Taxpayers pay the price, even when they beat SARS in court

Taxpayers taking on the South African Revenue Service (SARS) in court often face years of mounting legal costs, procedural risks, and commercial uncertainty, meaning even a legal victory may come at a significant financial price.

Tax disputes leading to litigation against SARS are rarely about insignificant amounts. In fact, Tax Consulting SA’s head of tax controversy and dispute resolution, André Daniels, noted that there are numerous historic examples of disputes amounting to billions of rands.

“Litigation is often viewed as the definitive mechanism through which tax disputes are resolved,” Daniels said. “It offers structure, formality, and ultimately, a judgment that determines the outcome.”

“In theory, this produces a clear result: a successful party and an unsuccessful one. In practice, however, tax litigation rarely delivers such clarity.”

While judgments provide legal finality, Daniels cautioned that they do not necessarily produce commercial certainty.

“Increasingly, taxpayers and advisors are recognising that the concept of ‘winning’ in litigation is far more nuanced than it appears, and that a clear outcome may, in many cases, be an illusion,” he said.

Recent case law, such as the 2026 Baseline Civil Contractors case, shows just how unforgiving the litigation process can be.

In this case, the court confirmed that a taxpayer cannot introduce a fundamentally new case at the appeal stage if it was not properly raised in the objection.

“Procedural requirements continue to play a decisive role in whether disputes are even heard,” Daniels explained.

Across the Tax Court, a number of matters have been determined primarily on procedural grounds, including condonation applications, the admissibility of evidence, and strict adherence to dispute timelines.

“A missed deadline, an incomplete objection, or an incorrectly framed issue can fundamentally alter the trajectory of a dispute. Once litigation is underway, the ability to correct these issues becomes limited,” Daniels said.

“Where traditional litigation approaches are adopted, disputes can become increasingly confrontational, with legal arguments taking precedence over practical resolution.”

While this may create the perception of strong advocacy, Daniels warned that it does not necessarily serve the client’s best interests.

“This adversarial nature of litigation often shifts the focus away from resolution. For taxpayers, this creates a challenging dynamic,” he said.

Litigation may feel like a strong, decisive response, but it often leads to higher costs, longer timelines, and reduced flexibility.

“The decision to litigate should therefore be taken with careful consideration, not as a default response, but as a strategic choice for a clear outcome,” he said.

SARS tax battles are increasingly decided by procedure, not substance

According to Daniels, recent SARS dispute resolution judgments reveal a growing emphasis on procedural compliance within the litigation framework.

This trend is reflected in the SARS published Tax Court judgments for the 2023 to 2026 period, where procedural issues have played a decisive role in determining whether disputes proceed.

Similarly, the High Court judgments published by SARS for the same period demonstrate that disputes may fail due to non-compliance with prescribed processes rather than the strength of the underlying tax position.

At the appellate level, rulings like the Baseline case have introduced greater certainty, but also increased rigidity in how disputes are adjudicated.

“The commercial implications of this shift are significant,” Daniels said. “Litigation unfolds over time, often over several years. During this period, legal costs accumulate, internal resources are diverted, and uncertainty persists.”

“Even where a taxpayer ultimately succeeds, the benefit of that success must be considered in context. The cost of litigation can materially reduce the value of a favourable outcome.”

From SARS’ perspective, Daniels said, drawn-out litigation delays revenue collection and requires the allocation of resources that could otherwise be directed toward broader compliance initiatives.

“A defining feature of tax litigation is how many disputes ultimately conclude. Despite extended procedural progression, a significant number of matters are resolved through settlement rather than final judgment,” he said.

The High Court’s 2025 decision in Inhlakanipho Consultants v CSARS confirmed that settlement agreements are binding and enforceable.

“This provides legal certainty but also highlights the broader point that many disputes are capable of resolution without prolonged litigation,” Daniels explained.

“The question that arises is whether those settlements could have been achieved earlier, without the intervening cost and delay.”

Winning in court does not always mean winning financially

According to Daniels, taxpayers are increasingly revisiting the question of what “success” really means in tax litigation.

“After extended periods of litigation, the focus often shifts from whether the case can be won to whether the process has delivered a commercially sensible outcome,” he said.

“In many instances, disputes evolve beyond their original scope. Costs increase, risks become more pronounced, and the underlying issue becomes obscured by procedural developments.”

Daniels said they are currently seeing a growing number of taxpayers re-evaluating ongoing disputes, particularly those that have become protracted or procedurally complex.

“In many cases, this involves re-engaging SARS on a structured, without-prejudice basis, even where litigation is already well advanced. This is not a concession of position, but a strategic recalibration,” he said.

When properly managed, this approach can yield outcomes that provide certainty, reduce cost exposure, and resolve disputes in a commercially viable manner.

“Litigation is one component of a broader dispute resolution framework,” Daniels said. “Winning a case is one outcome.”

“Achieving a result that is commercially sustainable, time-efficient, and aligned with the taxpayer’s broader objectives is another. The two are not always the same.”