Soon after the assessment was issued, SARS appointed the taxpayer’s South African bank as an agent in terms of section 99 of the Act and required the bank to remit the R1,5 billion to SARS. The bank paid an amount of R20 million to SARS, leaving a few hundred Rand in the account. SARS sought to recover the outstanding amount in terms of section 91(1)(b). This prompted the taxpayer’s urgent application to the Court.
The Court did not have jurisdiction to consider the application and determine whether the taxpayer is a resident of South Africa or carries on business through a PE in South Africa (ie the Court could consider legal issues only).
However, it is clear from the facts of the case that the practical effects of the pay now, argue later principle and section 99 of the Act may lead to harsh implications for a taxpayer. For instance, the taxpayer in the Oceanic Trust case may well be a resident of Mauritius and not conduct business through a PE in South Africa. However, until the merits of the taxpayer’s objection and/or appeal are considered, a taxpayer is required to pay SARS R1,5 billion (unless alternative arrangements are made with SARS). As it stands, the taxpayer is out of pocket for R20 million and if more money was held in the South African bank account it would certainly have been paid to SARS. Enforcing the pay now argue later principle (along with section 99 of the Act) may clearly have dire consequences for taxpayers.
Obtaining full and speedy settlement of tax disputes and the need to limit the ability of recalcitrant taxpayers to defer the payment of taxes certainly supports the need for the pay now, argue later principle. However, the consequences of enforcing this principle must be appreciated and carefully considered by SARS.