When SARS says ‘no’, they must tell you why

Taxpayers have the right to obtain reasons for decisions by SARS.

WHEN I was about three years old, my mother admonished me not to play with matches, and like the precocious brat I was, I demanded to know “why”. Many a parent, faced with similar demands from their offspring, would be tempted to exert parental authority in the form of those four words of finality: “Because I said so!”

But in my case, my mother decided that I needed a more compelling argument—one I would never forget for as long as I lived. The response that she provided came in the form of a visit to the burns unit at the local children’s hospital, and even now, some thirty-six years later, I can still hear the cries of agony from those children who had sustained burns of varying degrees. Needless to say, the lesson was well-learned—I never again played with matches.

This childhood memory brings to mind a case that went before the Gauteng Tax Court a few years back. In Qwa-Qwa Cash and Carry (Pty) Ltd v CSARS [2005] ZAGPHC 121, the taxpayer claimed to have exported goods to its customers in Lesotho. As far as Value-Added Tax (VAT) is concerned, any goods supplied by a VAT vendor to a customer outside the Republic of South Africa are zero-rated for VAT purposes.

This means that instead of charging the standard rate of 14% (as would be the case for local sales), the transaction ‘attracts’ VAT at 0%.

For reasons not disclosed in the case before the Tax Court, the VAT assessor at SARS was not convinced that …