SARS’s application of the additional medical scheme fees tax credit for prescribed expenditure: a rule of Law violation?
Authors Fareed Moosa
Affiliations: Head of Department (Mercantile and Labour Law) University of the Western Cape
Source: Journal of Corporate and Commercial Law & Practice, Volume 5 Issue 2, 2019, p. 57 – 78
Tax administration by the South African Revenue Service (SARS) is subject to constitutional control. As such, all SARS’s administrative processes must adhere to the rule of law, a founding constitutional value. This article argues that certainty, fairness, legality and rationality are basic principles of this value that must underpin SARS’s application of the rules governing the assessment of a taxpayer’s claim to benefit from the additional medical scheme fees tax credit provided for in s 6B(2) of the Income Tax Act 58 of 1962. This article shows that, in practice, SARS uses its examples of ‘qualifying medical expenses’ as legal yardsticks for determining whether a tax credit ought to be granted. The nub of this article is its hypothesis that this practice is antithetical to the principles engrained in the rule of law and, as such, does not pass muster. Consequently, the key contention made here is that any disallowance of a rebate on the basis that a taxpayer failed to satisfy any requirement in a listed example is justifiable grounds for an objection and appeal to be lodged under the Tax Administration Act 28 of 2011. Finally, this article argues further that a taxpayer is entitled to a rebate under s 6B(2) read with para (c) of the definition of ‘qualifying medical expenses’ in s 6B(1) of the Income Tax Act if the following two-legged test is met: First, the expense must be ‘prescribed’ by the Commissioner of SARS. Secondly, the expense must be ‘necessarily incurred and paid’ by the taxpayer ‘in consequence of any physical impairment or disability’ that is suffered by the taxpayer personally or by any person qualifying as a ‘dependant’ of the taxpayer.