I set out below the reservations of the South African Revenue Service (SARS) regarding certain aspects of the Bill, and proposals for amendment of the Bill.

SARS administers complex legislation, employs over 12,000 employees many of whom are required to exercise both statutory and organisational duties and powers. The efficient and cost-effective functioning of SARS is crucial for the functioning of our society. At the same time the taxpayer must be entitled to fair and just treatment. The objective of the Bill must be to establish a balance between these two.

I attach hereto a list of the sections in the Income Tax Act, 1962, and certain other revenue Acts, which contain provisions requiring the exercise of some form of discretionary power. This clearly indicates the number of administrative actions exercised by SARS officials on a daily basis. Furthermore, I attach a more comprehensive list of the nature of some of the actions taken and discretionary powers exercised in terms of the Value-added Tax Act, 1991, indicating the range of administrative action taken in terms of the Acts.

The definition of "administrative action" is exceedingly wide and goes beyond the range of decisions and actions that similar statutes in comparative jurisdictions normally cover. It encompasses not only statutory discretions, but also any other decision or act, which is not in line with our common law or the approach of the Constitutional Court. While these foreign jurisdictions are not subject to the same constitutional imprimatur contained in Section 33 of the Constitution, necessitating the enactment of an administrative justice statute, such statutes in other democratic countries normally specify the tribunals or agencies or the nature of the decisions which are subject to administrative justice requirements. By contrast the Bill purports to apply to all acts performed or decisions taken by a breath-takingly broad range of persons. The Bill goes on to exempt certain acts which are obviously not administrative, such as certain executive, legislative and judicial functions. A criticism of this approach to administrative action is contained in the Constitutional Court's ruling in President of the Republic of South Africa vs. SARFU, 1999 (10) BCLR 1059 (CC) at 119. Having confirmed its earlier decisions in FEDSURE Life Assurance Ltd and others vs. Great Johannesburg Transitional Metropolitan Council and others, 1999 (1) SA 374 (CC)), i.e. that administrative action does not include legislative decisions or even executive decisions,the court went on to state:

The Court held that in determining whether a decision is 'administrative action', a series of considerations may be relevant to deciding on which side of the line a particular action falls:

Against this background we can see that the definition of "administrative action" in the Bill is blunt. It contains no limitation or qualification whatsoever provided the action is taken by an organ of State. It is only in paragraph (d) of the definition that a condition is inserted that the act must relate to the 'exercise of a public power or performance of a public function.' It would seem that the draftspersons, grappling with a difficult task of defining 'administrative action', have simply defined all acts by any organ of state as administrative acts, save for a limited group which are clearly marked as executive, legislative or judicial.

Various revenue laws make provision for objection and appeal by taxpayers in respect of a wide range of matters to be dealt with fairly and impartially in terms of various procedures, including a Special Board and a Special Income Tax Court. For example, a decision by an assessor to disallow a deduction can be the subject of a Special Income Tax Court hearing. A right of appeal from this court lies to the full bench of a High Court or the Supreme Court Appeal (with leave to appeal by the President of the Special Income Tax Court). Under the Bill, it appears, such a procedure may well be allowed under clauses 4(4) and 4(5), and, if the Minister specifically exempts SARS, in terms of clause 4(6). This fair procedure for reviewing an assessment, however, is a post facto mechanism of appeal and review. It thus appears that the original assessment could be simultaneously the subject of litigation in terms of the review procedures contained in the various revenue laws, and, for exactly the same relief, a review before a Magistrates Court or High Court brought under the Bill. The case law is not clear that the Special Income Tax Court is a Court of Law. (CIR v City Deep Ltd 1924 AD 298 but see also KATZENELLENBOGEN, NO v COMMISSIONER OF CUSTOMS AND EXCISE AND ANOTHER 1959 (1) SA 331 (T) at 333D). In this regard SARS would wish to see any review of administrative action sustainable only by the statutory bodies established to perform such a function, provided they do so fairly and impartially. The operation of these tribunals would always be subject to common law review and could be subject to the Bill. In this regard, Clause 2(3)(b) should be amended so that the right to review an administrative decision, does not include a decision to refer a matter to a fair and impartial hearing, a tribunal or a court, nor does it include the decision which is the subject of such a hearing. Alternatively the common law requirement that a litigant should first exhaust the statutory review remedies provided in the law before approaching another court, should be incorporated in the Bill. The original logic behind this common law duty to exhaust domestic remedies remains persuasive.

1. Our common law recognises that there is no right to procedural fairness in respect of preliminary decisions to refer a matter to a hearing at which the rights to natural justice will be protected or enforced, down the line or, alternatively, the right to procedural fairness does not include a right to be heard in these circumstances for the same obvious reasons.

Carsen v Oos-Kaapse Komitee van die Groepsgebiedraad 1959 (3) SA 651 (A)

Real Printing and Publishing Co v Minister of Justice 1965 (2) 782 (C) Park Ross v Director: Office of Serious Economic Offences 1998 (1) 108 (C)

Van den Bergh v Secretary of Economics 1983 (1) SA 106 (A) 119A-120D

President of South Africa v SARFU 1999 (10) BCLR 1059 at 1149 and 1150

2. The Constitution already envisages that an impartial tribunal could be the sole agency for reviewing the right to administrative justice (see section 33(3)(a) of the Constitution). The Bill does not allow for this possibility. The implication of clause 8 of the Bill is that, prior to the implementation of procedure for judicial review, all proceedings for judicial review must be instituted in the High Court or the Constitutional Court. This in itself is unconstitutional as section 33(3)(a) of the Constitution provides for the review of administrative action by a court or an independent and impartial tribunal.
3. It would be most undesirable that complex matters of tax policy and allowances be decided in parallel by say a Magistrate's Court. The Special Board and Special Income Tax Court were created by statute to provide taxpayers with a cost-effective remedy in respect of administrative actions adversely affecting them. The creation of an automatic right to choose another forum as contained in clause 2(3)(b) should be discouraged. Furthermore, the right to a fair process should be excluded where there is a full fair and independent process down the line in terms of which objection, appeal and review will be dealt with by a court of law or tribunal. This principle has, in fact, been conceded in paragraph (d)(v) of the definition of "administrative action", by the exclusion of any decision to institute or continue a prosecution.

In clause 2(1)(b) the right to procedurally fair administrative action is granted to a person whose 'legitimate expectations' are adversely affected. Yet, in clause 4(1) that right is granted to a person whose mere 'interests' are adversely affected. This contradiction should be resolved.

Furthermore, in our view the onerous procedural requirements for procedurally proper administrative action should not be applicable merely because a person's 'interests' may be adversely affected. Our courts have consistently rejected mere adverse impact on one's interests as entitling a litigant a right of review. (see SA Roads Board v Johannesburg City Council 1991 (4) SA 1(A) at 104 and Du Preez v TRC 1997 (3) SA 204 A at 231 C). It would be a more consonant with the Final Constitution to limit the circumstances in which these procedural requirements apply. In this regard we note that the draftspersons have preferred the formulations contained in the Interim Constitution inter alia prescribing fairness when ones legitimate expectations are affected. This was omitted from the Final Constitution. In our view if a decision is reviewable on the grounds that it offends a legitimate expectation, it is necessary to spell out that in our law a legitimate expectation can give rise to a right of procedural fairness only where a statute does not indicate expressly or impliedly to the contrary and, further, that such an expectation can only arise where a person who is responsible for taking a decision has induced a reasonable expectation that he will receive or retain a benefit before the decision. The inducement must be clear or express, unambiguous and without qualifications. (see De Smith Woolf and Jowell Judicial Review of Administrative Action 5^th ed. 425 8-055). Public servants and the public interest must be protected against the risk of unwittingly creating legitimate expectations. When this broad entitlement to procedural fairness is combined with the far-reaching definition of "administrative action", the Bill will make the everyday tasks and mandate of administrators almost impossible to perform unless it is placed within proper parameters. Alternatively it is recommended that the reference to legitimate expectation be removed from the ambit of the Bill and be left to common law principles.

In SARS's view the attempt to establish the elements of 'procedural fairness' is unsatisfactory. Clauses 4(2), (3), (4) and (5) provide a most uncertain framework. If the requirements set out in 4(2) are core requirements, then it would seem that they are seldom appropriate in regard to the vast majority of everyday actions taken by administrators, particularly in regard to the internal functioning of an organ of state. The Constitutional Court and the Appellate Division have addressed that even the right to be heard will depend on the circumstances. (see Premier of Mpumalanga v Executive Committee of the Association of Governing Bodies of State Aided Schools 1999 (2) SA 91(CC)). Furthermore, there is little guidance in the terms "if circumstances justify it" and "to the extent necessary" to guide an administrator as to when he may depart from these requirements. Finally, it would seem that where an exemption from the requirements of these procedural steps is justified, then there is little purpose in requiring in sub-clause 4(6) that the exemption must, nevertheless, be compatible with the right to procedurally fair administrative action. This requirement should be removed. It is proposed that the exemption be limited by a proportionality requirement rather than a compatibility requirement.

The same criticisms raised in the preceding paragraph would apply to clause 5. In particular, here we would draw attention to the particularly broad category of decisions which bring clause 5 into play. It is brought into play by any administrative decision which 'adversely affects the public' (including any group or class of the public). There is no internal qualifications whatsoever. Almost any decision which benefits the public (or any group or class of the public) will adversely affect another group or class of the public. Does clause 5, for example, apply to a decision by the SABC not to screen a particular television programme? From SARS' perspective, is SARS required to follow the procedure set out in clause 5, when it wishes to issue a circular minute to its staff to assist them in assessing tax returns? Must the United Cricket Board follow a 'notice and comment' procedure before finalising its cricket fixtures? The Bill must properly specify the nature of the adverse effect, which must be greater than the interest.

Furthermore, SARS administers a number of tax laws and by the very nature of certain acts performed (e.g. to curb tax avoidance or to prevent the dissipation of assets during collection proceedings), giving due notice may defeat the whole purpose or object of such acts. This may be included under clause 5(4), but it may also be appropriate to include in clause 5(1) the option of a more expeditious alternative to the time-consuming processes envisaged in that section.

Whereas the grounds of review largely codify the common law grounds of review, in our view the bold extension of our common law grounds contained in clause 7(1)(g) invites the Courts to canvass the merits of minor administrator's most routine decisions, and to substitute their decision for that of the administrator. Mostly, however, it places an unrealistic burden on administrators at all levels of the public service to consider matters with a degree of complexity, which in many routine and minor cases, would be simply unrealistic. In the case of SARS, this body is required to process and assess several million returns and claims annually, much of it at a clerical level. The same applies to, say, municipalities supplying electricity, water and other services. In particular, we would suggest that the definition of 'law' is overbroad, and it is particularly so when it includes codes of international law and alternative courses of action. The definition of 'relevant considerations' to include ALL material information is inappropriate. While in certain cases, a particular administrator could be or should be able to consider international law measures or have all material information before him or her, and even to consider all alternatives and assess and weigh the least restrictive action open to him or her, in many routine decisions this simply goes beyond the standard set by the common law. In this regard we propose that the definitions in clause 7 be simply deleted. This would not materially narrow the grounds of review, while allowing a court to decide in an appropriate case where it is necessary to intervene because an action was taken without a materially relevant consideration being considered.

The Constitutional mandate requires the legislation to have due regard inter alia to the promotion of an efficient administration. While we do not dispute that requiring just and fair administrative action can and does promote efficient administration, we do not believe that this factor has been given sufficient weight in the structure of the Bill. It could, for example, be specifically included as a consideration or factor in exempting administrators from some of the obligations in the Bill, or be set out expressly as a ground to be considered when assessing the suitability of procedures that administrators must follow or that the courts must consider when reviewing an administrative action and making an order. Instead the Bill has given a very wide definition of "administrative action". A particularly broad mandate for access to courts to examine such action, has dropped the thresholds of prejudice which must exist before prior procedures are required, and has set a very high hurdle of core procedural requirements for the valid taking of the most routine decisions or actions.

We trust these comments will assist your Committee in its consideration of this most important Bill.