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 4 – SECTION 195(1) OF THE CONSTITUTION AND PUBLIC ADMINISTRATION DUTIES WITH REFERENCE TO SECTIONS 74A AND 74B

4.1 Introduction to Section 195(1), PAJA And The Principle of Legality

Now that the Constitutional Court in the Bato Star Fishing case1 has held that the cause of action for judicial review ordinarily arises from PAJA and not the common law,2 the starting point to review any unconstitutional and invalid conduct by SARS in terms of ss 74A and 74B would be in terms of ss 6, 7 and 8, applying one or more of the codified grounds of review specified in s 6(2) of PAJA, as set out in section 5.5.6 below. Furthermore, to the extent that a review application is based on the principle of legality3 (because the decision by SARS is held not to fall within the definition of ‘administrative action’ in PAJA) the codified grounds, it would be submitted in a review application to the High Court, should be applied to inform the grounds of review of the unconstitutional and invalid public power exercised by SARS in terms of s 2 of the Constitution. Hoexter, in her second edition of Administrative Law in South Africa4 draws the conclusion that the constitutional principle of legality, in the past few years leading into 2012, has developed not only to incorporate reviewing the lawfulness and reasonableness of the exercise of public power, but that the basis of a principle of legality transgression review now also extends to lack of procedural fairness, and arguably failure to provide reasons in appropriate circumstances.

The grounds for review would be applied to uphold the constitutional duties and obligations placed upon SARS in terms of s 195(1) of the Constitution. Section 195(1) is also arguably not subject to any constitutional limitation in terms of s 36 of the Constitution, because the provisions in s 195(1) fall outside the Bill of Rights. Section 237 of the Constitution also takes care of the fact that they must carry out their constitutional duties and obligations. The conduct by SARS in the form of a decision can be reviewed in court. However, there are other limitations. In terms of Chirwa v Transnet Limited and Others5 the Constitutional Court has held that the provisions of s 195(1) of the Constitution do not create justiciable rights such as those in the Bill of Rights, but merely provide interpretational assistance as to the duties of administrators like SARS. This finding does not detract from the provisions that s 195(1) read with s 237 imposes constitutional obligations on SARS, which point was not argued before the Constitutional Court. The finding of the Constitutional Court merely states that these constitutional obligations of themselves do not create lone standing justiciable rights. The opportunity then remains for taxpayers to challenge the failure by SARS to meet these actual constitutional obligations, as being conduct that is inconsistent with the Constitution, and therefore invalid.6 That then brings into play either the grounds of review in PAJA, or the constitutional principle of legality.

In further support of this line of reasoning, O’Regan J’s judgment in Bato Star Fishing7 echoes Kriegler’s judgment in Metcash,8 where he stated that nowhere is judicial review excluded in the ordinary course, and that ‘it has long been accepted that when the Commissioner exercises discretionary powers conferred upon him (or her) by statute, the exercise of the discretion constitutes administrative action which is reviewable in terms of the principles of administrative law.’ Kriegler J 9 cited as his authority the case of Contract Support Services (Pty) Ltd and Others v C SARS and Others10 and KBI v Transvaalse Suikerkorporasie Bpk.11

The discretionary powers of ss 74A and 74B would be subject to Kriegler J’s statements,12 as left open for development in terms of the provisions of s 39 of the Constitution13 and O’Regan J’s ratio in the Bato Star Fishing.14 Support for this submission is also to be found in the Grey’s Marine case.15 The discretionary powers of SARS in terms of ss 74A and 74B are subject to review where it can be shown that the conduct of SARS transgresses its constitutional obligations: ss 1(c), 33, 41(1), 195(1) and 237 of the Constitution. Depending upon the facts of each case, such transgressions by SARS would be conduct that is invalid.

Such a review application takes place in terms of ss 6, 7 and 8, relying on the grounds of review in terms of s 6 of PAJA, or relying on the constitutional principle of legality, currently by way of a Rule 5316 application.17

Next:  4.2 THE DUTIES OF SARS EMANATING FROM SECTION 195(1) OF THE
CONSTITUTION – 4.2.1 Introduction

In accordance with Circular 230 Disclosure

*******************

Footnotes:

1 Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others 2004 (4) SA 490 (CC) at para’s [22] – [25].
2 See also generally De Ville J Judicial Review of Administrative Action in South Africa (2003) Juta at 401; Currie I & Klaaren J The Promotion of Administrative Justice Act Benchbook (2001) SiberInk at para 7.2.
3 Hoexter (2012) at pages 121-5.
4 Ibid.
5 Chirwa v Transnet Limited and Others 2008 (4) SA 367 (CC) (28 November 2007) at para’s [74] – [76], [146] and [195].
6 For insight into this reasoning see section 1.4 infra and the anaysis of Glenister v President of the RSA and Others 2011 (3) SA 347 (CC).
7 Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others 2004 (4) SA 490 (CC) at paras [22] – [25].
8 2001(1) SA 1109 (CC) at page 1134 at paras [33] and [40].
9 Metcash Trading Limited v C SARS and Another 2001(1) SA 1109 (CC) at page 1134.
10 1999 (3) SA 1133 (W) at pages 1144 –5.
11 1985 (2) SA 668 (T) at para’s 67I I and 671 E-F.
12 Metcash Trading Limited v C SARS and Another 2001(1) SA 1109 (CC) at page 1134.
13 Section 39. Interpretation of Bill of Rights ‘When interpreting the Bill of  rights, a court…must promote the values…(in the Constitution)…must consider international law; and…may consider foreign law.’.
14 Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others 2004 (4) SA 490 (CC) at para’s [22]-[26] and [45].
15 Grey’s Marine Hout Bay (Pty) Ltd and Othersv Minister of Public Works and Others 2005 (6) SA 313 (SCA) at para’s [19]-[43].
16 Rule 53, Uniform Rules of Court, GNR 48 of 12 January 1965, made under s 43(2)(a) of the Supreme Court Act 59 of 1959, hereinafter referred to as ‘Rule 53’.
17 As discussed and analysed in Chapter 5: Judicial Review with reference to ss 74A and 74B.