Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

2.2 THE RELEVANT CONSTITUTIONAL PROVISIONS

2.2.6 Conduct and legitimate expectations

Taxpayers may also have an opportunity in limited circumstances to rely on the legitimate expectations doctrine62 which exists when SARS invokes its powers under ss 74A and 74B. Such a legitimate expectation is transgressed when SARS fails to follow an established practice in conducting audits or inquiries, such as following the processes and procedures in the Code of Conduct63and the SARS Internal Audit Manual.64 SARS is obliged to conduct its actions in a fair, impartial, unbiased, accountable and transparent manner in accordance with s 195(1) of the Constitution. At any time that SARS engages with the taxpayer in terms of ss 74A and 74B, the taxpayer should point out that it is SARS’ duty to promote a rational connection between the provisions it relies on and the specific purpose for invoking its powers. Otherwise it would be acting ultra vires.65 SARS should abide by its internal audit guidelines in doing so. This will evidence the fact that it is fulfilling its constitutional obligations towards the taxpayer. SARS’ constitutional obligations are enhanced by its own self-imposed, restrictive practice creating a legitimate expectation that it will comply with its own self-imposed guidelines in an impartial, fair and unbiased manner at the inquiry and audit phase.66 SARS would be embarrassed by showing compliance with its internal guidelines towards one taxpayer, and then not towards the next one: displaying clear partial and biased treatment towards the latter taxpayer.

In accordance with Circular 230 Disclosure

Next:  Chapter 2 – 2.3 A CONSTITUTIONAL BALANCE OF SARS’ POWERS AND THE ‘ADMINISTRATIVE ACTION’ DEBATE67 – 2.3.1 Introduction

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Footnotes:

62 See section 3.6: Legitimate expectations infra; Legitimate expectations are not defined in the s 1 definition of ‘administrative action’ of PAJA. However, the Constitutional Court in Premier of Mpumalanga and Another v Executive Committee of the Association of Governing Bodies of State-Aided Schools: Eastern Transvaal 1999 (2) BCLR151 (CC) at para [31] has indicated that a ‘right’ should probably be interpreted more broadly to include liability incurred by the state through the making of unilateral promises or undertakings, which includes in its ambit legitimate expectations. See Currie I & Klaaren J Promotion of Administrative Justice Act Benchbook (2001) SiberInk at 80. See also Williams R C et al Silke on Tax Administration (2009) Lexis Nexis at para 3.25 generally.
63Revised from time to time by SARS at http://www.sars.gov.za/home.asp?pid=54195 (last accessed 31 March 2013)
and referred to as the Code of Conduct in this thesis.
64 The SARS Internal Audit Manual – Part 4: The Audit Process; See 3.2: The SARS Internal Audit Manual infra for extensive extracts of its provisions; See Williams R C et al Silke on Tax Administration (April 2009) Lexis Nexis at para 8.17 generally.
65 See section 3.3: Lawfulness infra; LAWSA Volume 1 Administrative Law 2nd ed Lexis Nexis at para 144; FH Faulding & Co Ltd v The Commissioner of Taxation for the Commonwealth of Australia 94 ATC 4867, where the tax authority was held to have exceeded its information gathering powers in making a request for information in circumstances involving offshore information where the section did not entitle them to do so. (Emphasis supplied)
66 LAWSA: Volume 1: Administrative Law. 2nd ed: Lexis Nexis at para 113.