Rozelle van Schaik - Discussion regarding case

Discussion regarding case law
SARS v Pretoria East Motors (Pty) Ltd
Rozelle van Schaik
SARS v Pretoria East Motors
Overview of the Pretoria East Motors
Case
Judgment of The Supreme Court of Appeal of South Africa
On appeal from Pretoria Tax Court
AppellantThe Commissioner for SARS
* Conducted an audit for the periods 2000 to 2004
* Additional assessments for the 2000, 2001, 2002 tax years
* Additional VAT assessments 2000, 2001, 2002, 2003 and 2004
SARS v Pretoria East Motors
Overview of the Pretoria East Motors
Case
Respondent
Pretoria East Motors (Pty) Ltd
* Toyota South Africa authorised dealer
* Sells new and used vehicles
* Customised accounting system
SARS v Pretoria East Motors
3 Principles confirmed
DISPOSAL OF THE
ONUS OF PROOF
BASIS OF RAISING
ADDITIONAL
ASSESSMENTS
BASIS ON WHICH A
HIGH COURT WILL
REVISE PENALTIES
Section 102(1) of the Tax
Administration Act
(‘TAA’)
Chapter 8 of the TAA
Chapter 9 of the TAA
Part D and Part E
Paragraph 8 of the
Judgment
Paragraph 11 of the
Judgment
Paragraph 54 of the
Judgment
SARS v Pretoria East Motors
Disposal of the onus of proof
Section 102(1) of the TAA: A taxpayer bears the burden of proofing:
• An amount, transaction, event or item is exempt or not taxable.
• An amount or item is deductible or may be set-off.
• Rate of tax applicable to a transaction, event, item or class of taxpayer.
• Amount qualifies as a reduction of tax payable.
• A valuation is correct.
• A ‘decision’ subject to objection and appeal under a tax Act is incorrect.
SARS v Pretoria East Motors
Disposal of the onus of proof
Paragraph 8 …
‘It is so that the taxpayer’s ipse dixit will not lightly be regarded as decisive … the
interest of justice require that the taxpayer’s evidence and questions of its credibility
be considered with great care.’
Consequence of paragraph 8 of the judgment
• Impact of paragraph 8 of the judgment on the taxpayers burden of proof
SARS v Pretoria East Motors
Basis of raising additional assessment
Paragraph 11:
‘… The raising of an additional assessment must be based on proper grounds for
believing that, in the case of VAT, there has been an under declaration of supplies and
hence of output tax, or an unjustified deduction of input tax. In the case of income tax
it must be based on proper grounds for believing that there is undeclared income or a
claim for a deduction or allowance that is unjustified. It is only in this way that SARS
can engage the taxpayer in an administratively fair manner, as it is obliged to do. It is
also the only basis upon which it can, as it must, provide grounds for raising the
assessment to which the taxpayer must then respond by demonstrating that the
assessment is wrong …’
SARS v Pretoria East Motors
Basis of raising additional assessment
Consequences of paragraph 11 of the judgment:
• SARS’s obligation to provide grounds for raising an assessment
• Effect on SARS’s ability to raise assessments and/or additional assessments
• The taxpayer’s right to request reasons for an assessment
SARS v Pretoria East Motors
Basis of raising additional assessment
Chapter 8 of the TAA deals with Assessments:
Section 95 of the TAA deals with estimate assessments and states, inter alia, that
SARS must make the estimate based on information readily available to it.
Section 96 of the TAA states, inter alia, that estimated assessment need to include a
statement of the grounds of assessment.
SARS v Pretoria East Motors
Basis on which a high court will
revise penalties
Paragraph 54:
‘As the Tax Court, on appeal to it, was called upon to exercise its
own, original discretion,
this court will interfere with that determination only on the limited grounds on which a
value judgment of a court of first instance my set aside or varied on appeal (CIR v Da
Costa 1985 (3) SAA 768).
It bears nothing, however, that in this instance the Tax Court simply rubber-stamped
SARS decision.
Its failure to even engage with the issue means that we are at large.’
SARS v Pretoria East Motors
Basis on which a high court will
revise penalties
Consequences of paragraph 54 of the judgment:
• Authority and responsibility of the Tax Court
• Authority and responsibility of the High Court