Mazars Durban - 'PAY NOW, ARGUE LATER' PRINCIPLE: LIGHT ON THE HORIZON FOR TAXPAYERS

2015-12-01

Prior to the introduction of the Tax Administration Act, SARS often implemented the principle of 'pay now, argue later'. This principle allows SARS to demand payment of an assessed tax even if the taxpayer is disputing the assessment. In other words the obligation to pay the tax could not be suspended and seemed to be unfair practice
The Constitutional Court however accepted the principal as being fair practice.
A recent High Court case, as well as the introduction of the Tax Administration Act, has given taxpayers hope that this principle can be successfully suspended, in appropriate cases, until a court has reviewed the SARS decision.

Asking SARS to waive 'pay now' payment

Should a taxpayer wish to dispute an assessment or decision raised by SARS, they have the right to approach SARS and request that the demand for payment be suspended until such time as the dispute of the incorrect assessment has been attended to by SARS.

In terms of the Tax Administration Act,

A 'senior SARS official' can approve this request taking into account factors including;

The tax compliance record of the taxpayer
Whether there was prima facie fraud involved (note: this decision is at the discretion of the senior official)
If disallowing the taxpayerâ€™s request would result in 'irreparable hardship' to the taxpayer, balanced against the prejudice to SARS or the fiscus if the tax is not paid
Whether there is adequate security 'tendered' by the taxpayer (SARS are not just looking at whether the taxpayer has sufficient assets to cover the tax liability, they are looking to obtain actual security)
If recovery of the tax is in 'jeopardy' or there is a risk the taxpayer will dissipate the assets.

This means a taxpayer has an opportunity to suspend the payment should they have a compliance history with SARS and meet the necessary criteria set out above. If SARS rejects a taxpayerâ€™s request for postponement, then the taxpayer has the right to approach the courts for a review of SARSâ€™ decision as such decision is not subject to objection and appeal.

The problem with this is it takes many months for a review to be heard and the taxpayer will need to get the consent of SARS to suspend payment of the assessment until after the judicial review.
Should SARS not agree to this, the only avenue available to taxpayers is to apply for a court interdict to prevent SARS from demanding or collecting the taxes in dispute (SARS have the right to appoint, for example, the taxpayerâ€™s bank to pay unpaid assessed taxes directly from the taxpayerâ€™s bank account to SARS).

SARS interdicted

Media reports indicate that in August a taxpayer obtained such an interdict in the High Court. This is good news for taxpayers as it means the courts will independently review the powers granted to SARS and the rationale of its decision making. The precedent has now been set for other taxpayers to seek an interdict in appropriate cases to ensure payment only follows once a court has verified the rationale for the decision not to suspend payment pending the outcome of the main dispute.