Pay now, argue later: time for a middle way?

The Tax Administration Act already stops SARS from collecting while a suspension request is pending. The recent judgments, and a Tax Ombud complaint open for more than eleven years, show that the protection on paper is not reaching taxpayers in practice.

By Schalk Pieterse – TRM Tax Attorneys

Every tax practitioner knows the call. SARS has raised an additional assessment, the client is sure it is wrong, and the objection is being prepared. Then comes the question: surely, I do not have to pay while I dispute it? They do. Section 164(1) of the Tax Administration Act provides that an objection or appeal does not suspend the obligation to pay the tax, or SARS’s right to recover it, unless a senior SARS official directs otherwise. The taxpayer’s way out is to ask SARS, under section 164(2), to suspend payment until the dispute is decided.

I do not suggest that the principle should go. The Constitutional Court upheld its VAT equivalent in Metcash Trading Ltd v CSARS [2000] ZACC 21, and the fiscus needs it: the 2026 Budget Review put outstanding tax debt at R646 billion, of which R518.2 billion was undisputed. But the Court also held that the discretion to suspend is reviewable, and that the Commissioner “must, however, be able to justify his decision as being rational” (para 42). The recent cases suggest, in my view, that this safeguard is not holding. The principle had its own panel, “Pay-now-argue later under question”, at SAIT’s 13th Annual Tax Indaba in Sandton on 16 September 2026. SAIT framed the session around Ferreira, and that is the right place to start.

Ferreira: more than R1 billion in security was not enough

In Ferreira v CSARS [2026] ZAGPPHC 47 (2 February 2026), SARS had raised additional income tax assessments of about R531 million. The taxpayer’s appeal was pending in the Tax Court. SARS refused to suspend payment, and when he asked it to reconsider under section 9, tendering a pledge of his 80% shareholding in TMM Holdings valued at R1.25 billion, SARS refused again. It said the security was inadequate and recovery would be in jeopardy. In court, SARS admitted that the shares were worth more than R1 billion.

Dyke AJ set the second refusal aside. SARS’s Independent Debt Committee had never been told about the pledge, and SARS’s bare denial did not raise a genuine dispute of fact. The only prejudice to SARS “would be one of cash flow”, while the taxpayer would have to sell at fire-sale prices and any later success would be “pyrrhic” (para 77.4). The refusal was “so unreasonable that no reasonable person would have made it” (para 78).

The remedy sets the case apart. A court ordinarily sends a flawed decision back to the decision-maker, and section 8(1)(c)(ii)(aa) of the Promotion of Administrative Justice Act permits substitution only “in exceptional cases”. Applying Trencon, the court held that it was in as good a position as SARS to decide and that the outcome was a foregone conclusion, and it suspended payment subject to the pledge, with the costs of two counsel against SARS. The case should be read narrowly. The court stressed that this was not a policy-based decision and that the central issue was common cause (paras 87 and 88), so I expect substitution to remain the exception.

Ferreira is not an isolated case

In CSARS v Agrizzi [2023] ZAGPPHC 604, SARS itself accepted that the taxpayer had no realisable assets, that payment would cause irreparable hardship, that there was no risk of dissipation and that no fraud was involved. It refused suspension anyway and found that recovery was in jeopardy. Basson J held that there appeared to be “no rational basis for refusing”, and that it was “inherently contradictory” to find no assets to execute against and yet a risk to recovery.

In F Taxpayer v CSARS [2022] ZATC 1, the taxpayer asked for suspension on 11 June 2020, and SARS issued a final demand a week later, with nothing to suggest that any official held the belief about dissipation that section 164(6) requires. SARS then approved the suspension but would not show the taxpayer as tax compliant until the suspended debt was paid and relented only after the taxpayer gave notice of a High Court application. Cloete J held that SARS had displayed “an egregious lack of regard for the taxpayer’s constitutionally entrenched right to fair administrative action” (para 48).

Devland Cash and Carry (Pty) Ltd v CSARS [2026] ZAGPJHC 967 (28 August 2026) shows how long the road can be. In February 2020 SARS refused to suspend payment of a tax debt of about R1.9 billion, including penalties and interest, and the company went to court that month. It had to apply to compel the record of the decision, and what SARS delivered had parts of the committee minutes redacted. More than six years after the refusal, the court ordered SARS to produce the complete record. It held that how the committee weighed the factors goes “to the heart of whether the refusal was lawful, reasonable, and rational”, and that section 68 of the Act is not a general secrecy provision that lets SARS withhold a taxpayer’s own record from that taxpayer (paras 51 and 53). The review itself had still not reached its merits.

The moratoriums are already in the Act

None of this comes from a gap in the legislation. Section 164(6) provides that from the day SARS receives a suspension request until ten business days after it gives notice of its decision, “no recovery proceedings may be taken unless SARS has a reasonable belief that there is a risk of dissipation of assets by the person concerned”. Three further provisions build on it. SARS may not file a certified statement, which counts as a civil judgment although no judge has considered it, while “the period referred to in section 164(6) has not expired” or payment is suspended (section 172(2)). It may not set a refund off against the debt in that period, or while a suspension exists (section 191(2)(a)). And a suspended debt, or one that may not be recovered during the section 164(6) period, does not count against the taxpayer’s compliance status (section 256(3)(b)).

Put plainly, once the request is lodged, SARS may not take judgment, keep the refund or flag the taxpayer as non-compliant, and unless it reasonably believes that assets will be dissipated, it may not appoint the taxpayer’s bank either. None of that depends on SARS agreeing to anything.

The practice has not followed the Act

The Tax Ombud’s Annual Report for 2024/25 lists as a systemic issue that “Debt set-off and recovery steps are taken despite a request for suspension of payment”. The Ombud records that SARS’s systems do not cater for a pending request, so confirmed refunds are set off automatically against the disputed debt. That issue had been on the Ombud’s inventory for 136 months, more than eleven years, and was still ongoing. SARS’s failure to respond to suspension requests within the 30-day turnaround time was ongoing after 79 months.

The Act does little to close that gap. Section 164 sets no time within which SARS must decide. None of the four protective provisions says what follows when SARS breaches it. The Tax Ombud’s recommendations do not bind SARS (section 20(2)). So, a taxpayer whose refund is set off while a request is pending has, in practice, one effective remedy: the section 11(4) notice and an application to the High Court, funded by the taxpayer.

The imbalance is in accountability

Set that against the taxpayer’s position. A taxpayer who pays late is charged interest and, where it applies, a penalty. Wilful non-compliance can be a criminal offence under section 234. A person who manages a company’s finances can be held personally liable for its tax debt under section 180 where their negligence or fraud caused it to go unpaid. The Act holds the taxpayer to account at every turn, but when SARS breaches section 164(6), the cost of enforcing the moratorium falls on the taxpayer it was meant to protect.

Maumela v CSARS [2026] ZAGPJHC 886 shows how that plays out. The taxpayer launched an urgent application to stop collection pending review of a refusal, and SARS withdrew the refusal before the court had to rule on it. The court awarded costs on the ordinary scale only, holding that section 164 confers no “presumptive entitlement to suspension”. That is right as a matter of law, but ordinary costs seldom cover what an urgent application actually costs. The taxpayer in Ferreira had more than R1 billion in shares and two counsel. A taxpayer facing a R3 million assessment has neither. The review that Metcash pointed to is real, but in practice it is available only to the taxpayer who can fund it.

A middle way

The answer is neither to abolish the rule nor to leave it as it is. The Davis Tax Committee proposed in 2017 that a taxpayer pay 40% of SARS’s claim as a down payment. Canada starts from the other end: collection is barred while an objection or appeal is pending, but a large corporation can be made to pay half, and the Minister must satisfy a judge before collecting early on the ground that delay would jeopardise collection. In my view, a South African middle way needs four things, none of which requires Parliament to give up the rule.

First, a deadline. If SARS has not decided a request within a fixed period, say 30 business days, the suspension should be treated as granted until it does. Second, suspension on a defined tender. Where the taxpayer pays a fixed portion or tenders adequate security, suspension of the balance should follow, and SARS should carry the burden of showing that the dispute is frivolous or dilatory or that assets will be dissipated. On that approach, Ferreira would probably never have reached court. Third, reasons and the record with the decision, so that no taxpayer needs a Rule 53 application, and six years, to learn what the committee was told. Fourth, consequences. A judgment, set-off or compliance flag made in breach of the moratorium should be reversed by SARS within a short, fixed period, with interest, and a taxpayer forced to court to enforce it should recover costs that actually compensate.

Pay now, argue later protects the fiscus, and the fiscus needs protecting. But when the Tax Ombud has carried the same complaint for more than eleven years, and taxpayers must litigate to make SARS observe provisions that already bind it, the balance needs a relook. The rule can stay. The duty to act lawfully should bind SARS as firmly as the duty to pay binds the taxpayer.

Intellectual property disclaimer: The contents of any article published by Pieterse Sellner Erasmus should not be construed as professional legal advice.