The double tax agreements between South Africa and other countries sometimes contain clauses that facilitate close co-operation between SARS and the tax authorities in those countries. Article 25 of the Double Tax Agreement between Australia and South Africa provides for such co-operation. It enabled SARS to act on behalf of the Australian Tax Office (ATO) in the North Gauteng High Court recently (case no. 1319/13, in which judgement was delivered on 31 January).
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SARS sought an order against a South African respondent under Section 28 of the Tax Administration Act of 2011. The order would confirm the appointment of a curator bonis of the Australian taxpayer’s estate, compel the respondent to disclose all of his assets and income in South Africa to the curator, and allow the curator to deal with such assets until the respondent’s liability to the ATO was settled.
In its founding affidavit, SARS submitted that it was acting for the ATO in terms of the double tax agreement and that the respondent had a very large Australian tax liability. The respondent had in fact objected to the Australian tax assessment and this objection had been rejected, leading to the request by the ATO for SARS assistance. It is noteworthy that SARS made use of the machinery of the SA Tax Administration Act to obtain the relief that it sought.
First phase
The relief was in fact granted in the North Gauteng High Court, despite robust opposition from the respondent and his legal team. When the application was first made to court, SARS (the applicant) had to proceed under the Common Law in order to obtain the preservation order it sought. This is used where it is feared that a respondent may dissipate assets.
The application was based upon a rule nisi, which is a two-stage court hearing. The first is held to found the relief, normally on an urgent interim basis; the second appearance is made to confirm the relief, with both parties making their submissions before the judge. As noted, the relief was granted, but the final preservation order was not made under Common Law because the Tax Administration Act had come into effect in the interim. The matter had been postponed several times and the rule nisi had been extended accordingly.
Beware!
The message here is quite clear. Tax authorities the world over are closing the gaps that canny businesspeople made use of in the past. Action is swift when the machinery provided under international agreements is brought into play, perhaps swifter than in ordinary local tax matters, as national reputations are at stake. Certainly, in this matter, the SARS legal team did an excellent job and our court system did not disappoint. Credit has to be given where due. SARS is highly efficient and all taxpayers should note that well.
Peter O’Halloran is an advocate in private practice. Phone him on 00267 390 2779.
