Section 132 of the Tax Administration Act (28/2011) states that a Tax Court judgment regarding an appeal under the dispute resolution provisions contained in the act must be published for general information purposes and – unless the Tax Court sat publicly under certain stipulated circumstances – in a form that does not reveal the taxpayer's identity. This provision is based on the right to equality set out in Section 9 of the Constitution 1996 – specifically, Section 9(1), which states that everyone is equal before the law and has the right to equal protection and benefit thereof.
A number of issues have thus arisen from the fact that the South African Revenue Service (SARS) does not publish certain Tax Court judgments in its possession. While SARS may internally circulate all Tax Court judgments among its officials for their benefit, taxpayers and their advisers will not have access to such judgments. This creates an imbalance in respect of equality before the law and, in particular, equal protection and benefit of the law.
Recently published judgments
Until recently, SARS had published only a small number of 2017 Tax Court judgments on its website, which contravened its normal practice since the advent of the Tax Administration Act in 2011. However, on October 5 2017 SARS published a raft of Tax Court judgments that have thus far been handed down in 2017, the first of which dates back to January.(1) Why the publication of these judgments was delayed is unknown, particularly in light of the fact that the Tax Court found in favour of SARS in seven of the 11 judgments published.
Nonetheless, the published Tax Court judgments provide for interesting reading and cover a broad range of procedural and administrative issues, including whether a taxpayer was entitled to condonation for the late filing of its appeal under Section 107(2) of the Tax Administration Act.
Other key matters considered by the Tax Court on the underlying merits include the usual issues, such as capital versus revenue and the tax deductibility of certain expenditure under the general deduction formula set out in Section 11(a) of the Income Tax Act (58/1962). Other interesting issues that the Tax Court considered include whether:
- a taxpayer was entitled to claim a deduction for mining operations as a contract miner under Section 15(1)(a) of the Income Tax Act;
- a taxpayer became entitled to the proceeds from the sale of property under Section 1 of the Income Tax Act, by way of accrual, or Section 24(1);(2) and
- tax amounts should be included in the taxpayer's income for the purposes of Section 9D of the Income Tax Act (ie, the controlled foreign company provisions).
It will be interesting to study each judgment and analyse those which considered the imposition of understatement penalties under Sections 221 to 223 of the Tax Administration Act, which is a relatively new and developing area of tax jurisprudence in South Africa. Notably, in his decision in Case IT14247,(3) Nkosi-Thomas increased the understatement penalties imposed by SARS in accordance with the exercise of the court's discretionary powers provided for in Section 129(3) of the act.
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