Income tax-related search and seizure in South Africa: Lessons from Canada and New Zealand

• Jurisdiction: South Africa
• Pages: 240-269
• Author: Carika Fritz
• Date: 20 August 2019
• Published date: 20 August 2019
• Citation: (2017) 29 SA Merc LJ 240

INCOME TAX-RELATED SEARCH AND

SEIZURE IN SOUTH AFRICA: LESSONS

FROM CANADA AND NEW ZEALAND

CARIKA FRITZ*

Senior Lecturer, Department of Mercantile Law, University of Pretoria

ABSTRACT

The article identif‌ies certain aspects that prevent the current search-and-

seizure provisions in the Tax Administration Act 28 of 2011 from

achieving a balance between effective tax administration, on the one

hand, and respect for the fundamental rights of taxpayers, on the other.

It is shown that, whilst obtaining a warrant on an ex parte basis achieves

this required balance, the same cannot be said for not requiring specif‌ic

details with regard to what items may be searched for in terms of a

warrant and allowing warrantless searches based on the subjective

discretion of a South African Revenue Service (SARS) off‌icial. The article

further considers the income tax-related search-and-seizure provisions

in Canada and New Zealand in order to address the identif‌ied imbal-

ances. From this comparative analysis, it is apparent that it is unneces-

sary for the SARS to be permitted to conduct warrantless searches based

on its subjective discretion in the current search-and-seizure frame-

work, together with certain provisions found in these two jurisdictions,

would provide a more suitable alternative.

I INTRODUCTION

Allegations of an illegal ‘rogue’ investigative unit set up by the South

African Revenue Service (the SARS) made headlines in South Africa

between 2014 and 2016. As part of the public debate on this matter, the

powers afforded the SARS to enforce tax compliance have come under

scrutiny once again.

1

From these allegations and the public debate, a

primary question emerges: What is the SARS empowered to do in terms

*LLB LLM LLD (UP).

1

For further reading see Sikhane, ‘Investigation report — conduct of Mr Johan Hendrikus

van Loggerenberg, South African Revenue Service’ 5 November 2014 5–7; author unknown,

‘Rogue SARS unit did exist, and spied on South Africans between 1999 and 2009’ The South

African 4 October 2015, available at http://bit.ly/2mlfySy, accessed on 4 July 2016; Olifant,

Hunter & Jika, ‘Pravin Gordhan faces ‘‘imminent arrest’’ ’ Sunday Times 15 May 2016,

available at http://bit.ly/251K2t5, accessed on 4 July 2016.

240

(2017) 29 SA Merc LJ 240

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of the law?

2

When considering the powers afforded to the SARS in terms

of the Tax Administration Act 28 of 2011 (the TAA), the answer appears

at f‌irst glance somewhat alarming. Subban indicates that ‘SARS can

pretty much do anything; even pick up the f‌loorboards — if necessary’.

3

Subban’s mention of even picking up the f‌loorboards if necessary,

possibly refers to the power of the SARS to conduct searches and seizures

to verify compliance, something that is essential in ensuring effective tax

administration. Even though the SARS is afforded an arsenal of

information-gathering powers in Chapter 5 of the TAA, the power to

conduct searches and seizures appears to have the most signif‌icant

impact on taxpayers’ constitutional rights. In Haynes v Commissioner for

Inland Revenue (Haynes),

4

the court held that, in order for a search to be

in line with the Constitution of the Republic of South Africa, 1996 (the

Constitution), the other information-gathering powers must f‌irst have

been exhausted.

5

On an international level, Baker and Groenhagen

regard searches to be ‘[t]he most extreme form of interference with a

taxpayer’s right to privacy’.

6

The aim of this article is to establish whether the search-and-seizure

powers afforded to the SARS in terms of the TAA achieve a proper

balance between effective tax administration and the fundamental rights

of taxpayers. It also investigates whether the corresponding powers

afforded to the revenue authorities of Canada and New Zealand could

prove benef‌icial in the South African context. To achieve this aim, the

current search-and-seizure provisions as provided for in sections 59 to

63 of the TAA, are discussed, with due consideration of the impact these

provisions have on taxpayers’ rights to privacy under section 14 of the

Constitution, as well as the right of access to the courts in section 34 of

the Constitution. Thereafter, the income tax-related search-and-seizure

provisions in Canada and New Zealand are considered to establish

2

Rabkin, ‘The Pillay case tests the limits of what SARS can or cannot do in law’ Business

Day Live 2 March 2015, available at http://bit.ly/1EuGy4J, accessed on 4 July 2016.

3

Subban as quoted in Rabkin, Business Day Live 2 March 2015.

4

2000 (6) BCLR 596 (Tk).

5

Haynes 644. The court referred to the information-gathering powers in ss 74A and 74B of

the Income Tax Act 58 of 1996 (ITA) and ss 57A and 57B of the Value-Added Tax Act 89 of

1991 (VAT Act), which have since been repealed. See also Huang v Commissioner of SARS

(unreported case no SARS 1/2013 of 13 August 2014) paras 48–49, which dealt with the power

to search and seize under the TAA. The court indicated that it should be determined whether

there are less invasive means available by which to gather the required information.

6

Baker & Groenhagen, The protection of taxpayers’ rights — an international codification

(European Media Forum 2001) 48; See also Croome, Taxpayers’ Rights in South Africa (Juta &

Co 2010) 150–152.

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