But taxpayers won’t be able to avail themselves of the same benefit.
A proposed change to the Tax Administration Act (TAA) is getting taxpayers – particularly those embroiled in legal disputes with the South African Revenue Service (Sars) – rather hot under the collar.
Sars wants to be able to recover fees and costs from taxpayers if it uses in-house legal counsel and wins against a taxpayer in the higher courts. However, this ability to recover costs will not be extended to taxpayers using their in-house legal practitioners.
The courts include the high court, the Supreme Court of Appeal, and the Constitutional Court. It is also proposed that the TAA be further amended to provide that cost awards by the tax court (where Sars uses in-house legal counsel) be determined in accordance with the dispute resolution rules.
Amendments will be introduced to the dispute resolution rules to make provision for specific fees in these instances. Again, this is not extended to taxpayers who use their in-house legal counsel.
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Precedent in cost recovery
David Warneke, a tax partner at BDO, said during a recent webinar that there exists a precedent for the recovery of costs by the state attorney. However, he does not see why Sars should be permitted to recover its own internal legal costs in tax matters from the taxpayer where the taxpayer is not able to avail of the same benefit.
He adds that taxpayers would generally not be able to use their in-house legal counsel to appear on their behalf in the higher courts in tax matters, even if the taxpayer employs legal practitioners (advocates and attorneys).
They do not have an automatic right of appearance. However, the TAA specifically affords senior Sars officials who are legal practitioners the right of appearance in terms of Section 12 of the act.
“The proposed amendments to the act will expressly allow for a recovery of the costs from the taxpayer relating to Sars’s in-house legal counsel for appearance in the higher courts. The taxpayer is generally precluded from being represented by their own in-house legal counsel in these courts. This seems unfair to me.”
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Right of appearance
Warneke says it would be fairer if the TAA was amended to allow in-house attorneys (for both Sars and taxpayers) the right of appearance when there are disputes between Sars and taxpayers in the higher courts.
Since Sars’s legal practitioners are given an “automatic right of appearance” in terms of Section 12 of the TAA, the same should apply to the taxpayer’s internal legal practitioner.
Another – more positive – proposal is to allow a lay representative, other than a legal practitioner duly admitted and enrolled in terms of the Legal Practice Act, to represent a taxpayer in the tax court.
This could potentially make the tax court more accessible and affordable to taxpayers. However, the president of that court must be satisfied that the person is “fit and proper” to represent the taxpayer.
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Tax court not a court of law
The amendment follows a decision in the High Court in Cape Town that reaffirmed the principle that a tax court is not a court of law. The decision meant that taxpayers may be represented by a layperson.
The matter before the Cape Town High Court was an appeal against a tax court decision in the case of former swimsuit model Candice van der Merwe against Sars.
Her tax affairs came under the spotlight in 2013 when she received a gift of almost R143 million from a foreign friend. She appealed a decision by the tax court confirming the original assessment of her taxable income. However, the court’s orders were made without hearing her or her father, who was her authorised representative.
Van der Merwe argued that the tax court was “misdirected” in not allowing her father to appear on her behalf. The high court held that the tax court was not “a court of similar status” to the high court; therefore, the taxpayer was not limited to representation by a legal practitioner.
This article was republished from Moneyweb. Read the original here.
