In the recent decision of Red Ant Security Relocation and Eviction Services (Pty) Ltd v Commissioner for the South African Revenue Service the Pretoria High Court found that SARS had failed to follow due process in revoking tax compliance status in terms of the Tax Administration Act (“the TAA”). The Applicant in the matter sought an urgent interdict against the Commissioner’s decision to revoke its tax compliance status without prior notice, following the lapsing of a deferral agreement between the parties.
The Applicant based its application on the fact that SARS failed to comply with the requirements of section 256(6) of the TAA. They further relied on the fact that the audi alteram partem principle (which requires each party to be heard) was not adhered to. They further indicated that the provisions of the Promotion of Administrative Justice Act, 3 of 2000 (“PAJA”) was also not complied with
In terms of Section 256(6) of the TAA, SARS may alter the taxpayer’s tax compliance status from compliant to non-compliant if the original issue of the compliance status was issued in error; or was obtained on the basis of fraud, misrepresentation or non-disclosure of material facts . If this is the case, SARS must first give the taxpayer prior notice and an opportunity to respond to the allegations of at least 14 days prior to the alteration.
SARS contended that it did not need to provide notice to the applicant because it did not revoke the applicant’s tax compliance status, but that the applicant’s tax compliance status lapsed when the deferral agreement came to an end, and therefore that SARS did not need to give the applicant any further notice.
The Court found that SARS had not complied with the audi alteram partem principle and that SARS has an obligation to follow due administrative processes as provided for in PAJA. The Court ordered SARS to restore the Applicant’s tax compliance status. It further held that granting the Applicant its tax compliance status did not prohibit SARS from exercising any of its statutory rights and duties in relation to the applicant’s future tax compliance status, subject to compliance with section 256(6) of the TAA.
For some taxpayers, their tax compliance status is of utmost importance in ensuring that they are able to tender for new or continue with existing business with government institutions. This judgment confirms the right of the taxpayer to be notified prior to the change in its tax compliance status. SARS cannot alter a taxpayer’s tax compliance status without notice.