Businessman gives SARS a bloody nose in R531 million tax showdown
The Gauteng High Court has ruled against the South African Revenue Service (SARS) in a tax dispute
Image: Timothy Bernard / Independent Newspapers
The Gauteng High Court has ruled against the South African Revenue Service (SARS) in a tax dispute, finding that the revenue service acted unfairly in refusing to suspend payment of a R531 million disputed tax bill.
The case involves a businessman who offered R1.25 billion worth of shares in TMM Holdings as security for the debt, but the revenue service rejected the offer, due to alleged risks of asset dissipation and jeopardy to tax recovery.
The court said SARS ignored important facts, like the value of the shares offered as security, and made decisions based on “irrational and unreasonable” assumptions.
"Accordingly, I find further that the respondent based the second decision on incorrect facts rather than on the correct facts, and the second decision was so unreasonable that no reasonable person would have made it".
“The applicant’s obligation to pay the disputed tax and the respondent’s right to receive the disputed tax or to recover the disputed tax is suspended pending the outcome of the dispute between the parties regarding the applicant’s liability for the payment of the disputed tax, subject to the applicant delivering a pledge of his 80% shareholding in TMM Holdings (Pty) Limited, within five days of receipt of this order.”
South African Institute of Taxation (SAIT) Head of Technical Practitioner Relations & Support, Gert Van Heerden, said the ruling is “beneficial for fair tax administration.
"This decision is beneficial for fair tax administration and the development of law, and no taxpayer should face ruin over irrational decisions.SARS must be able to show that decisions match facts, and courts will step in if it cannot." Van Heerden said.
According to SAIT, these are Implications for Taxpayers and SARS:
- SARS discretion demands evidence-based rationality, no more boilerplate rejectionsignoring facts like over-collateralized security.
- Courts stand ready to intervene decisively when decisions contradict clear evidence, challenging the "pay now, argue later" principle.
- Taxpayers facing massive assessments gain stronger leverage for suspensions during Tax Court appeals, protecting against undue prejudice.
mthobisi.nozulela@iol.co.za
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