Innovative approaches to tax disputes: South Africa’s drive for fairness and efficiency

The proposal aims to introduce alternative dispute resolution (ADR) proceedings at the objection phase of tax disputes. Picture: Independent Newspapers.

The proposal aims to introduce alternative dispute resolution (ADR) proceedings at the objection phase of tax disputes. Picture: Independent Newspapers.

Published Mar 23, 2024


André Daniels and Kivashna Veerasamy

In a move set to redefine the landscape of tax dispute resolution in South Africa, the National Treasury unveiled a groundbreaking proposal during the 2024 Budget Speech. The proposal aims to introduce alternative dispute resolution (ADR) proceedings at the objection phase of tax disputes. This strategic shift is a promising step in the right direction in transforming the tax dispute resolution landscape, which would usher in a new era of fairness, efficiency, and cooperation in resolving tax disputes.

The conventional path

Traditionally, tax disputes in South Africa have followed a conventional path, often characterised by lengthy and adversarial processes. Taxpayers who are aggrieved by the South African Revenue Service (Sars) assessments have had limited options beyond formal objections and appeals, leading to protracted disputes, strained relationships, and significant costs for both taxpayers and the tax authority.

Forward-thinking solutions

However, the proposed introduction of ADR proceedings at the objection phase marks a pivotal departure from this norm. Under the new framework, taxpayers and Sars will have the opportunity to engage in facilitated discussions and negotiations at an earlier stage than the current dispensation allows. This proactive approach encourages early intervention and collaboration, fostering a more conducive environment for resolving disputes amicably and expeditiously.

The significance of this proposed change cannot be overstated. By integrating ADR into the objection phase, taxpayers and Sars will have the opportunity to address issues at the commencement of the dispute process, potentially preventing disputes from escalating into prolonged legal battles. This not only saves valuable time and resources but also promotes trust, transparency, and compliance within the tax system and between taxpayers and tax authorities.

A step in the right direction

Furthermore, the proposed change reflects a broader commitment to enhancing access to justice and promoting a culture of fairness and equity in tax administration; by providing taxpayers with a viable alternative to traditional dispute resolution mechanisms, that are modernised and streamlined. Further embracing innovative approaches to tax dispute resolution, highlights a willingness to adapt to the evolving needs of taxpayers and stakeholders in a dynamic and complex economic environment.

Navigating Sars tax disputes with precision

When stepping into the realm of dispute proceedings with Sars, it is imperative to dance to the beat of the golden rules. Seeking guidance from a tax attorney is a crucial step for success in tax disputes. Obtaining reasons for the assessment is the preliminary phase, enabling the precise crafting of an objection. An objection must be strategically formulated, as this document guides the process and is binding in an ADR, whether in the current or proposed dispensation.

A suspension of payment must be filed to halt collection steps by Sars, as the submission of an objection does not automatically pend Sars collection steps. Sars continues to operate on the “pay now, argue later” principle, as enshrined in legislation. Similar to objections, this request is not to be undertaken without careful consideration, it demands meticulous legal strategy and the oversight of a seasoned tax attorney.

Revolutionising tax dispute resolution

The proposed changes to South Africa's tax dispute resolution proceedings, particularly the introduction of ADR at the objection phase, signify a bold and progressive approach to enhancing fairness, efficiency, and cooperation within the tax system. By promoting early intervention, dialogue, and consensus-building, the new framework holds the promise of transforming the way tax disputes are resolved, ultimately contributing to a more equitable and resilient fiscal ecosystem for all stakeholders involved.

* Daniels is the head of tax controversy and dispute resolution, and Veerasamy is a tax attorney at Tax Consulting SA.