Warrantless inspections by the SARS: Limitation of taxpayers’ privacy?

• Jurisdiction: South Africa
• Published date: 20 August 2019
• Pages: 477-498
• Author: Fareed Moosa
• Date: 20 August 2019
• Citation: (2018) 30 SA Merc LJ 477

WARRANTLESS INSPECTIONS BY THE SARS:

LIMITATION OF TAXPAYERS’ PRIVACY?

FAREED MOOSA*

Senior Lecturer, University of the Western Cape

Abstract

It is trite that, in accordance with section 14 of the Bill of Rights,

taxpayers enjoy fundamental privacy in respect of, inter alia, their

homes, property, possessions and communications. The integrity

and privacy of a taxpayer’s home and business environment are

important rights and values to be respected and protected during

tax administration conducted by the South African Revenue

Service. Their promotion is part of the spirit, purport and objects of

the Bill of Rights to be fulf‌illed by reason of the interpretive

imprimatur in section 39(2) of the Constitution. A taxpayer’s

privacy may, in accordance with section 36 of the Constitution, be

limited by way of a ‘law of general application’. This article

examines critically whether section 45 of the Tax Administration

Act 28 of 2011 (TAA) imposes a limitation on taxpayers’ privacy as

envisaged by the Constitution’s limitation clause. Section 45

empowers tax off‌icials to enter upon a taxpayer’s premises without

a warrant for purposes of conducting an inspection. This article

argues that to qualify as lawful, every exercise of power to conduct

warrantless, non-consensual, tax inspections under section 45 must

occur in an orderly fashion, with respect and due regard for

taxpayers and their fundamental rights, including privacy. This is so

because, in a democracy, the substantive enjoyment of rights has a

high premium. This article concludes that the power of inspection

under section 45 is a limitation of a taxpayer’s privacy in a law of

general application, namely, the TAA.

* BProc LLB (UWC) LLM (Tax) (UCT) LLD (UWC). Attorney and Head of the

Department of Mercantile & Labour Law, University of the Western Cape. E-mail:

fmoosa@uwc.ac.za.

477

(2018) 30 SA Merc LJ 477

© Juta and Company (Pty) Ltd

I INTRODUCTION

The South African Revenue Service (the SARS) is ‘established as an

organ of state within the public administration’

1

whose ‘objective is the

eff‌icient and effective collection of revenue’.

2

In this context, revenue

means ‘income derived from taxes, duties, levies, fees, and any other

moneys imposed in terms of legislation, including penalties and interest

in connection with such moneys’.

3

As a creature of statute, the SARS has

no inherent power which authorises its off‌icials to conduct inspections

designed to uncover otherwise conf‌idential information held by taxpay-

ers or their advisors, agents, employees, or associates that would allow

the SARS properly to assess a taxpayer’s liability for tax. Therefore,

without a statutory mechanism granting the SARS such authority, its

off‌icials would have to depend on taxpayers fulf‌illing their tax duties

honestly by making a frank disclosure of all tax-related information. As a

legal position, this is undesirable. Taxes are, in the main, not paid

willingly. Tax is a ‘grudge’ payment made because the law prescribes it.

4

The public’s appetite for tax wanes when government off‌icials are

perceived as corrupt and to be wasting revenue. This undermines the

creation of a strong culture of tax compliance.

South African courts recognise that there are ‘crooks who devise all

manner of schemes to exploit the [tax] system to their advantage’.

5

Therefore, a real need exists for powers that will enable SARS off‌icials

effectively to combat tax evasion and counteract other unscrupulous

behaviour by delinquent and/or recalcitrant taxpayers who fail to make

proper disclosure of information relevant to the determination of their

tax liability. In this regard, sections 40, 41, 45, 61, 62, 63 and 64 of the

Tax Administration Act

6

(the TAA) are important. These provisions

create a web of related, but independent, powers, each of which permits

SARS off‌icials to administer taxes by gathering suff‌icient, reliable, and

1

Section 2, South African Revenue Service Act 34 of 1997 (the SARSA). Public

administration concerns the everyday management of the state through the implementation

of laws and policies by line departments categorised as administrative agencies, statutory

agencies, and service delivery agencies (such as the SARS). See Bodasing, ‘Public Administra-

tion’ in Woolman et al (eds), Constitutional Law of South Africa vol 2, 2 ed (Juta 2008) 23A-4–

23A-6.

2

Section 3 of the SARSA.

3

Section 1 of the SARSA def‌ining ‘revenue’.

4

New Adventure Shelf 122 (Pty) Ltd v CSARS [2017] ZASCA 29 (28 March 2017) para 28.

In South African Reserve Bank v Shuttleworth 2015 (5) SA 146 (CC) para 42, Moseneke DCJ

aff‌irmed that ‘the power to tax residents is an incident of, and subservient to, representative

democracy’.

5

Metcash Trading Ltd v CSARS 2001 (1) SA 1109 (CC) para 18. See, generally, ITC 1865 75

SATC 250.

6

Act 28 of 2011.

(2018) 30 SA MERC LJ

478

© Juta and Company (Pty) Ltd