Latest developments in South Africa in the context of tax controversy

October 2025  |  SPECIAL REPORT: CORPORATE TAX

Financier Worldwide Magazine

October 2025 Issue

This article emphasises the renewed emphasis of the South African Revenue Service (SARS) on increasing its collection capability. In doing so, we analyse historical data on dispute resolution and SARS collection processes.

In the second part of this article, reference is made to the status of the Tax Court in South Africa and the ability to bypass this process and directly approach the High Court of South Africa.

Approach to tax collection in South Africa

Significant controversy arose earlier this year in relation to the budget process in South Africa when the minister of finance proposed increasing the value added tax (VAT) rate by 1 percent from 15 to 16 percent. The adopted process was successfully challenged by opposition parties in court, resulting in the abolishment of the proposed VAT increase.

A different approach was adopted to increase the fuel levy and bolster SARS’ tax collection ability by allocating an additional R7.5bn to it over the next three years. The additional allocation to SARS is intended to boost its ability to collect debt from R20bn to R50bn annually.

In a media conference, Edward Kieswetter, the commissioner for SARS, indicated that the funding is to be used to hire up to an additional 1700 tax collectors. The minister of finance indicated in his budget speech that the additional funding will enable SARS to collect at least an additional R35bn in taxes, thus avoiding the increase in tax rates that would otherwise have had to be implemented.

Even though the potential additional revenue is not included in revenue estimates, the minister of finance indicated that SARS’ performance will be monitored by assessing the change in the amount of cash collected from debt, which will be published monthly.

SARS has in fact increased its collection ability by adopting a number of cash collection initiatives (in the year of assessment ending 31 March 2025). These include: (i) R103bn from tax verifications in circumstances where the risks were originally flagged through means of artificial intelligence-driven risk profiling models; (ii) debt equalisation and refund fraud risk management machine learning models; (iii) R30bn from syndicated crime; and (iv) R94bn from resolving outstanding debt cases.

In a recent media release, SARS indicated that the rise in revenue can be attributed to enhanced strategies and the diligent implementation of compliance measures. Increased SARS efforts to collect taxes also led to a rise in dispute resolution matters.

Based on statistics for the year of assessment ended 31 March 2024: (i) 145,165 objections were filed; (ii) 59 percent of objections were allowed; (iii) 243 new appeals concerning disputes exceeding R1m were referred to the Tax Court Litigation Unit; (iv) appeals conceded by SARS declined from 57 percent to 51 percent; (v) 14,094 appeals were finalised; and (vi) to the extent that matters proceeded to court, SARS still had a success rate in excess of 80 percent.

Statistics underscore SARS’ emphasis on collecting taxes in circumstances where the dispute resolution mechanism is overflowing. It announced that alternative dispute resolution (ADR) processes could also be initiated if a taxpayer files an objection, which is generally submitted after SARS issues an assessment.

Previously, ADR proceedings could only be initiated once a taxpayer lodged an appeal, which follows disallowance of an objection and submission of a specific appeal against such disallowance of objection. The ability to initiate ADR proceedings at an earlier stage is intended to alleviate the burden on the Tax Courts, as disputes can be resolved earlier. If a dispute is to be heard by the Tax Court, it can take up to three years from the date of objection.

Tax Court status

The Tax Court is established under section 116 of the Tax Administration Act (TAA). It has jurisdiction over tax appeals lodged by taxpayers and can also hear and rule on an interlocutory application or an application in a procedural matter relating to a dispute as provided in the Tax Court rules.

A Tax Court consists of a High Court judge (who is the president thereof), assisted by an accountant and a representative from the commercial community.

Under section 104 of the TAA, a taxpayer may only object to and appeal certain decisions, specifically: an assessment issued by SARS, a decision to not extend the period for lodging an objection, and a decision to not extend the period for lodging an appeal.

The jurisdiction of the Tax Court should be distinguished from that of the High Court in South Africa, which generally hears litigation matters. Apart from the general jurisdiction of the High Court, a number of specialist courts have been established to deal with specific matters, such as anti-competitive, labour and election issues. These specialist courts generally have status and powers equivalent to the High Court.

However, in the recent decision in Poulter v CSARS, the court indicated that the taxpayer’s father could represent the taxpayer in proceedings before the Tax Court on the basis that the Tax Court is not a court of law. This conclusion was based on the fact that the Tax Court lacks inherent power to regulate its own proceedings, the decisions of the Tax Court do not create any binding precedent and the Tax Court is established by a proclamation as opposed to an act of parliament.

It was therefore held that the Tax Court is essentially an administrative tribunal and a court of revision, as opposed to a court of law – even though it has all the trappings of a court in the judicial sense. The Constitutional Court also referred to the status of the Tax Court in the judgment of United Manganese of Kalahari (Pty) Ltd v CSARS.

Even though the judgment dealt primarily with the ability of a taxpayer to bypass the Tax Court’s jurisdiction and approach the High Court in the first instance as per section 105 of the TAA, it was indicated that the Tax Court is neither a court nor a tribunal as contemplated in section 33(3)(a) of the Constitution.

However, the question of whether the Tax Court was a court was specifically left open. This creates uncertainty as to the ability to the Tax Court to hear review matters, even though it can potentially do so in considering an appeal. Legislative intervention is needed to clarify Tax Court status, preferably confirming that it is a court similar to other specialist courts in South Africa.

This issue has become even more relevant given the provisions of section 105 of the TAA indicating that a taxpayer may dispute an assessment or decision in the Tax Court unless the High Court directs otherwise. In the United Manganese judgment, the effect of section 105 of the TAA is that there must be a SARS assessment or decision before the High Court can be approached

A taxpayer can only raise a tax matter in the High Court via reviews and declaratory applications. If a taxpayer seeks to have an assessment set aside on review, it can probably be said that it is disputing the assessment. The same applies where the effect of the declaratory order goes to the correctness of an assessment. In this context, the Tax Court does not have jurisdiction to entertain review or declaratory orders in itself, even though this could affect whether an appeal is considered.

There does not need to be exceptional circumstances for a taxpayer to approach the High Court. The test is whether recourse to the High Court is appropriate or whether there is good cause to approach it rather than the Tax Court. A factor in allowing recourse to the High Court is whether the taxpayer has lodged an objection to an assessment and whether the objection has been disallowed. If no objection has been lodged, it would be difficult to grant recourse directly to the High Court.

Another factor in whether the High Court can be approached directly is the judicial aversion to piecemeal adjudication. Should a taxpayer wish to pursue an application in the High Court, but at the same time reserve its rights to pursue the process in the Tax Court, there is a danger of piecemeal adjudication – and in that instance the Tax Court proceedings will have to be suspended.

If the substance of the matter a taxpayer wishes to test in the High Court could also be adjudicated in the Tax Court, it is more likely that permission will not be granted to pursue the matter in the High Court.

However, a distinction should be made in the circumstances outlined below.

First, if the matter does not involve any discretionary component, it is less likely that permission would be granted to pursue the matter in the High Court. Examples include where the assessment was materially influenced by an error of law or fact, irrelevant considerations were taken into account or that relevant points were not considered.

Second, if the taxpayer is entitled to object to an appeal against a discretionary decision, one should distinguish between the strict sense of ‘true discretion’ and the loose sense of where there is, in the eye of the law, only one right answer. In the case of discretion in the loose sense, the full right of appeal to the Tax Court stands on the same footing as an appeal in a non-discretionary case.

Lastly, a declaratory application may be justified if the taxpayer raises a pure point of law.

Generally, permission to approach the High Court will be declined so as not to encourage preliminary appeals that will result in the main case being held in abeyance. Only if the matter can be resolved permanently, or if the Tax Court cannot hear the matter, is it likely that permission will be granted to approach the High Court.

Given all these uncertainties and the blending of tax appeals with judicial review, taxpayers always face the risk that permission will not be granted to approach the High Court in circumstances where the matter can otherwise be dealt with by the Tax Court.

 

Dr Emil Brincker is a director and head of the tax & exchange control practice at Cliffe Dekker Hofmeyr. He can be contacted on +27 (0)11 562 1063 or by email: emil.brincker@cdhlegal.com.

© Financier Worldwide

BY

Emil Brincker

Cliffe Dekker Hofmeyr

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