The South African Revenue Service (Sars) has become a far more formidable opponent in tax disputes, wielding the tax acts with greater purpose and precision. Once it raises an assessment, it is increasingly prepared to dig in and defend its position.
That means taxpayers need to be more accurate, strategic and tenacious than ever when challenging an assessment, cautions Nico Theron, founder of Unicus Tax Specialists.
“Sars is much more inclined to push matters into litigation to make their assessments stick.”
Modern tax disputes
Modern tax disputes are no longer simply about whether a taxpayer is right or wrong. They increasingly reflect a combination of Sars’s greater efficiency, mounting pressure to collect revenue and increasingly complex, legally nuanced interpretations of the tax law.
Theron says the biggest mistake taxpayers make is to deal with a dispute as if it is a compliance issue. Compliance and disputes have always been different and separate legal processes.
According to SARS’s 2024/2025 annual report, the revenue service achieved an 83% success rate in tax disputes that reached litigation. For taxpayers, the figure underlines the importance of handling a dispute correctly and strategically from the outset, rather than waiting until the matter reaches the courts.
“It is becoming increasingly inappropriate for professionals responsible for managing day-to-day compliance to also handle disputes, given that disputes are becoming more complex, legally nuanced and strategic.”
Once an issue arises the taxpayer must concern himself with the details before it becomes a mess where one tries to “salvage an unsalvageable case”. Legislative interpretation can be deceivingly nuanced for someone without technical, legal and dispute resolution expertise.
Swift action
Once a liability is raised, it directly affects a taxpayer’s compliance status and must be addressed immediately. Tax risks can have broader business and governance consequences – they are not merely financial or compliance issues.
“Hence the importance of treating an audit and subsequent assessment with which you disagree as a dispute from the start, even if an objection has not yet been lodged.”
Correspondence from Sars matters. Sars can, and does, make mistakes. Doing nothing or waiting too long to respond can leave taxpayers worse off. Theron advises taxpayers challenging Sars’s position to define their defence carefully. Too often, taxpayers focus narrowly on the immediate issue without considering the wider implications of the dispute.
The defence
If the defence is framed broadly, it offers the tax specialist space to present the matter from different angles. It is critical to pay attention to the letter of audit findings, says Theron.
“I understand that taxpayers want finality and it can be frustrating to deal with an audit. The tendency is to underplay the response to the letter of audit findings.”
However, if careful consideration is given to the letter, it can avoid a dispute. It takes discipline and knowledge of tax legislation, the objection and dispute process and case law, to address the matters raised by Sars in the audit findings.
The response must be strategic and detailed, as frustrating as it might be, he adds. “Pay heed to the questions, understand what Sars wants to achieve with a question.”
Sars seldom asks a question if it does not already have an answer. Theron also advises taxpayers not to give in when there is push back from Sars. The tax authority can make mistakes. Tenacity, strategy and technical know-how will get you over the line.
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