The court judgment in the case of Joseph Nyalunga versus Sars (South African Revenue Service) had to consider whether being in jail is a good enough excuse for someone not to have fulfilled their tax obligations, such as objecting to an assessment or furnishing Sars with information.
On the other hand, it raises the problem that those with access to funds, even criminals, can delay justice for a very long time.
The background to Nyalunga versus Sars started in 2011, when Nyalunga, a former officer in the South African Police Service, was arrested on the N4 highway near Middelburg.
The former police officer was driving his Range Rover Sport which contained a cash amount of R3.3 million.
Nyalunga was charged with money laundering and released on bail. When the police searched his home, a further cash amount of R5.8 million was found.
In 2013, while Nyalunga was incarcerated, Sars sent him an ‘intention to audit letter’ regarding “possible under-declaration of taxable income”. Later that year, Sars issued an ‘audit findings letter’. Nyalunga was provided with the opportunity to provide further information. Nyalunga did not respond, and Sars issued the ‘finalisation of audit letter’.
Nyalunga responded to that, informing Sars that he was still in prison and couldn’t provide any documents.
Sars raised an assessment in late 2013 for the years 2006 to 2013, and Nyalunga was given 30 days from the date of his release (April 8, 2014) to object to the assessment.
Briefly, Sars obtained a tax judgment in the amount of R15.2 million on June 23, 2014. During 2016, the sheriff unsuccessfully attempted to execute the warrant against Nyalunga.
In 2018 the sheriff managed to attach goods, and Nyalunga then brought an urgent court action.
There was a lot of toing and froing, including excuses for the late filing of written submissions. Nyalunga said he could not participate as a normal taxpayer as he was incarcerated, also arguing that Sars’s procedures and processes were unfair.
The court found that incarceration is not a good enough reason for the delay in Nyalunga’s review application, and that it would not be in the interests of justice to overlook the delay.
The court also agreed that a tax assessment may only be challenged by means of an objection and appeal process, unless a high court directs otherwise.
The applicant was required by the Tax Administration Act to first exhaust all internal processes before he made the application to review. The applicant did not raise any objection to the assessment.
The court found that on the basis that Nyalunga had not submitted any tax returns, and that he had failed to raise an objection to the estimated assessments raised by Sars, and that three years had lapsed since the assessment (in fact, four years), the assessment has prescribed.
The review application failed and the assessment stands. Nyalunga has to pick up Sars’s legal costs.