South Africa’s courts send a harsh message to SARS

Two recent High Court rulings have made it clear that while SARS has broad powers, its decisions can be overturned if it fails to follow proper internal procedures, provide adequate evidence, or comply with fair administrative processes.

This was explained by Tax Consulting SA’s Head of Tax Controversy & Dispute Resolution, André Daniels, and Senior Tax Attorney, Richan Schwellnus.

Daniels and Schwellnus explained that two recent High Court judgments, in which the South African Revenue Service’s (SARS) powers came under close scrutiny, have delivered a clear message.

Despite the tax authority’s wide powers under the Tax Administration Act (TAA), those powers are discretionary, but not unfettered.

“When SARS exercises its statutory powers, it is bound not only by the wording of legislation but by its own internal decision-making structures, its committees, and even the memoranda placed before those committees,” they said.

“Further, the processes that SARS itself has designed to ensure that decisions are taken lawfully, rationally, and fairly are also important.”

This arose because of two recent judgments – Ferreira v CSARS 2026 (Ferreira) and CSARS v Muleya 2025 (Muleya).

Both make it clear what the consequences are where SARS cannot demonstrate that a decision was taken through a proper, informed, procedurally compliant process, in accordance with its own protocols.

When this happens, such a decision becomes vulnerable to review under the Promotion of Administrative Justice Act (PAJA).

The Ferreira tax dispute was not about whether the taxpayer owed over R500 million to SARS, or whether SARS could invoke the pay now, argue later rule under section 164 of the TAA, Daniels and Schwellnus said.

“The issue before the court did not even relate to whether SARS was entitled to refuse the taxpayer’s Request for Suspension of Payment application,” they said.

“Instead, the court examined how SARS arrived at the decision to refuse this Request for Suspension of Payment.”

After SARS initially refused the taxpayer’s request to suspend collection steps, the taxman was offered additional security in the form of an 80% shareholding valued at more than R1 billion.

Notwithstanding this, Daniels and Schwellnus pointed out that SARS again refused to reconsider its decision under section 9 of the TAA.

“The High Court intervened in this case because there was no evidence that the Independent Debt Committee was properly informed of this new, highly material security when the second decision was taken,” they said.

“Despite this, SARS continued to justify its refusal on the basis of inadequate security, risk of dissipation of assets, and prejudice to SARS, reasons which simply did not align with the facts that were before it.”

The problem, Daniels and Schwellnus said, was not the outcome, but SARS’ internal decision-making process.

End of an era of secrecy for SARS

Daniels and Schwellnus explained that the Muleya dispute, on the other hand, concerns a different factual scenario but the same procedural weakness in SARS’ internal decision-making processes.

“In this case, the court carefully reviewed how SARS officials exercised their powers, what information they relied on, and whether SARS’ own internal standards and procedures were adhered to when those powers were exercised,” they explained.

The court made it clear that SARS officials cannot simply rely on broad legislative powers as a cover-all to ignore evidentiary and procedural protocols established by SARS itself through its internal frameworks and operating procedures.

“Similarly, the focus was not on whether or not SARS might ultimately be correct,” Daniels and Schwellnus said.

The court’s focus was on SARS’s adherence to the proper procedural processes entrusted to the tax authority to ensure the proper administration of South Africa’s tax system.

What these two judgments show is an important shift: courts are no longer satisfied with SARS simply saying it has blanket discretion to make decisions under the TAA. Instead, courts are asking –

• Was the correct information presented to the correct decision-makers?
• Did the relevant committee actually consider the material facts?
• Did SARS follow its own decision-making pathway?
• Can SARS produce the record showing how the decision was reached?

“If the answer to these questions is unclear, SARS’ decision is liable to be reviewed under PAJA,” Daniels and Schwellnus warned.

They added that, where SARS declines or revokes a taxpayer’s Request for Suspension of Payment under section 164 of the TAA, taxpayers may feel they have very little room left to manoeuvre.

However, the Ferreira and Muleya cases show that the taxman’s far-reaching discretionary powers are not absolute when related to tax disputes and collection measures.

Where SARS arbitrarily rejects taxpayers’ requests under section 164 of the TAA, such decisions could be vulnerable to judicial scrutiny and review to test their administrative and procedural fairness.

The same applies to many other SARS powers, not only to collection steps but also to further preservation steps and other discretionary decisions taken through internal committees.

“SARS’ protocols, committees, memoranda, and decision pathways are no longer invisible internal mechanisms. They are part of the evidentiary record that determines whether a decision is lawful,” Daniels and Schwellnus said.

A warning for taxpayers and SARS

According to Daniels and Schwellnus, both of these judgments change how taxpayers must approach requests to SARS.

“A section 164 Request in respect of the TAA, or any request involving a discretionary SARS decision, should be drafted with a very deliberate purpose,” they said.

The purpose is not only to persuade SARS, but also to create a proper documentary and evidentiary record, which will enable taxpayers to approach South African courts for intervention where SARS fails to administer cases fairly.

“That record must show, objectively, that SARS was provided with all relevant information and that, if SARS ignores that information, its refusal thereof becomes reviewable in court,” they said.

“This is no longer a polite engagement with SARS. It is a structured administrative process that anticipates how a court may later examine SARS’ decision.”

Daniels and Schwellnus stressed that these judgments are not merely interesting academic developments. “Rather, they serve as practical warnings to SARS and taxpayers alike,” they said.

Where taxpayers and tax practitioners still approach requests to SARS as informal requests or polite engagements, real strategic leverage is likely being missed.

Every submission to SARS should be carefully prepared with the understanding that a judge may one day scrutinise and review these documentary records.

“Every refusal by SARS should be analysed, not simply for the ‘fairness’ of the outcome or decision made, but for whether it reveals that SARS did not properly follow its own decision-making processes,” they explained.

Daniels and Schwellnus added that taxpayers and their advisors should not simply accept the Tax Authority’s refusals or rejections on face value or as routine correspondence.