A Taxpayer's Right to Fair Alternative Dispute Resolution

Abstract

By GG 48188, dated 10 March 2023, the Minister of Finance (hereafter, the Minister) repealed the rules published in GG 37819, dated 11 July 2014 (hereafter, the old rules). In accordance with sec. 103 of the Tax Administration Act 28 of 2011 (hereafter, the TAA), the Minister published 68 new rules (hereafter, the new rules) which came into immediate effect. They delineate procedures for the efficient resolution of disputes occurring within the framework of secs. 101 to 150 of the TAA. Rules 13 to 25 deal with alternative dispute resolution (hereafter, ADR), a voluntary process undertaken on a without prejudice basis outside the formal litigation mechanisms prescribed by sec. 107(1) of the TAA. The new rules, like the old rules, provide for a forum where ADR can occur through private engagement between taxpayers and the South African Revenue Service (hereafter, SARS), with or without the aid of a facilitator, concerning a dispute subject to a pending appeal lodged under the TAA with the specialist Tax Board or Tax Court. In accordance with the rule of law, taxpayers are entitled to procedurally and substantively fair resolution of tax disputes by way of ADR. However, while the new rules serves as the source of a taxpayer’s entitlement to procedurally fair ADR, it is unclear as to the true source of a taxpayer’s substantive right to a fair ADR process. Is the source the new rules, the TAA, or sec. 34 of the Constitution of the Republic of South Africa, 1996 (hereafter, the Constitution)? This article argues that sec. 34 cannot be the substantive law source of this right because its provisions, properly construed, apply to dispute resolution in courts, tribunals, and forums performing an adjudicative function after a fair public or private hearing. When ADR occurs through direct engagement between taxpayers and SARS without the aid of facilitators, then disputes are resolved by consensus through discussion and persuasion. Similarly, ADR through facilitated conciliation does not involve adjudication – facilitators make nonbinding recommendations and do not make final decisions on disputed issues of fact and/or law. This article argues that the new rules are not the source of a substantive law right to fair ADR for tax administration purposes. This article shows that a right of this nature is implied into the TAA when its relevant provisions in Chapter 9 are properly interpreted. It is argued that the scope of this right is to be determined by interpreting the new rule 17 and sec. 107(5) of the TAA through the normative spirit of fairness contained in sec. 34 of the Constitution.