A recent judgment of the Tax Court in Johannesburg provides another reminder of how costly it can be for taxpayers who do not think carefully before allowing a tax dispute to progress into full-scale litigation without ensuring that they are properly prepared to actually run the case.
André Daniels
Head of Tax Controversy & Dispute Resolution
In MNO v Commissioner for the South African Revenue Service (Case No. IT 46503), the Tax Court was scheduled to hear an appeal against four income tax assessments over four days. Effectively, on the eve of the trial, the taxpayer discovered a large quantity of additional material. SARS took the position that its expert would need more time than only the weekend left before the set court date to consider the newly discovered material before the matter could properly proceed.
The hearing never got off the ground. Instead, the taxpayer was left with a postponement, a potentially substantial legal bill and the underlying tax dispute remaining undecided.
Litigation against the South African Revenue Service (“SARS”) is sometimes unavoidable. There are disputes where the parties have exhausted every meaningful opportunity to resolve their differences and a court must ultimately decide the issue.
However, litigation should ordinarily be the end of the road, not the starting point.
Four Days in Court, Without a Day in Court
The appeal was set down to run from 1 to 4 June 2026. On 30 May 2026, the taxpayer discovered the additional material. With only the weekend available, SARS said it was simply not possible to consider the material properly. The taxpayer ultimately accepted that the appeal had to be postponed sine die.
Importantly, therefore, the Tax Court was not called upon to determine whether SARS’ assessments were correct. It did not decide the underlying tax dispute at all.
The only issue that remained was costs. This demonstrates one of the realities taxpayers sometimes underestimate when embarking on tax litigation. Considerable time and money can be spent before the merits of the dispute ever reach a judge.
The Cost of Being Unprepared
The taxpayer accepted that it would have to pay the wasted costs caused by the postponement. The real fight concerned how far those costs should extend.
SARS had briefed senior and junior counsel for the four-day hearing and had also engaged an expert. It sought the costs of both counsel for all four days, together with the expert’s reasonable preparation and reservation fees, which the Court ultimately agreed to.
Wilson J found that SARS should be fully indemnified for the costs associated with counsel having reserved all four days for the trial. The Court was particularly critical of the timing of the taxpayer’s discovery. The additional material, it held, ought to have been disclosed “weeks or months if not years ago”.
Quite tellingly, Wilson J remarked that: “This sort of conduct gives the legal process a bad reputation.”
The result was that the appeal was postponed indefinitely and the taxpayer was ordered to pay the costs occasioned by the postponement, including senior and junior counsel on Scale C for all four scheduled hearing days, as well as the expert’s reasonable taxable preparation and reservation fees. After all of that, the underlying tax dispute remains unresolved.
Litigation Has a Price Before Anyone Wins or Loses
This judgment fits into a broader lesson emerging from tax disputes before our courts. The question should not simply be whether a taxpayer has a case against SARS, but rather whether litigation is genuinely the most effective way of resolving it.
By the time a matter reaches the Tax Court, the taxpayer may already have incurred the costs of attorneys, counsel, experts, discovery, preparation, consultations and trial preparation. If something then goes wrong procedurally, those costs do not simply disappear.
Worse still, as this case demonstrates, the taxpayer may become liable for SARS’ wasted costs while still having its own legal team and experts to pay. The taxpayer can therefore spend substantially on litigation without obtaining any determination of the actual tax liability.
That is hardly a victory for anyone, let alone the taxpayer.
A Return to Meaningful Engagement
None of this means taxpayers should avoid litigation where litigation is necessary. SARS gets assessments wrong and legitimate disputes arise. There will always be cases involving questions of law, principle or fact that cannot reasonably be resolved without judicial intervention. However, taxpayers and SARS should be equally alive to the value of meaningful engagement before reaching that point.
South Africa’s tax dispute resolution framework provides several opportunities for disputes to be narrowed or resolved without a fully contested Tax Court hearing. Those mechanisms should not be treated merely as procedural hurdles on the road to litigation.
Where the parties can identify the real issues in dispute, exchange the relevant evidence and engage constructively on their respective positions, there is often considerable value in doing so. This requires participation from both sides.
Taxpayers must place their cards on the table and ensure that their documentary and evidentiary position is properly prepared. SARS, in turn, should meaningfully consider the taxpayer’s case rather than approaching every dispute as something that must ultimately be defended in court.
The objective should be resolution, not litigation for litigation’s sake.
Court Should Be the Last Resort
There are times when going to court is exactly the right decision, but once a taxpayer elects to litigate, the matter must be approached with the seriousness that litigation demands.
Evidence cannot emerge at the eleventh hour. Experts cannot realistically be expected to reconsider substantial new material over a weekend. Court dates, counsel and experts come with real costs, whether the trial ultimately proceeds or not.
MNO is therefore another useful reminder that the financial consequences of tax litigation are not confined to whether the taxpayer ultimately wins or loses the substantive dispute. Sometimes, the costs arise simply because the dispute was not ready to be litigated.
For taxpayers considering litigation against SARS, the lesson is straightforward: exhaust meaningful engagement where possible, prepare properly where litigation becomes necessary, and understand that once a matter reaches the courtroom door, even a postponement can carry a very expensive price tag.
The Tax Court in MNO never determined whether SARS was right, but someone still had to pay for the legal costs.
In this case, it was the taxpayer.
