Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

CHAPTER 4 – SECTION 195(1) OF THE CONSTITUTION AND PUBLIC ADMINISTRATION DUTIES WITH REFERENCE TO SECTIONS 74A AND 74B

4.2.4 Services must be provided impartially, fairly, equitably and without bias

Section 195(1)(d) states: ‘services must be provided impartially, fairly, equitably and without bias’. All of these issues must be read in the context of the discussions on lawfulness and procedural fairness61 in this thesis.
The concept of impartiality with reference to ss 74A and 74B means that SARS  must apply the provisions without favour or prejudice, and in an unbiased manner.62 The reference to the word ‘equitably’ implies just and impartial conduct by SARS. Just conduct is covered by the analysis and discussions around lawfulness in administrative law, where SARS must adhere to the rule of law and comply with the jurisdictional facts63 of the empowering provision of ss 74A and 74B.

Reference to the word ‘fairly’ brings procedural fairness into play, as analysed and discussed earlier64 in this thesis.
Within the context of ss 74A and 74B, if any impartiality or bias is present when SARS exercises its discretion, or the discretion is exercised without complying with the jurisdictional facts or required procedural fairness, the discretion will be reviewable. Any justification65 by SARS that non-compliance is excusable because the discretion is not ‘administrative action’ as defined in PAJA, or is part of a multi-staged decision-making process which is not ‘ripe’ for review, will be contrary to the constitutional obligation that SARS must comply with in terms of s 195(1)(d). Furthermore s 195(1)(d) is not subject to the limitations clause in s 36 of the Constitution.

The SARS Code of Conduct for the general taxpayer public to take note of, creates a legitimate expectation that SARS will do the following:

2.1 Right to certainty and to be informed, assisted and heard…give you an opportunity to be prepared for, and assisted by a representative during a meeting regarding an audit or investigation by SARS; provide you with the outcome of an audit or investigation; provide you with the opportunity to respond to adverse audit or investigation findings
…
2.6 In dealing with you, we will endeavor to: Respect, protect, promote and fulfill your constitutional rights; Act professionally and in accordance with a high standard of professional ethics; Treat you impartially, fairly, equitably and without bias; …Be accountable; Provide you with timely, accessible and accurate information and feedback; Treat you with respect…; (Emphasis supplied)

The duties placed on SARS in terms of s 195(1)(d) are clear and obvious and emphasized in its Code of Conduct. Any transgression of s 195(1)(d) and the legitimate expectation created in the Code of Conduct at sections 3.1 and 6.6 above would be inconsistent with the Constitution and ‘invalid’ conduct.

Meeting budgets imposed on them by management motivates SARS assessors. As a result, it is quite plausible in theory that an inquiry and audit may be motivated by meeting a budget target. That does not of itself mean that the inquiry and audit is unlawful, but unless SARS follows strict procedures in executing its powers to engage the taxpayer, sufficient suspicion may exist to justify an accusation by the taxpayer that the inquiry and audit is motivated by an ulterior or irrelevant factor, in a biased manner such as an improper personal gain, as referred to in the Code of Conduct. Such conduct by SARS would be reviewable.

Next:  4.2.5 Public administration must be accountable

In accordance with Circular 230 Disclosure

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Footnotes:

61 See section 3.3: Lawfulness and 3.5: Procedural Fairness, supra.
62 Marcus G J et al Bill of Rights Compendium Lexis Nexis at 1A.2; This would include application of a practice by SARS such as the letter of findings; Drs Du Buisson, Bruinette & Kramer Inc. v C:SARS Case No. 4595/02 in the High Court of the Transvaal Provincial Division, where SARS provided reasons to the taxpayer for the inquiry and audit after the taxpayer brought the application to set the audit aside.
63 See section 3.3: Reasonableness and 3.3.2: Jurisdictional facts supra.
64 See section 3.5: Procedural Fairness supra.
65 SARS would have to tread carefully here in the light of decisions such as Nyambirai v Nssa & Another 1995 (2) ZLR 1 (S) and De Freitas v Permanent Secretary of Agriculture, Fisheries, Lands and Housing 1998 3 LRC 62;Ferucci and Others v Commissioner for South African Revenue Service and Another 65 SATC 47 at pages 54-55; Premier of Mpumalanga and Another v Executive Committee of the Association of Governing Bodies of State-Aided Schools: Eastern Transvaal 1999 (2) BCLR151 (CC) at para [42]: ‘…no question of justification …can arise as the decision taken…did not constitute ‘a law of general application’ as required by that provision…’; Compare Registrar of Pension Funds and another v Angus NO and others [2007] 2 All SA 608 (SCA); US v McCarthy 514 F 2d 368.