The recent Supreme Court of Appeal (SCA) judgment in QI Logistics (Pty) Ltd v Commissioner for theSouth African Revenue Service, reinforces one of the most important procedural rights available to taxpayers: when SARS makes an adverse decision, the taxpayer must ask for reasons.
André Daniels
Head of Tax Controversy & Dispute Resolution
Too often, after months of an audit, verification or investigation, SARS issues an assessment or decision containing little more than a conclusion. The taxpayer is informed of the outcome, but not why SARS rejected the detailed explanations, legal submissions and supporting documentation that had been provided. As in QI Logistics, this situation is not uncommon.
In practice, many taxpayers then proceed to lodge an objection. The QI Logistics judgment demonstrates why this approach may overlook a fundamental taxpayer’s right.
Before challenging SARS‘ decision, taxpayers should seriously consider requesting reasons.
The Facts
The dispute arose after SARS held the licensed clearing agent liable for approximately R35 million in customs duties and penalties on the basis that certain fuel consignments had allegedly not been properly acquitted for export.
The taxpayer responded to SARS‘ notices by submitting detailed written representations together with four lever arch files of documentary evidence demonstrating that the fuel had, in fact, been exported.
SARS nevertheless issued its letter of demand.
Its explanation amounted to little more than an assertion that certain customs entries had not been endorsed at the relevant border posts.
The taxpayer then did precisely what every taxpayer should do: it requested reasons explaining why its evidence had been rejected.
SARS failed to respond, an omission ultimately proving fatal to SARS‘ case.
Reasons Are Not Optional
The SCA reaffirmed an important constitutional principle that administrative decisions must be capable of justification.
It is not sufficient for SARS to just conclude that a taxpayer is liable. There must be a rational connection between the information before SARS, the statutory powers being exercised, thereasons provided and the decision ultimately reached.
Where taxpayers submit extensive documentary evidence and detailed representations, SARS must demonstrate that it actually considered that material.
If SARS rejects the taxpayer’s evidence, it should explain why and indicate:
– Was the evidence incomplete?
– Was it unreliable?
– Was it inconsistent with other information?
– Was it legally insufficient?
The taxpayer requested reasons why its submitted documents were said to be insufficient to prove due acquittal, but the Commissioner never furnished any reasons. The reasons the Commissioner stated in the subsequent letter of demand were, according to the judgment, “sparse” and repeated only that some entries were not endorsed for arrival and exit.
Repeating the original conclusion did not satisfy the obligation on SARS.
Why Requesting Reasons Matters
This judgment should change the way taxpayers and tax practitioners approach disputes with SARS.
The Dispute Resolution Rules promulgated in terms of Section 103 of the Tax Administration Act No. 28 of 2011, gives taxpayers the right to request written reasons for administrative action that materially and adversely affects their rights.
When a taxpayer requests reasons for an adverse decision, SARS must provide adequate written reasons within the prescribed period of 45 business days. This is a significant strategic step which must not be overlooked by taxpayers.
The SCA confirmed that:
“[40] Where reasons are absent or inadequate, and the contemporaneous record does not reveal the basis for the decision, a court may infer that the administrator failed to engage with relevant material or failed properly to exercise the power conferred. In terms of s 5(3) of PAJA, if an administrator fails to furnish adequate reasons for an administrative action, it must, subject to subsection (4)12 and in the absence of proof to the contrary, be presumed that the administrative action was taken without good reason.”
SARS Cannot Repair Its Decision Later
The Commissioner attempted during litigation to provide detailed explanations through answering affidavits explaining why the taxpayer remained liable. The SCA rejected this approach taken by theCommissioner.
Administrative decisions must generally stand or fall on the reasons that existed when the decision was made.
SARS cannot ordinarily issue an inadequately reasoned decision and then attempt to construct proper reasons years later once litigation has commenced.
That principle promotes accountability. It requires SARS to properly consider the taxpayer’s representations before making a decision, not after being challenged in court.
A Significant Shift in Tax Dispute Strategy
Where SARS issues an adverse decision containing little or no reasoning, taxpayers should not immediately assume that the next step is to lodge an objection. They should first request proper reasons.
If SARS fails to provide those reasons, it may find itself in a significantly weaker position should thedispute ultimately proceed to review proceedings.
Without proper reasons, SARS may struggle to demonstrate that it genuinely considered thetaxpayer’s evidence or properly exercised the statutory powers entrusted to it.
Accountability Must Apply to Both Sides
One of the longstanding frustrations among taxpayers and tax practitioners is the imbalance that often exists within the tax administration system.
Where taxpayers miss statutory deadlines, the consequences are immediate and severe, including the imposition of penalties and interest. Objections may be declared invalid, and in certain instances, appeal rights can be lost altogether.
By contrast, SARS has historically been allowed, in certain instances, to miss statutory obligations with comparatively few practical consequences.
This is illustrated by recent Tax Court judgments. In IT 25180 (9 December 2025), a taxpayer’s minimal delay in filing an expert notice and summary was not condoned. By contrast, in VAT 12167(12 March 2026), SARS was granted condonation despite filing its Rule 31 statement approximately four years late, with the delay attributed to an official’s illness, internal capacity constraints and administrative failures.
The QI Logistics judgment suggests that the courts are becoming increasingly willing to recognise that administrative failures by SARS cannot simply be overlooked.
Although the SCA did not create a statutory penalty for SARS‘ failure to provide reasons, it did confirm that such failures may ultimately result in SARS‘ own decisions being reviewed and set aside.
Time for Legislative Reform?
In recent years, National Treasury has demonstrated a willingness to amend tax legislation following important decisions of the Supreme Court of Appeal and Constitutional Court where shortcomings in the law have become apparent. This would not be unprecedented. The same approach should now be considered in respect of SARS‘ repeated failure to comply with legislated dispute resolution time periods, by introducing meaningful consequences where statutory deadlines are ignored.
Perhaps the time has now come to consider whether similar reforms are required in respect ofadministrative accountability.
A modern revenue authority undoubtedly requires extensive powers to protect the fiscus. However, those powers must be exercised lawfully, rationally and transparently.
If taxpayers face penalties, interest and the loss of legal rights for failing to comply with statutory obligations, it is legitimate to ask whether there should also be meaningful consequences where SARS officials repeatedly disregard their own statutory duties.
The Supreme Court of Appeal has delivered an important reminder that accountability in tax administration is not a one-way street.
Taxpayers should never underestimate the importance of requesting reasons. Sometimes, theabsence of reasons may become the strongest ground upon which to challenge SARS‘ decision.
