A critical analysis of a taxpayer’s rights relating to a request by sars for relevant material in respect of an audit

This treatise aimed to critically analyse a taxpayer’s rights relating to a request by SARS for relevant material, in respect of an audit (including information requested for the audit of prescribed tax periods). The study also considers whether such a request for relevant material infringes or threatens a taxpayer’s constitutional rights to privacy, information and just administrative action that is lawful, reasonable and procedurally fair. The research considered the information-gathering powers awarded to SARS in terms sections 3(2), 40 and 46 of the TAA versus a taxpayer’s rights to privacy, information and just administrative action in terms of the Constitution. The reasonable and justifiable limitation of taxpayers’ rights, in terms of the general limitation clause contained in section 36(1) of the Constitution, was also considered. The research method consisted of a literature review of various articles, journals, publications, books, statutes and related commentary, judicial decisions and comments of experts. The study revealed the following: • The definition of ‘relevant material’ allows SARS alone to subjectively determine what information is ‘foreseeably relevant’ for the ‘administration of a tax Act’, in respect of an audit. The threshold of what documentation is ‘foreseeably relevant’, is low, and the application of what is foreseeably relevant follows very broad grounds. • SARS’s discretion cannot be easily challenged as the provisions of section 46 of the TAA are peremptory and give rise to mandatory obligations, unless the taxpayer has ‘just cause’ for not providing the relevant material to SARS. • SARS must meet all the jurisdictional requirements of section 3(2) of the TAA to justify that the selection of a taxpayer for an audit or the request for relevant material is necessary for the purposes of the ‘administration of a tax Act’ and is not related to a ‘fishing expedition’ or some other ‘ulterior purpose’. • A taxpayer should evaluate the scope of the information requested to determine if it is ‘frivolous, over-zealous or patently irrelevant’ and falls outside the provisions of section 3(2). It is submitted that a taxpayer could resist such requests to information, to which SARS is not lawfully entitled, to ensure that its constitutional rights are not violated. • A taxpayer is not entitled to the information that SARS used to select it for an audit or SARS’s internal guidelines or policy manuals that are used by its assessors. The risk x indicators and red flags used by SARS to select a taxpayer for an audit constitute ‘SARS confidential information’ and a taxpayer does not have any legal right to specific reasons as to why his tax return has been selected for an audit. • SARS’s decision to request relevant material (or to conduct an audit) is a preliminary or initial step of a process and does not constitute ‘administrative action’ in terms of the PAJA, as it does not adversely affect a taxpayer’s rights nor have a direct external legal effect. A taxpayer therefore cannot rely on the PAJA to refuse such a request. • Even non-administrative action is subject to the broad constitutional ‘principle of legality’, which is an aspect of the rule of law implicit in the Constitution and provides a safety net when the PAJA does not apply. SARS must act within the scope of section 46 and the information requested must constitute ‘relevant material’ and must be ‘foreseeably relevant’ for the purposes of ‘administration of a tax Act’. SARS may not exercise its discretionary investigative powers in an arbitrary or irrational manner and its requests for information must be based on sound, rational decision-making.Thesis (MA) -- Faculty of Business and Economic science, 202