Thistle and Coronation: Can a Taxpayer Place Reliance on a Legal Opinion to Avoid or Reduce Penalties while at the Same Time Withholding Disclosure of the Opinion from SARS?

• Jurisdiction: South Africa
• Date: 01 April 2024
• Pages: 20-27
• Author: Blumberg SC Matthew
• Published date: 01 April 2024
• Published By: Siber Ink
• DOI: 10.10520/ejc-btclq_v15_n1_a4

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Thistle and Coronation:

CAN A TAXPAYER PLACE RELIANCE ON A LEGAL

OPINION TO AVOID OR REDUCE PENALTIES WHILE AT

THE SAME TIME WITHHOLDING DISCLOSURE OF THE

OPINION FROM SARS?

MATTHEW BLUMBERG SC

ABSTRACT

Understatement penalties1 featured in two tax cases recently argued in the

Constitutional Court. In both cases, the taxpayer had sought to avoid or

reduce liability for understatement penalties on the basis that the taxpayer’s

contentious tax position had been based on a favourable legal opinion. In

the one case, the opinion was disclosed to SARS. In the other, it was not. In

the latter case, SARS contended that the taxpayer ought to have disclosed

the opinion and adduced it in evidence. The SCA had disagreed, fi nding that

‘it was not incumbent on [the taxpayer] to disclose a tax opinion that it had

obtained, any more than it would be on any other party which litigates on the

basis of a procured legal opinion.’

It is, for various reasons, diffi cult to predict whether or not the

Constitutional Court will engage with this fi nding. For the reasons explored

below, however, taxpayers should proceed with caution before seeking to

invoke the SCA-fi nding as authority for the proposition that they may rely on a

legal opinion to avoid or reduce penalties, while at the same time withholding

disclosure of the opinion from SARS.

Introduction

Unusually, two tax matters were heard in the Constitutional Court during

February 2024, viz The Thistle Trust v CSARS2 and Coronation Investment

Management SA (Pty) Ltd v CSARS.3 4

1

The regime for which is in Part A of Chapter 16 of the Tax Administration Act 28

of 2011.

2

CCT case number 337/2022, heard on 8 February 2024. The citation of the SCA

judgment is CSARS v The Thistle Trust (516/2021) [2022] ZASCA 153 (7 November

2022).

3

CCT case number 47/2023, heard on 13 February 2024. The citation of the SCA

judgment is CSARS v Coronation Investment Management SA (Pty) Ltd (1269/2021)

[2023] ZASCA 10 (7 February 2023).

4

The Constitutional Court’s ‘short list of tax-related judgments’ has been com-

mented on elsewhere — see e g ‘Tax and the Constitutional Court — do they ever

meet?’ S Weber De Rebus 2020 (Nov) DR30.