an appraisal of selected tax-enforcement powers of the south african revenue service in the south

407 Pages·2017·11.58 MB·English

AN APPRAISAL OF SELECTED TAX-ENFORCEMENT POWERS OF THE SOUTH
AFRICAN REVENUE SERVICE IN THE SOUTH AFRICAN CONSTITUTIONAL
CONTEXT

by

CARIKA FRITZ

Submitted in fulfilment of the requirements for the degree

LLD

In the Faculty of Law,
University of Pretoria

March 2017

Supervisor: Prof TD Legwaila
Co-supervisor: Prof RCD Franzsen

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UNIVERSITY OF PRETORIA
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While academic staff teaches you about referencing techniques and how to avoid plagiarism, you too
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You are guilty of plagiarism if you copy something from another author’s work (eg a book, an article or
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The declaration which follows must accompany all written work submitted while you are a student of
the University of Pretoria. No written work will be accepted unless the declaration has been completed
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Full names of candidate: Carika Fritz
.

Student number: 04393775

Date: 28 March 2017

Declaration

1. I I understand what plagiarism is and am aware of the University’s policy in this regard.

SIGNATURE OF CANDIDATE: ......………………………………………………………………………….

SIGNATURE OF SUPERVISOR: .. ……………………………………………………………………………

This document must be signed and submitted to the Head: Student Administration within two months
of registering for the research component of the programme.

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University of Pretoria

Declaration of originality

This document must be signed and submitted with every
essay, report, project, assignment, mini-dissertation, dissertation and/or thesis

.
Full names of student: Carika Fritz

Student number: 04393775

Declaration

1. I understand what plagiarism is and am aware of the University’s policy in this
regard.

2. I declare that this thesis is my own original work. Where other people’s work
has been used (either from a printed source, Internet or any other source),
this has been properly acknowledged and referenced in accordance with
departmental requirements.

3. I have not used work previously produced by another student or any other
person to hand in as my own.

4. I have not allowed, and will not allow, anyone to copy my work with the
intention of passing it off as his or her own work.

Signature of student:………………………………………………………………………….

Signature of supervisor:……………….....…………………………………………………..

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SUMMARY
There is tension between the South African Revenue Service’s duty to collect taxes
on the one hand, and its duty to respect taxpayers’ rights on the other. An
environment where there is clearly respect for the rights of the taxpayer may indeed
result in increased voluntary compliance.

This thesis constitutes a comparative appraisal of whether the following enforcement
powers of the South African Revenue Service (“SARS”) in the South African
constitutional context, namely (i) SARS’ power to conduct searches and seizures in
order to verify compliance and investigate the commission of offences; (ii) the “pay
now, argue later” rule; and (iii) the appointment of a third party on behalf of a
taxpayer are in accordance with the Constitution of the Republic of South Africa,
1996 (“Constitution”). It is argued that these powers do not necessarily conform to
the Constitution’s values and the fundamental rights contained in the Bill of Rights in
Chapter 2 of the Constitution.

To address the apparent shortcomings in the current dispensation, the thesis
compares these enforcement powers of SARS with similar powers afforded to the

revenue authorities of Canada, Australia, New Zealand and Nigeria. Important

conclusions are drawn from this comparative review and a number of
recommendations for law reform are proposed which, if implemented, would align
these enforcement powers with the provisions of the Constitution. The
recommendations entail, inter alia, that the seizure component of a search and
seizure process should be treated separately, that half of the payment obligation
should be suspended until the dispute is heard by an impartial forum, and that an
objective measure must be in place to ensure that a taxpayer is able to afford basic
necessities when a third party appointment is made.

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ACKNOWLEDGMENTS
“I can do all things through Christ which strengtheneth me.”
(Philippians 4:13)
I would like to express my sincerest gratitude to the people mentioned below.
Without their ongoing support, encouragement and assistance this thesis would not
have been possible.
a. My supervisor, Prof Thabo Legwaila, and co-supervisor, Prof Riël Franzsen.
Thank you for being the perfect “good cop/bad cop” combination and ensuring
that my ideas and arguments were challenged from every possible angle whilst
not leaving me despondent. Thank you for your patience and the impact that
you have had on my thesis and career so far. It is a privilege to have learned
from you both.
b. Prof Chris Nagel. Thank you for editing my “Ingels” and making it presentable to
the world.
c. My colleagues in the Department of Mercantile Law. Thank you for your support
and encouragement. Special mention must be made of Prof Hermie Coetzee,

Prof Stefan Renke and my former academic associate, Mr Raeez Moosa.

d. Dr Camilla Pickles. My dearest friend, thank you for talking through my
frustrations and reading my work even though it is miles apart from your own
area of expertise.
e. My sister Lindall Stadler. Thank you for your assistance with the bibliography
and for always encouraging me.
f. My parents, Gert and Anelia Keulder. Thank you for encouraging me to do my
best at all times and for instilling the importance of education in me.
g. Last but not least, my husband, Christo Fritz. Thank you for believing in me and
my abilities, when I did not. I could not have done this without your support and
encouragement. Thank you for keeping me “balanced” through this process.

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The financial assistance of the National Research Foundation (NRF) towards this
research is hereby acknowledged. Opinions expressed and conclusions arrived at,
are those of the author and are not necessarily to be attributed to the NRF.

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LIST OF ACRONYMS
ADJRA Administrative Decisions (Judicial Review) Act, 1997
ATO Australian Tax Office
BORA Bill of Rights Act, 1990
CCA Customs Control Act 31 of 2014
CDA Customs Duty Act 30 of 2014
CEA Customs and Excise Act 19 of 1964
CIA The Combines Investigation Act r.s.c 1970
CITA Canadian Income Tax Act RSC 1985, c 1 (5th supp)
CPA Criminal Procedure Act 51 of 1977
CRA Canadian Revenue Authority
FCAA Federal Court of Australia Act,1976
FIRS Federal Inland Revenue Service
FIRSEA Federal Inland Revenue Service (Establishment) Act, 2007

ICCPR The International Covenant on Civil and Political Rights,1976

IGT The Inspector-General of Taxation
IRD Inland Revenue Department
ISA Insolvency Act 24 of 1936
ITA Income Tax Act 58 of 1962
NOPA Notice of Proposed Adjustment
NOR Notice of Response
NTAA New Zealand Tax Administration Act 166 of 1994
OECD Organisation for Economic Co-operation and Development
PAJA The Promotion of Administrative Justice Act
SARFU South African Rugby Football Union
SARS South African Revenue Service

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SIUSTA Special Investigating Units and Special Tribunals Act 74 of 1996
SSA Search and Surveillance Act 24 of 2012
T(IOEP)A Taxation (Interest on Overpayments and Early Payments) Act, 1983
TAA Tax Administration Act 28 of 2011
TAB Tax Administration Bill
TALAA, Tax Administration Laws Amendment Act 44 of 2014
2014
TALAA, Tax Administration Laws Amendment Act 23 of 2015
2015
TAT Tax appeal tribunal
TLSAA Taxation Laws Second Amendment Act 18 of 2009
VAT Act Value-added Tax Act 89 of 1991

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Table of Contents
PART 1 CONTEXTUAL SETTING .................................................................................. 1
CHAPTER 1 – INTRODUCTION ..................................................................................... 2
1.1 BACKGROUND ....................................................................................... 2
1.2. RESEARCH OBJECTIVE AND RESEARCH QUESTIONS ................... 10
1.3 COMPARATIVE COUNTRIES ............................................................... 11
1.3.1 Canada .................................................................................................. 11
1.3.2 Australia ................................................................................................. 12
1.3.3 New Zealand .......................................................................................... 13
1.3.4 Nigeria .................................................................................................... 14
1.4 LIMITATION OF STUDY ........................................................................ 15
1.5 EXPOSITION ......................................................................................... 16
CHAPTER 2 - CONTEXTUAL SETTING OF TAXATION .............................................. 18
2.1 INTRODUCTION ................................................................................... 18
2.2 THE TAX CONCEPT ............................................................................. 18
2.3 PURPOSE OF TAXATION ..................................................................... 19
2.4 POWER TO TAX AND TO COLLECT TAXES ....................................... 21

2.5 CANONS OF TAXATION ....................................................................... 24

2.5.1 General .................................................................................................. 24
2.5.2 Equity ..................................................................................................... 25
2.5.3 Certainty ................................................................................................. 28
2.5.4 Convenience .......................................................................................... 29
2.5.5 Efficiency ................................................................................................ 29
2.5.6 Applying the canons of taxation ............................................................. 31
2.6 FROM PARLIAMENTARY SUPREMACY TO CONSTITUTIONAL
SUPREMACY ........................................................................................ 32
2.7 INTERPRETATION OF LEGISLATION IN THE CONSTITUTIONAL
DISPENSATION .................................................................................... 35
2.8 BILL OF RIGHTS ................................................................................... 38
2.8.1 General .................................................................................................. 38
2.8.2 Right to equality ..................................................................................... 39
2.8.3 Right to privacy ...................................................................................... 41
2.8.4 Right to property .................................................................................... 43
2.8.5 Right to just administrative action .......................................................... 45

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2.8.6 Right to access to courts ........................................................................ 52
2.8.7 Limitation of rights in the Bill of Rights ................................................... 54
2.9 CONCLUSION ....................................................................................... 56
PART 2 SEARCHES AND SEIZURES .......................................................................... 58
CHAPTER 3 – SEARCHES AND SEIZURES CONDUCTED BY SARS ....................... 57
3.1 INTRODUCTION ................................................................................... 57
3.2 DEVELOPMENT OF INCOME TAX AND VALUE-ADDED TAX-
RELATED SEARCHES AND SEIZURES .............................................. 59
3.2.1 Searches and seizures in terms of the ITA and the VAT Act ................. 60
3.2.2 Searches and seizures in terms of the TAA ........................................... 71
3.3 DEVELOPMENT OF CUSTOMS-RELATED SEARCHES AND
SEIZURES ............................................................................................. 92
3.3.1 Searches and seizures in terms of the CEA ........................................... 92
3.3.2 Searches and seizures in terms of the CCA ........................................ 105
3.4 CONCLUSION ..................................................................................... 109
CHAPTER 4 – SEARCHES AND SEIZURES –OTHER JURISDICTIONS ................. 113
4.1 INTRODUCTION ................................................................................. 113
4.2 CANADA .............................................................................................. 114

4.2.1 Contextual setting ................................................................................ 114

4.2.2 Search and seizure - fiscal provisions .................................................. 118
4.2.3 Comparison with SARS’ powers .......................................................... 124
4.3 AUSTRALIA ......................................................................................... 127
4.3.1 Contextual setting ................................................................................ 127
4.3.2 Search and seizure – fiscal provisions ................................................. 128
4.3.3 Comparison with SARS’ powers .......................................................... 134
4.4 NEW ZEALAND ................................................................................... 135
4.4.1 Contextual setting ................................................................................ 135
4.4.2 Search and seizure – fiscal provisions ................................................. 136
4.4.3 Comparison with SARS’ powers .......................................................... 143
4.5 NIGERIA .............................................................................................. 145
4.5.1 Contextual setting ................................................................................ 145
4.5.2 Search and seizure – fiscal provisions ................................................. 146
4.5.3 Comparison with SARS’ powers .......................................................... 148
4.6 CONCLUSION ..................................................................................... 149

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