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

4.2.2 What are the democratic values and principles referred to in s 195(1)?

This sub-heading reflects the opening clause of s 195(1) of the Constitution, which does not limit the duties of SARS to ‘democratic values and principles enshrined in the Constitution’ as set out in s 195(1), but emphasises these together with the other democratic values and principles enshrined in the rest of the Constitution: ss 1(c), 33, 41(1) and 237.

Much has been written in this thesis, in the context of SARS as a functionary, about these constitutional values and principles as they apply to a functionary exercising public power. What remains to be done now is an analysis of the duties of SARS under s 195(1) of the Constitution, and a demonstration of how these duties accord with their constitutional obligations.

Section 195(1) sets out the requirements for good public administration. The SARS Act, as already noted above, also makes specific reference to s 195 of the Constitution in s 4 (2):

4. FUNCTIONS
…
(2) SARS must perform its functions in the most cost efficient way and in accordance with the values and principles mentioned in s 195 of the Constitution. (Emphasis supplied)

The use of the word ‘must’ is peremptory and confirms the duties and obligations of SARS to adhere to the principles enshrined in the Constitution, including the rule of law in s 1(c) (including the principle of legality), s 33, s 41, and those listed in s 195(1), which together with s 237 of the Constitution and s 4(2) of the SARS Act, SARS  are obliged to diligently perform without delay.

In President of the Republic of South Africa and Others v South African Rugby Football Union and Others,24 the Constitutional Court stated that public administration is subject to constitutional controls, which entails: ‘establishing and maintaining an efficient, equitable and ethical public administration which respects fundamental rights and is accountable to the broader public… Chapter 10 of the Constitution, entitled ‘Public Administration’, sets out the values and principles that must govern public administration and states that these principles apply to administration in every sphere of government, organs of State and public enterprises.’

In The Permanent Secretary, Department of Welfare, Eastern Cape Provincial Government and Another v Ngxuza and Others25 it was held that the Constitution ‘commands all organs of State to be loyal to the Constitution (as stated in s 41(1)(d)) and requires that public administration be conducted on the basis that ‘people’s needs must be responded to’ (s 195(1)(e))’. It is the responsibility of the courts to safeguard any misuse of the law.

Taxpayers’ needs must be responded to, including: a high standard of professional ethics being displayed; services being provided impartially, fairly, equitably and without bias; public administration being accountable; and transparency being fostered by providing the public with timely, accessible and accurate information. Furthermore, it is the responsibility of the courts to uphold these constitutional obligations.

In Reuters Group Plc and Others v Viljoen NO and Others,26 the court stated the following:

[46] In the President of the Republic of South Africa & Others v The South African Football Union & Others (2000 (1) SA 1 (CC)), the Constitutional Court observed at 62 paragraph 138:

‘Public administration…is subject to a variety of constitutional control. The Constitution is committed to establishing and maintaining an efficient, equitable and ethical public administration which represents fundamental rights and is accountable to the broader public. The importance of ensuring that the administration observes fundamental rights and acts both ethically and accountably should not be understated.’ …(Emphasis supplied)

The reference to public administration acting both ethically and accountably is once again a reference by the courts to the obligations imposed on organs of state such as SARS.

In Carephone (Pty) Ltd v Marcus NO and Others27 the Court held that any public institution created by the Constitution or by legislation finds it ultimate authority and competence in the Constitution and is subject to its provisions. If it involves the exercise of public power: ‘(i)t is also subject to the basic values and principles governing public administration (s 195(2)(b) of the Constitution) …In terms of s 195(1)(d) of the Constitution the service provided to the parties by the Commissioner must also be impartial, fair, equitable and unbiased.’

SARS, like the Commission in Carephone,28 finds its ultimate authority and competence in the Constitution, and is subject to its provisions including the provisions of s 195(1) of the Constitution where the service provided by SARS to the taxpayer must be impartial, fair, equitable and unbiased.

Finally, in Democratic Alliance and Others v Acting National Director of Public Prosecutions and Others29 the Supreme Court of Appeal held:

[58] …Chapter 4 of the Constitution deals with co-operative government and dictates that all spheres of government must adhere to constitutional principles in this regard and must conduct their activities within constitutional parameters. (Emphasis supplied)

The excerpt from the dictum in the Democratic Alliance case is significant in supporting the submission that all spheres of government (including organs of state such as SARS) must comply with the provisions of Chapter 4 of the Constitution, which includes being loyal to the Constitution and not assuming powers or functions except those conferred by them in terms of the Constitution (s 41(1)). Read with the basic values and principles that Public Administration must comply with as set out in s 195(1), it is submitted that these constitutional principles apply to SARS and the exercise of its powers in terms of ss 74A and 74B. These constitutional obligations create duties SARS that SARS cannot ignore. These constitutional principles, and obligations, form part of the cornerstone of the rule of law in s 1(c) of the Constitution, and so form part of the constitutional principle of legality. Failure to comply diligently and without delay with these constitutional principles, and obligations, would be conduct that is reviewable in the High Courts – whether that conduct is regarded as ‘administrative action’ in terms of PAJA, or not.

Next  4.2.3 High Standard of Professional Ethics

In accordance with Circular 230 Disclosure

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Footnotes:

24 1999 (2) SA 14 (CC) at para’s [133]-[134].
25 Permanent Secretary, Department of Welfare, Eastern Cape Provincial Government v Ngxuza 2001 10 BCLR 1039 (SCA) at para [15].
26 2001 (2) SACR 519 (C) at para [46].
27 1999 (3) SA 504 (LAC) at para’s [9] – [14]; See also the authorities quoted: cf Executive Council, Western Cape Legislature, and Others v President of the Republic of South Africa and Others 1995 (4) SA 877 (CC) (1995 (10)
BCLR 1289) at para [62]; President of the Republic of South Africa and Another v Hugo 1997 (4) SA 1 (CC) (1996 (6) BCLR 708) at para’s [11] and [28].
28 Ibid.
29 2012 (3) SA 486 (SCA) at para [58].