealing with two different but

equally critical concerns within South Africa’s tax legislation:

(i) First, from an administrative perspective, the case considers the

entitlement of a taxpayer to review a decision taken by the South

African Revenue Service (‘SARS’) in court rather than to pursue

the protracted dispute resolution mechanisms provided for in

the Tax Administration Act 28 of 2011 (‘TAA’). The case also

brings issues around burden of proof into play, as well as the

interaction of various administrative provisions in the TAA with

those in the underlying tax Acts.

(ii) Secondly, from a substantive perspective, the case is the f‌irst

reported case to consider any aspect of the General Anti-

Avoidance Rule (‘GAAR’) since the GAAR’s amendment in

2006. While admittedly, not all of the components of the GAAR

are considered in the case, it is the f‌irst judicial interpretation of

the provision and may be the f‌irst indication of the eff‌icacy of the

GAAR in combatting tax avoidance.

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(2021) 33 SA Merc LJ 470

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The GAAR has not been subject to judicial interpretation in the High

Court since its amendment in 2006 (Pidduck, The South African General

Anti-tax Avoidance Rule and Lessons from the First World: A Case Law

Approach (unpublished PhD thesis, Rhodes University, 2017) 5; Pid-

duck, ‘The Sasol Oil case – Would the present South African GAAR

stand up to the rigours of the court?’ (2020) 34(3) South African Journal

of Accounting Research 254 at 255). While the GAAR has been subject to

limited judicial interpretation in the Tax Court (unreported case no

IT24502 and IT24503 (WCHC) 12 November 2020) since its amend-

ment in 2006, these cases do not constitute legal precedent and are only

binding on the parties to the specif‌ic case (CIR v City Deep Ltd 1924 AD

298). The judgment in the Absa case is therefore particularly relevant

when considering that it is the only reported case that sets judicial

precedent since the amendment of the GAAR in 2006.

This case note sets out the facts, issues, judgment — including

submissions — and comments and analysis of the Absa case.

The analysis of the case unearths a disjointedness between the legisla-

ture’s intention and the wording of certain administrative provisions,

and criticises the ability of the administrative provisions contained in

various tax Acts to work in concert with one another. A review of these

administrative provisions by the legislature may be warranted in the

light of this case. Furthermore, the judgment could also impact the

interpretation and application of similar terms used in the reportable

arrangement section of the TAA.

The analysis also exposes some causes for concern regarding the

interpretation of the GAAR that may undermine its ability to combat tax

avoidance and suppress the mischief of taxpayers. Consequently, until

possible appeal, this judgment may have far-reaching effects on the

GAAR if the precedent set here is followed in other courts. These matters

are explored in more detail in the comments analysis in Part V.

II THE FACTS

The facts of the case are explained by means of four diagrams presented

in the f‌igures below. Each f‌igure is followed by an explanation. Figure 1

outlines the f‌low of the investments; Figure 2 summarises the streams of

investment income; and Figures 3 and 4 outline the various guarantees

and securities provided to Absa Bank.

https://doi.org/10.47348/SAMLJ/v33/i3a6

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