Bad idea: Tax objections drafted “On the back of a cigarette box”

Few taxpayers, in our experience, fully appreciate the importance and gravity of the early stages of the tax dispute resolution process with SARS – the objection stage. Too often, we see that objections are drafted in haste “on the back of a cigarette box” and important, often case-wining arguments, omitted from the grounds for objection or not properly formulated and substantiated.

The importance of the objection stage was well illustrated in the case H R Computek (Pty) Ltd v Commissioner for the South African Revenue Services (830/2012) [2012] ZASCA 178 (29 November 2012) where the taxpayer did not include certain grounds in its objection against an assessment raised by SARS. When the dispute eventually ended up in court, the court refused to entertain certain arguments the taxpayer sought to advance in appeal that was not included in the grounds for objection. In a more recent case in the Bloemfontein Tax Court, the Court (XYZ CC v SARS, ITC13868) granted default judgment against a taxpayer who failed to timeously submit its statement of grounds for appeal. One of the reasons for this result, according to the judgment handed down on 27 February 2019, is that all the grounds for appeal should already have been formulated by the taxpayer at the objection stage and the taxpayer can in any event not add any new grounds in appeal that was not included in the objection – the court therefore did not accept that the time it takes to draft the statement of grounds for appeal is good cause for not timeously delivering that statement.

Yet in practice, some taxpayers tend to only rope in tax dispute resolution experts at appeal stage (or not at all), which is perceived (incorrectly so) as the more important or more critical stage of the tax dispute resolution process. As experts in tax dispute resolution, we often find this approach adopted by some taxpayers to be extremely debilitating as it often significantly curtails the realm of possible valid arguments to be raised in the taxpayer’s defence. In fact, some cases that could have been won if the defence was properly formulated, at the earliest stage of the dispute, end up being lost.

The importance of doing a thorough analysis of facts and SARS’ grounds for assessment and strategically building a case against an assessment or decision from SARS at objection stage cannot be over emphasised. Not doing so could have dire consequences and is, at the very least, a very bad idea.

We are tax dispute resolution experts with an impeccable record of winning cases against SARS. Contact us for assistance as soon as SARS raises an assessment or makes a decision subject to objection and appeal.