Tax legislation and the right to equality: Does section 23(m) of the Income Tax Act 58 of 1962 rationally differentiate between salaried individuals and individuals who earn their income mainly from commission?

• Jurisdiction: South Africa
• Published date: 19 January 2021
• Citation: (2020) 32 SA Merc LJ 1
• Date: 19 January 2021
• Author: Botha, L.
• Pages: 1-21

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Articles

TAX LEGISLATION AND THE RIGHT TO

EQUALITY: DOES SECTION 23(m) OF THE

INCOME TAX ACT 58 OF 1962 RATIONALLY

DIFFERENTIATE BETWEEN SALARIED

INDIVIDUALS AND INDIVIDUALS WHO

EARN THEIR INCOME MAINLY FROM

COMMISSION?

LOUIS BOTHA*

Senior Associate, Cliffe Dekker Hofmeyr (Tax and Exchange Control)

ZOË MEYER

†

Research assistant in the Department of Jurisprudence,

University of Pretoria

ANTON KOK

‡

Professor in the Department of Jurisprudence,

University of Pretoria

Abstract

The authors speculate how a court should deal with a tax matter that

implicates the right to equality. Section 23(m) of the Income Tax Act

58 of 1962 squarely raises an equality dispute —in the context of

rational/irrational differentiation, not fair/unfair discrimination. The

aim of this article is to evaluate if section 23(m) rationally

differentiates between salaried and non-salaried individuals —if the

differentiation created by section 23(m) is constitutionally permissible.

First, the authors discuss the influence of the Constitution of the

Republic of South Africa, 1996 on tax legislation with reference to

selected cases where provisions in tax legislation came under

constitutional scrutiny. Secondly, the operation of section 9 of the

Constitution is explained. Thereafter, the authors interpret section

23(m) in considering whether the differentiation therein falls foul of

* BComm (Law) LLB LLM (Pret).

†

BA (Law) (Pret).

‡

BComm (Law) LLB LLM LLD (Pret).

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section 9 of the Constitution. Having regard to those deductions which

are not available to a salaried individual in terms of section 23(m) and

to the number of individuals who are listed by SARS as salaried and

non-salaried individuals in SARS’s statistics from 2015 to 2018, the

conclusion is reached that the differentiation between salaried and

non-salaried individuals appears to be rational as it might lead to a

significant increase in the administrative burden of SARS and of the

salaried individuals in question.

I INTRODUCTION

As set out in more detail below, provisions in South African tax

legislation have come under constitutional scrutiny in a number of

cases. In First National Bank v Commissioner for South African Revenue

Service,

1

the property clause was considered. Metcash Trading Ltd v

Commissioner for South African Revenue Service

2

implicated the right to

access to courts. Gaertner v Minister of Finance

3

dealt with the right to

privacy. In Pienaar Brothers (Pty) Ltd v Commissioner for the South

African Revenue Service & another,

4

the court considered the property

clause and the requirement that all legislation must be consistent with

the rule of law.

5

More recently, in Barnard Labuschagne Inc v South

African Revenue Service & another,

6

the potential infringement of the

right to access to courts was considered.

7

In this article, we speculate how a court should deal with a tax matter

that involves section 9 of the Constitution — the right to equality. South

Africa’s National Treasury, which is responsible for administering the

1

First National Bank of SA Ltd t/a Wesbank v Commissioner for South African Revenue

Service & another; First National Bank of SA Ltd t/a Wesbank v Minister of Finance 2002 (4) SA

768 (CC) para 31.

2

2002 (4) SA 768 (CC) para 67.

3

(CCT 56/13) 2013 ZACC 38 (14 November 2013).

4

[2017] 4 All SA 175 (GP).

5

The requirement under section 1(c) of the Constitution of the Republic of South Africa,

1996 (‘the Constitution’).

6

2020 ZAWCHC (15 May 2020).

7

Aside from tax matters implicating a right in the Bill of Rights, under the Constitutional

Court’s broadened jurisdiction, allowing it to hear matters raising an arguable point of law of

general public importance, the Constitutional Court has heard at least one matter dealing

with the interpretation of a tax provision (Big G Restaurants (Pty) Limited v Commissioner for

the South African Revenue Service (CT13/19) [2020] ZACC 16 (21 July 2020)). The judgment

does not turn on how tax legislation should be interpreted in light of a provision in the Bill of

Rights. However, it makes the interesting point that a provision in income tax legislation,

specif‌ically section 24C of the Income Tax Act 58 of 1962 (‘ITA’), should not be interpreted to

allow a restaurateur that is attached to a franchise to claim the section 24C allowance,

compared to a restaurateur that is not attached to a franchise.

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