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

CHAPTER 3 – LIMITATIONS TO INVOKING SECTIONS 74A AND 74B OF THE INCOME TAX ACT

3.3.3.2 Mala fides or bad faith
A mala fide76 decision by SARS is any discretion exercised by SARS in bad faith, entailing harassment, fraud or dishonesty, where it knowingly uses its power for reasons outside the ambit of the law. A discretion must be exercised for substantially valid reasons77 with bona fides, and must also be exercised in respect of each individual case78 without the presence of dishonesty on the part of the decision-maker – as apparent from the motives of the decision-maker.79

For instance, if SARS simply applied ex parte to the court for a warrant of search and seizure in terms of s 74D, without first exhausting and applying the less intrusive means of obtaining information, documents or things from a taxpayer through ss 74A and 74B, because it was irritated with the initial correspondence exchanged between the parties, where the taxpayer was questioning the entitlement of SARS to make inquiries in the first place, the decision would arguably be mala fides.80 This would also be contrary to the principle of proportionality, a sub-section of reasonableness in section 3.4.2 below. SARS should use the least intrusive means to impose upon the fundamental rights of taxpayers to privacy in terms of s 14 of the Constitution.

Another obvious example of a mala fide decision would be SARS simply issuing revised assessments if the taxpayer failed to comply with the initial ss 74A and 74B requests, without properly considering the taxpayers reasons for not complying.

Mala fide conduct will be subject to review in terms of ss 6, 7 and 8 where the codified grounds of review in s 6(2)(e)(i) and/or(ii) and/or 6(2)(e)(v) of PAJA would apply; or in terms of the constitutional principle of legality.81

Next:  Chapter 3.3.3.3 – Failure to apply mind or relevant and irrelevant considerations

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