In the context of South African tax law, with regards to payment of tax

pending objection or appeal or under dispute we follow the so-called

‘pay now, argue later’ principle. The ‘pay now, argue later’ principle,
which is firmly established in our law was firstly codified in section 88 of
the Income Tax Act1 which was later repealed by the introduction of the
Tax Administration Act 2, it now forms part of the Tax Administration Act.
With respect to a payment of an amount of tax which is being disputed,
the payment of such tax is not automatically suspended or deferred, the
taxpayer is therefore obliged to pay the disputed tax unless SARS
(South African Revenue Services) decides otherwise. 3

The introduction of the Tax Administration Act (TAA) provides an

opportunity for aggrieved taxpayers (by certain decisions made by
SARS), in terms of section 104 the Act taxpayer may dispute or bring an
objection against an assessment or decision made by SARS. With
section 164 the previously mentioned rule or principle of ‘pay now, argue
later’ is given effect, this section provides that the obligation to pay tax
and SARS’s right to receive and recover tax will not be suspended by an
objection or appeal or pending the decision of a court of law pursuant to
an appeal. A suspension may only be granted if the taxpayer makes a
request to a senior SARS official to suspend the payment of tax or a
portion thereof due under an assessment or pending finalization of an
objection. Section 164(2) further says, that is if the taxpayer intends to
dispute or disputes the liability to pay the tax. It is then clear from this
section that the power or discretion to suspend payment of a tax in
dispute lies with a senior SARS official (although term not defined in the
Tax Administration Act).

The Constitutional Court in Metcash Trading Ltd v Commissioner for

SARS4, considered the ‘pay now, argue later’ principle in the context of
Value-added tax (VAT) and its constitutionality. Rationality of this
principle is summed up by the courts in Capstone 556 (Pty) Ltd v
Commissioner for SARS5, as follow:
The considerations underpinning the ‘pay now, argue later’ concept
include the public interest in obtaining full and speedy settlement of tax
debts and the need to limit the ability of recalcitrant taxpayers to use
objection and appeal procedures strategically to defer payment of their
taxes.

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The obligation to pay can only be deferred or suspended by SARS upon
request by the taxpayer. But who makes the decision? Section 162(2) of
the Tax Administrative Act provides that a taxpayer may request a ‘senior
SARS official’ to suspend the payment of a tax or a portion thereof due
under assessment. Section 1 of the Act defines ‘SARS official’ as the
Commissioner, an employee of SARS or a person contracted or
engaged by SARS for purposes of the administration of a tax act and
who carries out the provisions of tax act under the control, direction or
supervision of the Commissioner. But it is still not clear what is meant by
‘senior SARS official’6, although some guidance can be found in section
6(3) of the Tax Administration Act.

What do they take into account in deciding whether to defer the payment
in dispute or grant the requested relief? According to section 164(3) of
the Tax Administration Act, the senior SARS official must consider the
following factors when exercising to suspend or not to suspend:
• the compliance history of the taxpayer;
• The amount of tax involved;
• The risk of dissipation of assets by the taxpayer during the period
of suspension;
• Provision of adequate security for the payment of the amount
involved;
• Irreparable financial hardship for the taxpayer;
• Imminent sequestration or liquidation proceedings;
• Whether fraud is involved in the origin of the dispute; or
• Failure by the taxpayer to furnish information requested for
purposes of a decision.

A successful application for deferral or suspension of payment means

that the obligation to pay is suspended or deferred, but interest will
continue to accrue on the unpaid amount. Section 164(7) of the TAA
provides that if the taxpayer pays the amount of tax in dispute and their
objection is ultimately upheld or adjudicated in their favour, she or he is
entitled to the interest from the date they paid the disputed amount to the
date on which such paid amount is refunded.7

Contrary, if SARS denies this application for suspension of payment or

revokes an existing suspension, SARS is obligated to provide detailed
grounds for its decision. If the taxpayer feels that such grounds are not
reasonable or rational based on the view that the decision made by

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SARS is procedurally unfair, the taxpayer can bring an application for
judicial review within 10 business days to the High Court. Given that a
taxpayer has no further or any other remedy at their disposal to dispute
the assessment, section 100(1) of the TAA comes into effect, the
assessment becomes final. When the taxpayer fails to make payment of
the tax due and payable according to the additional assessment, SARS
may initiate recovery proceedings. The taxpayer must make the payment
on the date set out on the additional assessment.

The benefit of suspension to the taxpayer is that no recovery procedure

may be taken, only if SARS has reasonable belief that there is a risk of
dissipation of assets.