Democratic principles underpinning tax administration in SA

• Date: 01 December 2019
• Pages: 1-16
• Published date: 01 December 2019
• Author: Fareed Moosa
• Record Number: btclq_v10_n4_a2
• DOI: 10.10520/EJC-1ac40f4768

1

© SIBER INK

Democratic Principles

Underpinning Tax

Administration in SA

FAREED MOOSA*

ABSTRACT

South Africa is a constitutional State (Rechtsstaat) that is governed by a

supreme, humanitarian orientated Constitution with an entrenched Bill of

Rights whose spirit, purport and objects are infused with, and informed by,

the values and principles of an open and democratic society based on human

dignity, equality and freedom. Taxpayers are included among the benef‌iciaries

of the fundamental rights incorporated in the Bill. This includes the right to

just administrative action by the South African Revenue Service and its off‌i-

cials when executing their functions under the Tax Administration Act, 2011

and any other legislation in the myriad of tax laws enacted in South Africa.

This fundamental right entitles taxpayers to tax administration that is lawful,

reasonable and procedurally fair. In addition, taxpayers are entitled to written

reasons for administrative decisions taken during tax administration that

adversely affect taxpayers or their interests. Supremacy of the Constitution

dictates that all f‌iscal legislation and conduct in the administration thereof is

subject to constitutional control. Thus, taxation and tax administration must

conform to the rule of law and the other values and principles enshrined

in, for example, section 195(1) of the Constitution and the Promotion of

Administrative Justice Act. The rule of law is a foundational value that forms

part of the Constitution’s spirit. When applied through the prism of the

Constitution, the rule of law advances f‌iscal transformation because it ensures

that tax laws and tax administration occur in a manner unlike that which

marred public administration during South Africa’s pre-constitutional, apart-

heid era. The rule of law establishes a legal landscape in the tax arena that

is underpinned by legality, equality, uniformity, clarity, consistency, equity,

non-retrospectivity, and the advancement of human rights and freedoms for

taxpayers. Law or conduct is invalid if it is inconsistent with the prescripts of

the rule of law.

Introduction

In accordance with South Africa’s (‘SA’) f‌iscal and economic policies, most,

if not all, commercial transactions, even illegal ones, have tax conse-

quences.1 Although section77(1) read with (3) of the Constitution of the

1

* BProc (UWC), LLB (UWC), LLM (UCT), LLD (UWC). Head of the Department of

Mercantile & Labour Law, University of the Western Cape.

MP Finance Group CC (in liquidation) v Commissioner, South African Revenue Service

(hereafter ‘C:SARS’) 2007 5 SA 521 (SCA) at para 12.

2Volume 10 • Issue 4 • December 2019

Business Tax & Company Law Quarterly

© SIBER INK

Republic of South Africa, 1996 (‘the Constitution’) deals with the passing

of national taxes through money Bills, the duty to pay tax and perform

acts ancillary thereto does not arise from the Constitution. Consistent

with the English common-law tradition of SA,2 this duty arises from legis-

lation. Thus, taxation is a creation of statute. In SA, national taxation is

fragmented into a panoply of taxes in a plethora of legislation. The tax

structure3 comprises a portfolio of direct taxes (such as income tax and

estate duty) and indirect taxes (such as, value-added tax, transfer duty, and

securities transfer tax).

Fiscal transformation requires that taxes are administered eff‌iciently

and effectively in accordance with tax laws read with SA’s supreme,

humanitarian-oriented Constitution.4 In SA, general tax morality is low

and there is a high rate of tax evasion and tax fraud.5 This exemplif‌ies the

need for a strong tax collection agency equipped with adequate powers

that give it bite to optimise tax collection that serves SA’s f‌iscal interests.

The administrative role referred to here is played by an organ of state,

namely the South African Revenue Service (‘SARS’). On 1 October 2012

the Tax Administration Act 28 of 2011 (‘TAA’)6 came into effect. It is SA’s

premier tax administration statute. The TAA confers wide-ranging powers

on SARS and its off‌icials that are designed to enhance taxpayer morality

and integrity, thereby cultivating a tax compliance culture.7

All administrative powers of SARS and its off‌icials must be exercised in

accordance with the rule of law, a founding value entrenched in section1(c)

of the Constitution. This applies to all tax laws and tax administration

occurring pursuant thereto. The rule of law is an integral part of the spirit

of the Constitution and the Bill of Rights (hereafter the Bill) which, in

terms of section39(2), must be promoted whenever a tax or other statute

is interpreted. The rule of law is an alternative basis by which taxpayers

may seek judicial review of tax laws over and above an inconsistency with

2

Dicey AV Introduction to the Study of the Law of the Constitution (1931) 311.

3

‘Tax structure’ refers to a set of national taxes responsible for the total tax revenue

of SA.

4

In SA’s pre-constitutional era, its tax authority engaged in practices that were

’entirely inconsistent with modern values of openness and accountability in a

democratically orientated administration’ (Jeeva v Receiver of Revenue, Port Elizabeth

1995 2 SA 433 (SECLD) 441G).

5

Metcash Trading Ltd v C:SARS 2001 1 SA 1109 (CC) (hereafter ‘Metcash’) at para 20.

6

For a discussion of its constitutionality, see Moosa F ‘Taxation: Constitutionality of

the Tax Administration Act’ (2017) 28 Stellenbosch LR 638.

7

For a discussion of the powers conferred on SARS by the TAA, see Moosa F ‘The

power to search and seize without a warrant under the Tax Administration Act’

(2012) 24 SA Mercantile LJ 338; Moosa F ‘A warrantless search of “premises” under

the Tax Administration Bill’ 2012 27 Insurance & Tax Journal 3; Keulder C and

Legwaila T ‘The constitutionality of third party appointments — before and after

the Tax Administration Act’ (2014) 77 Tydskrif vir Heedendaagse Romeinse Hollandse

Reg 53.