Nothing Sacred

THE STRIPPER AND THE TAX MAN: Bare-faced law needs to be challenged

WHAT’S THE LINK between a Moldavian stripper who has been in a Cape Town jail and has now won a Constitutional Court victory in a disputed debt matter and Section 99 of South Africa’s Income Tax Act? Read on. There are few more powerful arms of the State than its collectors of revenue. That power is reflected in the policy of collectors of tax that you pay now and argue later, that they charge you non-deductible tax at prime plus a healthy margin, while – when they’re in the wrong – they pay you back with interest below prime which is, to add insult to injury, taxable in your hands.

Thus, starting in Sweden in the 13th Century, many societies have set up tax ombudsmen to mediate between aggrieved taxpayers and the collectors. For example, the United States has the Tax Advocate’s office, which is funded by the Federal government.

Now SA is also considering an office of a tax ombudsman to assist citizens who have a disagreement with the SA Revenue Service (Sars). That befits the by far most efficient arm of the State in our country and reflects credit upon it.

One of those areas of disagreement may well involve Section 99 of the Income Tax Act No 58 of 1962, which, as Sars puts it, “allows (it) to appoint employers, or anyone in control of a taxpayer’s moneys… to act as agent on its behalf”.

That means if Sars decides you owe it, it can unilaterally instruct your employer or banker or whatever to turn your money over to it. Sars has no need to obtain a court order proving its claim on your money. It decides it has a claim and appoints an agent to collect. That’s akin to an “emoluments attachment order” or garnishee. However, such orders can’t be imposed – except in the case of Sars – without, as a Pretoria University study points out, three conditions,which are where a court has so authorised, or where the judgment debtor has consented thereto, or in terms of Section 65J(2)(b), in which a judgment is obtained and a registered letter sent to the judgment debtor demanding payment.

The study comments that the “second and third instances create problems”. They’re complicated, expensive, difficult to oversee (particularly given the dysfunctional state of our courts) and open to abuse. And when such an order is granted, employers invariably farm it out to collection agencies.

Sars maintains it sends out at least seven notices to allegedly delinquent taxpayers before it exercises its Section 99 powers. That may well be and one sympathises with Sars, given the reluctance of so many to pay their taxes and the incompetence of State judicial staff. But the fact remains this sort of unilateral garnishee order can result in embarrassment, dismissal and many other assaults on a taxpayer’s dignity and privacy.

That brings us to our Moldavian stripper. She had an alleged debt, just as allegedly delinquent taxpayers have to Sars. She was prosecuted and jailed under another ancient piece of legislation, Section 30 of the Magistrates Courts Act of 1944, based on the grounds the debtor might be a flight risk. The Constitutional Court has declared that procedure unconstitutional, on the grounds one can’t be imprisoned for a debt that hasn’t been proved in law.

Imprisonment is a punishment. So is having your salary or other assets seized on behalf of the State by your employer or any other entity deemed by Sars to have access to your moneys. Justice Mogoeng wa Mogoeng ruled in the stripper’s case that someone can’t be punished because of “a debt which has itself not been established through the judicial process”.

In 1998 the constitutionality of Section 99 was unsuccessfully challenged by a taxpayer who had incorrectly received a refund from Sars he refused to return. That was an opportunistic ploy that deserved to fail and in which the court described Section 99 as a “weapon of great importance to the State”. But being a weapon of importance to the State doesn’t render it constitutional and it deserves to be challenged again.