For many the principle of “pay now argue later” seems unfair. 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 is not suspended.
However unfair it may seem, “pay now argue later” has been accepted by the Constitutional Court.
A recent High Court case 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
Recent tax legislation has allowed taxpayers to request that SARS waive the “pay now argue later” principle pending the outcome of an appeal against an assessment. 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 is at the discretion of the senior official to decide)
- If disallowing the taxpayer’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 such as a guarantee)
- If recovery of the tax is in “jeopardy” or there is a risk the taxpayer will dissipate the assets.
These give the SARS senior official wide latitude and there are other undisclosed factors that SARS may consider. This means a taxpayer faces an uphill task in getting SARS to agree to waive payment until the matter is settled.
If SARS rejects a taxpayer’s request for postponement, then the taxpayer has the right to approach the courts for a review of SARS’ 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 Revenue from demandingor collecting the taxes in dispute (SARS have the right to appoint the bank to pay unpaid assessed taxes directly from the taxpayer’s bank account to SARS).
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 that payment only follows once a court has verified the rationale for the decision not to suspend payment pending the outcome of the main dispute.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)