A rather notorious tax case spanning several years has gone full circle and must be heard from scratch before the Tax Court, this time entitling the taxpayer to be represented by a representative of her choice.
This follows a decision in the High Court in Cape Town that reaffirmed the principle that a Tax Court is not a court of law. Therefore, taxpayers can be represented by a layperson, making the legal system more accessible and potentially more affordable.
The appeal before the High Court stemmed from a Tax Court decision in the case of former swimsuit model Candice van der Merwe against the South African Revenue Service (SARS).
Van der Merwe and her father, Gary, have been embroiled in legal battles with SARS for many years. Candice’s 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. The court’s orders were made without hearing her or her father, who was her authorised representative.
Not a court of law
Van der Merwe argued that the Tax Court was “misdirected” not to allow her father to appear on her behalf. The High Court agreed with case law that 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.
Section 166 of the Constitution identifies the courts of law in our judicial system, and the Tax Court is “plainly” not a court referred to the provision in the Constitution. The Court concluded that the functions of a Tax Court were essentially that of an administrative tribunal.
“The fact that it has been established as a court and that it is called upon to discharge its functions in a judicial manner and appropriately constituted to be able to do so do not negate its role essentially as an administrative-decision maker,” the judges found.
That role positions the Tax Court outside the judicial system provided for in the Constitution and confirms that Tax Courts are not courts of law.
Jean-Louis Nel, tax director at Van Huyssteens Commercial Attorneys, says that in terms of the common law, it is not permissible for a layperson to represent a natural person in a court of law.
“In the present case, the full bench found that the Tax Court, although its procedures accord in a similar manner to that of judicial proceedings a court of law, is a court of revision and not a court of law.”
Fair administrative action
Jonty Leon, managing partner at Leap Group, says the ruling upholds the principle of fair administrative action. It ensures that taxpayers can effectively present their cases before the Tax Court, regardless of the representative chosen.
“It underscores the importance of clarity and fairness in administrative proceedings, particularly in tax-related matters,” says Leon.
The case sets a precedent for the representation of taxpayers in similar administrative tribunals and reinforces the principle of access to justice in tax-related disputes, he adds.
Kyle Mandy, tax partner at PwC, says in theory the ruling effectively allows any person, regardless of their expertise, to represent a taxpayer in the Tax Court.
“This is important because it gives taxpayers the choice and could potentially result in reduced costs for a taxpayer appealing to the Tax Court, bearing in mind that the cost of legal representation can be very high.”
Weigh up the risks
However, just because a layperson can represent a taxpayer in the Tax Court, it may not always be a good idea. Taxpayers should bear in mind that the Tax Court functions in a judicial manner, notes Mandy.
“It is therefore important that a taxpayer representative is knowledgeable and experienced with the court rules and processes, leading and cross-examining witnesses and presenting arguments.”
He adds that the case may ultimately proceed on further appeal to a higher court where a legal representative is required, and it may be to a taxpayer’s disadvantage to introduce legal representation only at that stage.
“Ultimately, the advantages and disadvantages should be weighed up by taxpayers depending on the nature and complexity of the matter against the costs and risks of not using a suitably qualified and experienced representative.”
The “devil is in the detail”, agrees Nel. The taxpayer bears the burden of proof and must prepare an appeal with an understanding of tax law, place evidence on affidavit that rebuts SARS’s decision, and present the matter orally to the Tax Court.
Furthermore, a senior SARS official may appear in the Tax Court or High Court only if the official is a legal practitioner duly admitted and enrolled under the Legal Practice Act.
Nel says this means that in all cases before the Tax Court, a taxpayer will be up against a SARS official who is formally educated, trained, and admitted as a legal practitioner.
“One can say that a taxpayer that is represented by a person that is not trained in the art of advocacy is bringing a knife to a gunfight,” warns Nel.
Amanda Visser is a freelance journalist who specialises in tax and has written about trade law, competition law, and regulatory issues.
Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies. The information in this article does not constitute financial planning, legal or tax advice that is appropriate to every individual’s needs and circumstances.
