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

3.3.3.4 Unlawful fettering
SARS officials should not exercise their discretionary powers under ss 74A and 74B acting under dictation by simply adhering blindly, without further thought, to policies or directives given.89An official purporting to exercise a discretion under the unauthorised or unwarranted dictates of another person or body, is unlawful and reviewable,90 as is the referral by an authorised administrator of the taking of a decision to one who is unauthorised.91

In exercising their discretionary powers, SARS officials may not place limits on their own powers by adhering rigidly to policies.92

In Kemp NO v Van Wyk93 the following principles were summed up:

A public official who is vested with a discretion must exercise it with an open mind but not … a mind that is untrammelled by existing principles or policies…What is required is only that he or she does not elevate principles or policies into rules that are considered to be binding, with the result that no discretion is exercised at all.

An example in the case of the application of ss 74A and 74B would be a rote fashioned following by SARS assessors of a directive given by the Commissioner that they should audit all the top 1,000 taxpaying companies before a particular year of assessment prescribes, within the statutory three year period from the date of the original assessment, without taking into account the fact that some of these companies may have already undergone extensive tax risk management processes with the co-operation of various SARS offices, or extensive civil regulatory audits, to check that the very years of assessment in question had been dealt with correctly by those taxpayers, and thereby without first complying with the SARS Code of Conduct, and taking into account the facts required to be considered by SARS assessors before selecting taxpayers for audit, as required in terms of the SARS Internal Audit Manual.

‘Fettering’94 is not a ground specifically incorporated into s 6 of PAJA.95 However, it is a well-established basis of review at common law,96 and is covered by the ‘catch-all grounds’ in s 6(2)(i) of PAJA under the phrase conduct ‘otherwise unconstitutional or unlawful’.

Next:  3.3.3.5 Arbitrary and capricious decision-making

In accordance with Circular 230 Disclosure

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Footnotes:

89 Ibid. at page 319.
90 Section 6(2)(e)(iv) of PAJA; Ulde v Minister of Home Affairs 2009(4) SA 522 (SCA); Mabi v Venterspost Town Council 1950 (2) SA 793 (W); Hofmeyr v Minister of Justice 1992 (3) 108 (C).
91 Vries v Du Plessis NO 1967 (4) SA 469 (SWA).
92 Hoexter (2012) at page 319.
93 2005 (6) SA 519 (SCA) at para [1].
94 Ibid.
95 As it does not specifically appear as a codified ground of review in PAJA.
96 Wrong or non-performance giving rise to common-law review; Hira v Booysen 1992 (4) S