A message from the SCA: Tax law is unfair, deal with it!

In the case of New Adventure Shelf 122 v Commissioner: SARS (310/2016) [2017] ZASCA 29 (28 March 2017), the Supreme Court of Appeal had to deal with the question of whether South African tax law allows for the carry back of capital losses arising from cancellation of an agreement where that agreement was concluded in a prior year and assessed to tax but cancelled in a subsequent year.

The court deals swiftly with the question and hands down a judgment in favor of SARS but not without leaving taxpayers with a very clear and unambiguous message at par 28:

“In any event, even if in certain instances it may seem ‘unfair’ for a taxpayer to pay a tax which is payable under a statutory obligation to do so, there is nothing unjust about it. Payment of tax is what the law prescribes, and tax laws are not always regarded as ‘fair’. The tax statute must be applied even if in certain circumstances a taxpayer may feel aggrieved at the outcome.”

While the judgment is off course correct, it does tend to leave a bad taste in one’s mouth. It is unfortunate that the taxpayer in this case did not enter into the sale agreement on more tax advantageous terms to prevent this sad, yet inevitable conclusion.

The judgment serves to reestablish the importance of employing a tax professional before a transaction is entered into as opposed to after the fact. Seeking advice after the fact is not always detrimental but why take the risk of having no choice

Access a copy of the judgment here

Author: N Theron