Section 45 of the Tax Administration Act: An unconstitutional limitation on taxpayer privacy?

• Author: Moosa, F.
• DOI: https://doi.org/10.47348/SALJ/v138/i1a8
• Citation: (2021) 138 SALJ 171
• Date: 04 March 2021
• Pages: 171-196
• Published date: 04 March 2021

171

SECTION 45 OF THE TAX ADMINISTRATION

ACT: AN UNCONSTITUTIONAL LIMITATION

ON TAXPAYER PRIVACY?

FAR EED MOOSA†

Associate Professor, Faculty of Law, University of the Western Cape

The Tax Administration Ac t 28 of 2011 is a law of gene ral application. Sectio n 45 of

the Act empowe rs a SARS ocial to en ter, without a warrant, premise s where a trade

or enterprise is reasonably believed to be carried on in order to conduct an inspection

aimed at gathering information that will aide SARS in determining whether the

business operator is compliant with tax obligations. In a constitutional democracy,

the enjoyment of fundamental rights has a high premium. Accordingly, every lawful

exercise of the power conferred by s 45 must take place in an orderly fashion, with

decency and r espect for taxpayers and t heir privacy. The state may n ot unduly interfere

with this right, whether by withdrawing it altogether, abridging it, or diminishing its

scope and ambit. This article hypothesises that inspections undertaken in terms of

s 45 limit taxpayers’ privacy in a manner that may not pass muster under s 36(1)

of the Constitution o f the Republic of South Afri ca, 1996. On thi s basis, it is argued

that, to cure its deciencies, s 45 ought to be amended by the introduction of the

provisions proposed in this article.

Section 45 of the Tax Administration Act – constitutionality – limitation

of rights – privacy

I INTRODUCTION

Section 40 of the Tax Administration Act 28 of 2011 (‘TAA’) imbues the

South African Revenue Service (‘SARS’) with the discretion to ‘select a

person for inspe ction, verication or audit on t he basis of any considerat ion

relevant to the proper administ ration of a tax Act,1 including on a ra ndom

or a risk assessment basis’.2 Once selected, a SARS ocial3 is empowered

† BProc LLB (UWC) LLM (UCT) LLD (UWC). https://orcid.org/0000-0002-

2161-287X.

1 For the meaning of ‘t ax Act’ in this context, see s 1 of the TAA.

2 David Clegg LexisNexis Concise Guide to Tax Administration (2012) 86

explai ns ‘risk assessment ’ as referring ‘to the u se of an analytic t ool which proles

taxpayers according to the likelihood, on a statistical basis, that some or other

shortfall exists in their ta x aairs’.

3 For the denition of ‘ SARS ocial’, see s 1 of the TAA. For the distinction

between this term and ‘senior SARS ocial’, see Fareed Moosa ‘The power to

search and seize without a warrant under the Tax Ad ministration Act’ (2012) 24

SA Merc LJ 338.

https://doi.org/10.47348/SALJ/v138/i1a8

(2021) 138 SALJ 171

© Juta and Company (Pty) Ltd

172(2 021) 138 THE SOUTH AFR ICAN LAW JOURNAL

https://doi.org/10.47348/SALJ/v138/i1a8

by s 454 to arrive at a taxpayer’s business ‘premises’5 unannounced and

without a warr ant to conduct an admi nistrative (not regu latory) inspection

to establi sh any of the objective facts listed in s 45(1)(a), (b) and/or (c). Read

with s 40, s 45 authorises random, non-targeted inspections, as well as

risk-assessment based, targeted inspections of ‘records, books of account

or documents’.6 Inspections enable SARS to gather information that aids

it in admi nistering ta x laws and monitoring compli ance.7 It is through this

lens that its authority under s 45 must be viewed.8

II PROBLEM STATEMENT

By enforcing South Africa’s tax laws, SARS forms part of the broader

governance structure. As such, SARS aids the government to full its

constitutional mandate. Democracy is strengthened when the state and its

organs (i) are infused with a deep culture of accountability, (ii) are strict

enforcers of the rule of law, (iii) have a zero-tolerance for state action

with impunity, and (iv) are respectful of all aspects of the Constitution

of the Republic of South Africa, 1996 (‘the Constitution’).9 Section 8(1)10

directs that the Bill of Rights ‘applies to all law’11 (such as the TAA), and

that all organs of state (such as SARS)12 must respect fundamental rights

4 Section 45 reads: ‘(1) A SARS ocial may, for the purposes of the

administration of a tax Act and without prior notice, arrive at a premises where

the SARS ocial has a reasonable belief that a trade or enterprise is being

carried on and conduct an inspection to determine only – (a) the identity of the

person occupy ing the premises; ( b) whether the person occupyi ng the premises is

register ed for tax; or (c) whether the per son is complying wit h sections 29 and 30.

(2) A SARS oci al may not enter a dwelli ng-house or domestic prem ises, except

any part thereof used for the purposes of trade, under this section without the

consent of the occupant.’

5 For the mea ning of ‘premis es’ in s 45, see Fareed Moosa T he 1996 Constitution

and the Tax Administration Act 28 of 2011: Balancing Ecient and Eective Tax

Administration with Taxpayer s’ Rights (unpublished LLD t hesis, UWC, 2016) 367–9.

6 For the denition of ‘ document’, see s 1 of the TAA.

7 See Gaertner v Minister of Finance 2014 (1) SA 442 (CC) para 60; Valerie

Braithwaite ‘Tax system integrity and compliance: The democratic management

of the tax sy stem’ in Valerie Braithwaite (ed) Taxing D emocracy: Understanding Tax

Avoidance and Eva sion (2003) 281–5 argues t hat unity in a ta x oce, responsiveness

to taxpayers, and soundness of purpose in tax administration are key features

bridgi ng the gap between the integrity of t ax ocials and ta xpayer compliance.

8 For a comparison between s 45 and s 63 of the TAA, see Fareed Moosa

‘Analysing and comparing warrantless tax inspections and searches’ (2019) 22

PELJ 1.

9Economic Fre edom Fighters v Speaker of the Nati onal Assembly; Democratic Allian ce

v Speaker of the National Assembly 2016 (3) SA 580 (CC) par a 54.

10 Section 8(1) reads: ‘The Bill of Rights applies to all law, and binds the

legislature, the execut ive, the judiciary and a ll organs of state.’

11For a discussion of the meaning of ‘law’ in this context, see Moosa op cit

note 5 at 255.

12 The denition of ‘organ of state’ in the Constitution, 1996 (s 239(b)(ii))

includes within its ambit ‘any functionary or institution – … exercising public

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