Firms that service government needs can’t do so without a tax compliance certificate. This makes them very vulnerable in that their existence depends upon their obtaining a tax clearance certificate every year. In Case 28084 of 2012, heard recently at the North Gauteng High Court, the issue of a tax clearance certificate was in dispute. The applicant builds affordable housing through government tenders. Earlier this year, it was issued a tax clearance certificate by SARS.
Then, about two months later, in March, SARS informed the applicant in writing that the certificate had been rendered inactive. Reasons for the decision were given in the letter. Correspondence flowed between the applicant and SARS, with the latter reiterating it considered the applicant to be non-tax-compliant for the reasons stated in the original letter.
The applicant was invited by SARS to submit representations to it by a certain date. In the court case, the judge held that the applicant was entitled to reasonable notice of SARS’ intention to question the certificate.
Opportunity
The applicant should have had an opportunity to put its case to SARS before SARS issued the letter rendering the certificate invalid. Furthermore, because of the applicant’s government contracts, SARS’ decision impacted heavily upon it. The judge granted an order that the decision by SARS to invalidate/cancel/withdraw the tax clearance certificate was of no force and effect.
The applicant’s request that the matter be heard on an urgent basis was also granted. Costs were awarded to the applicant. The principle to be gleaned from this matter is that the rights of a taxpayer cannot simply be unilaterally limited by SARS. Taxpayers have the right to make representations to SARS before decisions that might adversely affect them are taken.
Review
The above also underscores again the close connection between administrative law and tax law. Decisions taken by SARS officials fall within the ambit of administrative action. As such they may be subject to review if such decisions don’t comply with the legal requirements for valid administrative action.
Peter O’Halloran is head of tax at BDO, Gaborone. Contact him on 00267 390 2779 or at [email protected]. Please state ‘Tax’ in the subject line of your email.
