The Pretoria Tax Court made an interesting ruling in Income Tax Case No 1866 75 SATC 268.Section 32(1) of the Value-Added Tax Act, No 89 of 1991 (VAT Act) states that the following decisions of the South African Revenue Service (SARS) are subject to objection and appeal, namely:
• In terms of s23(7) of the VAT Act notifying that person of SARS’s refusal to register that person in terms of the VAT Act.
• In terms of s24(6) or (7) of the VAT Act notifying a person of SARS’s decision to cancel, or refusal to cancel of his registration in terms of the VAT Act.
• Refusing to approve a method for determining the ratio contemplated in s17(1) of the VAT Act.
• In terms of s50A(3) or (4) of the VAT Act.
However, there are a number of provisions in the VAT Act, in addition to those listed in s32(1) of the VAT Act, that give SARS discretionary powers. For example, for purposes of the VAT Act, a valid tax invoice, containing certain prescribed details, must be produced. However, s20(7) of the VAT Act provides that, where SARS is satisfied that there are sufficient records available to establish the particulars of any supply, and that it would be impractical to require that a full tax invoice be issued, it may, subject to such conditions as it may consider necessary, dispense with some of the prescribed details or with the need to issue a tax invoice, or give permission that the particulars of a tax invoice be furnished in another manner.
In the case under discussion, SARS raised the preliminary point that the Tax Court did not have jurisdiction to deal with an appeal against the decision by SARS taken under s20(7) of the VAT Act, as the provision is not listed in s32(1) of the VAT Act, and accordingly is not subject to objection and appeal. The Pretoria Tax Court upheld SARS’s point. It determined that the correct procedure to challenge a decision of SARS which is not subject to objection and appeal in terms of s32(1) of the VAT Act, is a review application in the High Court; and the Tax Court does not have the power to hear review applications.
However, although it is not entirely clear from the judgment, it appears as if the taxpayer appealed against an assessment for VAT raised by SARS, and relied on the provisions of s20(7) of the VAT Act in disputing that assessment. In terms of s33(1) of the VAT Act (which has since been repealed) an appeal against an assessment does lie to the Tax Court.
The Tax Administration Act, No 28 of 2011 (TAA) now sets out the procedure that taxpayers must follow to lodge an objection or appeal in respect of the VAT Act (and other tax legislation).
Section 104(1) of the TAA states that a taxpayer who is aggrieved by an assessment may object to the assessment. Section 104(2) of the TAA states that a taxpayer may, in the same manner as an assessment, object or appeal against, amongst other things, “any…decision that may be objected to or appealed against under [the VAT Act, among other legislation].”
Section 105 of the TAA is headed “Forum for dispute of assessment or decision” and states that a taxpayer may not dispute an assessment or decision in any court or other proceedings, except as provided for in Chapter 9 of the TAA or by application for review to the High Court.
Section 107 of the TAA states that, if SARS disallows an objection in whole or in part, then the taxpayer may appeal to the Tax Court (or the tax board, if the amount in dispute is relatively small). In terms of section 117 of the TAA, the Tax Court has jurisdiction over tax appeals lodged in terms of section 107 of the TAA.
To return again to the provisions of the VAT Act. The authors of De Koker, AP and others, VAT in South Africa, LexisNexis, at paragraph 19.9 suggest “that taxpayers are entitled to proceed by way of objection and appeal against the exercise of a discretion, where the right of objection and appeal is neither specifically excluded nor specifically granted by the [VAT Act].”
Unfortunately, no authority is provided for this proposition and it would appear to conflict with the law as laid down by the Pretoria Tax Court in the case under discussion.
However, there may be another angle to the matter. Consider the following example. A taxpayer objects and appeals against an assessment raised by SARS. The taxpayer’s objection and appeal is based on the fact that SARS should, in terms of s20(7) of the VAT Act, have accepted a tax invoice that omitted certain non-material details. In that case, the taxpayer would not be objecting against a decision but against an assessment; and, arguably, the taxpayer would not need to apply for a review to the High Court, but would be able to follow the procedure set out in the TAA.
The matter would be different if, say, the taxpayer asked SARS to accept a document as a tax invoice in terms of s20(7) of the VAT Act and, prior to raising an assessment, SARS determines on spurious grounds that it is not satisfied as contemplated in that provision. In that case, the taxpayer would probably, in the light of the provisions of s32(1) of the VAT Act, as read with the provisions of s104(2) of the TAA and the judgment under discussion, be obliged to apply to the High Court for a review of SARS’s actions.
What is apparent is that a taxpayer must be very careful when considering the procedure and forum she must use to dispute a decision of SARS.