Behind the Taxman’s controversial warrantless search powers.
Finding a balance between taxpayers’ rights and Sars’s powers to search premises can prove difficult, especially in cases where a tax official does not have a warrant.
The “warrantless search and seizure”, a controversial new power introduced in the Tax Administration Act that came into effect last year, has been debated at length since it was first proposed a couple of years ago. The criticism against the provision stems from fears that a warrantless search could infringe certain constitutional rights of taxpayers such as taxpayers’ right to privacy or fair administrative action.
The latter issue was raised at the recent 4th National Tax Conference on the Tax Administration Act hosted by the South African Institute of Tax Practitioners (SAIT). Some commentators at the conference questioned whether there are necessary checks and balances in place to adequately deal with the fairly wide and far-reaching powers granted to Sars officials to carry out warrantless search and seizures.
In terms of the Tax Administration Act, a senior Sars official may carry out a search and seizure exercise if they have reasonable grounds to believe that there may be an imminent removal of relevant material likely to be found at a premises. In addition, the Senior Sars Official must also have reasonable grounds to believe that a search warrant would be issued and that the delay in obtaining a warrant would defeat the object of the search and seizure.
According to Muhammad Saloojee, director of corporate tax at KPMG, the fundamental difference between a ‘warrant-based’ search and seizure and a ‘warrantless’ one, is one of judicial intervention. A warrant-based search and seizure warrant has to be issued by a judge or magistrate, who would assess whether it should be issued against information which Sars will be required to put forward under an oath or solemn declaration. In a warrantless search and seizure, application to a judge or magistrate is circumvented, and so the question that is being posed is whether this would be lawful.
Whilst the provision may appear far-reaching, the provisions contain certain safeguards, he says. The Senior Sars Official will have to satisfy himself or herself that the juridical basis for conducting a warrantless search and seizure exists, otherwise, he or she risks acting unlawfully. Assessing the juridical facts and then acting upon it would be considered an administrative act, and will have to meet the tenants of fairness and reasonableness, he says.
“This is the tricky part, since in effect the Senior Sars Official steps into the shoes of the judicial officer in making this assessment and it is the exercise of this power which could be challenged in certain circumstances,” says Saloojee.
Where a warrantless search is being conducted, Saloojee says a Sars official must inform the taxpayer that he or she is conducting a warrantless search and of the alleged failure of a tax obligation. He says the new legislation determines that Sars may not, without the consent of the occupant enter a dwelling house under a warrantless search, except for any part of the house that is used for business.
“There is a limitation in terms of trying to secure some of the rights of privacy of taxpayers by not allowing Sars to do warrantless searches on their private residences. What this means is that when Sars needs to search a person’s private dwelling, they will have to apply for a search and seizure warrant to enter and search a dwelling house, and Sars will have to meet the requirements of a warrant-based search,” he says.
There is also a hybrid provision that allows Sars to conduct a search and seizure on premises which were not identified in a warrant in similar circumstances, where there is a risk of relevant material dissipating, he says. This section caters for the situation where Sars is authorised under a warrant to search premises A, and in performing its search on premises A, it has reasonable grounds to believe relevant material is kept at premises B. Sars may then search premises B without having to obtain a new warrant. In this case too, Sars cannot search premises B if it is a dwelling house or domestic premises except for any part which is used for trade purposes, without the consent of the taxpayer.
“There is obviously a need for Sars to be able to act quickly in certain instances where there is a risk of relevant material dissipating, and whilst the warrantless search and seizure provisions may appear draconian, there are in-built safeguards which would prevent this power from being abused. Applying these safeguards will be key to balancing the powers of Sars on the one hand and taxpayers rights on the other,” says Saloojee.