Taxpayer’s obligation to pay tax not suspended by objection or appeal

Taxpayer’s obligation to pay tax not suspended by objection or appeal

'Pay now, argue later' CAN be waived
A taxpayer’s obligation to pay income tax due in terms of an assessment, against which he has lodged an objection or appeal is not suspended by that objection or appeal unless the Commissioner so directs; (section 88(1) of the Income Tax Act 58 of 1962).

The constitutionality of the “pay now, argue later” principle in matters of tax has been upheld by the constitutional court (see Metcash Trading Ltd v CSARS 2001 (1) SA 1109 (CC)) and is now beyond dispute.

The Commissioner’s practice
Taxpayers and their advisers can take some comfort from the judgment in Hindry v Nedcor Bank Ltd, 1999 (2) All SA 38 (W), 61 SATC 163 at 181 which quotes from an affidavit filed by the Commissioner in which he said that –

“where it is merited by a particular case, I do not hesitate to suspend the payment of taxes as envisaged by s 88(1). I am particularly inclined to do so where the taxpayer provides me with adequate security.”

The power of the High Court
The Supreme Court of Appeal has held in relation to the Value-Added Tax Act that “a court may, in the exercise of its discretion, withhold a winding-up order in respect of a deemed debt if it is shown that the debt is disputed on bona fide and reasonable grounds”; (Hawker Air Services (Pty) Ltd [2006] SCA 55 (RSA) at paragraph [21].)
The same principle, it is submitted, applies to a disputed income tax assessment.