One of the interesting Tax Administration cases of 2015 was Lifman and Others v The Commissioner of the South African Revenue Services and others (unreported), where the Western Cape High Court took a purposive approach to the interpretation of section 172(1) of the Tax Administration Act, No 28 of 2011 (“the Act”) i.e.: in light of the purpose for which it was enacted.
The facts of the case are that during an inquiry in terms of section 50 of the Act into notorious Cape Town underground boss, Mark Lifman’s affairs, SARS found that Lifman and a number of close corporations (“CC’s”) of which he was the sole member, owed approximately R13 million in taxes.
In November 2014, SARS, Lifman and the CC’s agreed that Lifman and the CC’s would pay back the R13 million to SARS by 31 March 2015, failing which, SARS would take a civil judgement against them. Lifman and the CC’s offered certain assets as security and the security was registered in this regard.
SARS sent a letter, dated 5 February 2015 to Lifman and the CC’s stating that the deadline to settle the debt was the end of March 2015. On 3 March, SARS sent another letter stating that the debt must be paid or SARS will take the appropriate remedy available to them, including judgement, sequestration and/ or liquidation.
Lifman and the CC’s failed to meet the deadline and, on 1 April 2015, SARS proceeded to take civil judgement against them in terms of section 172(1) of the Act. In response, Lifman and the CC’s brought an application for an urgent interdict against SARS, citing that the 10 day notice requirement in the Act had not been met.
Section 172(1) states that:
If a person has an outstanding tax debt, SARS may, after giving that person at least 10 business days’ notice, file with the clerk or registrar of a competent court, a certified statement setting out the amount of tax payable and certified by SARS as correct…A certified statement filed under section 172 must be treated as a civil judgment, lawfully given in the relevant court in favour of SARS for a liquid debt for the amount specified in the statement.
The court held that the purpose of giving this notice is to allow the taxpayer to make preparations and therefore, if the taxpayer had been given written notice prior to SARS taking judgement, then SARS was justified in its actions. The court stated that notice did not necessarily have to be given only 10 business days before SARS took judgement. The court held that preparations had already started when the agreement was entered into between SARS, Lifman and the CC’s in November 2014 (Lifman and the CC’s subsequently requested a deferral of payment that SARS declined), and the 3 March letter gave Lifman and the CC’s amble opportunity to make preparations / get their affairs in order. The court stated that it was therefore unnecessary for SARS to explicitly state that Lifman and the CC’s had 10 days from 1 April 2015 to pay.
It is also interesting to note that the court chose not to give a direct answer to the question of whether notice only has to be given with regards to the outstanding tax debt, or whether notice must also be given with regards to SARS’ intention to take a civil judgement against the taxpayer (and subsequently be authorised to seize and attach the taxpayer’s assets after notice has passed).