"Pay now, argue later" rule in the South African tax law : a critical analysis.
Chaka, Jappie Benjamin Thabo.
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The adoption of the Constitution by the Constitutional Assembly in 1996 heralded an era of hope for South Africa. An era devoid of repression and discord, where, the Constitution and not Parliament, reigns supreme. Concomitantly, South African nationals - taxpayers alike - were conferred with constitutional rights and the Constitutional Court (CC) became a vanguard of these rights. The court in Metcash Trading Ltd v CSARS (Metcash1) was called upon to make a determination on the constitutionality of sections 36, 40(2) (a) and 40(5) of the VAT Act. Snyders J declared the aforementioned sections of the VAT Act unconstitutional and referred the matter to the CC for confirmation. The referral was, in the circumstances, necessary and in sync with the provisions of the Constitution. A glimmer of hope for taxpayers attributable to the decision of the court in Metcash1, was dashed by a unanimous decision of the CC in Metcash where the contentious sections of the VAT Act were declared constitutionally sound and the decision of the court a quo was quashed. Metcash bears testimony to the fact that South Africa is indeed a constitutional state. Metcash was decided within the context of the VAT Act and since income tax is different from VAT, there’s widespread speculation concerning what the court’s decision would be when called upon to make a determination on the constitutionality of the “pay now, argue later” rule within the income tax - context. While noble criticisms have been levelled against Metcash and by extension to the “pay now, argue later” rule, the reality is, unless Metcash is set aside or the legislature intervenes, the “pay now argue later” rule (the rule) is here to stay. The thrust of the research was to establish whether the rule strikes a balance between two inextricably linked and competing interests, to wit, SARS’s paramount duty to efficiently and speedily collect and administer tax on the one hand, and taxpayers’ constitutional rights on the other. Taxation constitutes the lifeblood of governments and South Africa is no exception. Since no constitutional state can exist without tax and equally no organized society can function without tax, it is important for governments to ensure that the tax levied on their respective nationals is commensurate with the income generated by a taxpayer during a given tax period. Justification for the rule lies in the fact that: the rule obtains in open and democratic societies; the legislative enactment that forms the substratum of the rule has general application in South Africa. Contrary to criticisms, there is overwhelming evidence to the effect that the rule does not vitiate taxpayers’ constitutional rights and that many - a - disgruntled - taxpayer whose rights have been materially and adversely affected by the Commissioner’s actions or omissions pursuant to SARS’s aforementioned duty - have a myriad of remedies at their disposal; inter alia; Constitutional, PAJA and other remedies. The only disadvantage being that, since such remedies are primarily litigation - based, they are costly and time - consuming. More cost-effective remedies for taxpayers such as the establishment of the Hugh Corder – type of administrative tribunals and the Australian ‘merits system’ are recommended. The heightening of public awareness concerning the fiscal complaints related - services that the Public Protector and the Human Rights Commission render to dissatisfied taxpayers is also recommended.