The Road Accident Fund (RAF) has emerged victorious in its legal battle against the South African Revenue Service (SARS), with the Gauteng Division of the High Court granting an interim interdict that prevents the tax authority from deducting R5.1 billion under contentious circumstances.
The ruling underscores the court's view that such deductions would financially jeopardise the RAF and potentially endanger the support it provides to motor vehicle accident victims across the country.
This legal confrontation stems from a dispute over RAF levy diesel refunds that SARS is allegedly obliged to pay to Eskom, following an agreement struck in October 2024 between the two entities.
The RAF contends that SARS’s plans to offset the amount owed to Eskom against the levies it collects on behalf of the RAF represents a breach of legal stipulations established in the RAF Act. According to the RAF, only those deductions outlined in section 5(2) of their Act, in conjunction with the Customs and Excise Act 91 of 1964, are permissible.
Timeline of events
The saga began in November 2024 when SARS requested a meeting with the RAF, stating that it needed to discuss “recent audits and implications for the RAF” without providing a clear agenda. During this meeting, SARS revealed plans to deduct the substantial R5.1 billion from the RAF levies as part of a settlement agreement with an unnamed taxpayer, further fuelling the RAF’s concerns over transparency and procedural fairness.
In response, the RAF declared a dispute per the Intergovernmental Relations Framework Act 13 of 2005, seeking a facilitation process instead of embarking on immediate legal proceedings. While SARS acquiesced to this process, it remained steadfast in its intent to make the levy deductions, prompting the RAF to warn of legal action if these actions proceeded without resolution.
Despite the ongoing facilitation, SARS proceeded with an initial deduction of R1.2 billion, inciting the RAF to apply for an urgent interdict. The initial court hearing took place on 24 February 2025, during which Judge Tolmay emphasised the necessity of transparent communication from SARS concerning the deductions that would greatly affect the RAF's operations. The judge remarked that SARS was required to inform the RAF about such deductions well ahead of time due to the potential financial implications involved.
A courtroom revelation
As the legal arguments unfolded, the facilitation process between the two parties collapsed, leading to a full hearing in court. It was here that Judge Tolmay found the actions of SARS particularly concerning—especially their failure to disclose critical details regarding the taxpayer and the settlement agreement itself, despite the terms of that agreement allowing for such disclosure.
In a pointed critique, the judge warned that the intended deductions could severely compromise the functionality of the RAF, while noting that SARS would not incur irreparable harm should these deductions not take place at this juncture. The judge dismissed SARS's reliance on procedural technicalities to justify their actions, stating that it was clear throughout the process that the RAF had raised valid disputes and thus warranted protection under the interim interdict.
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Ultimately, the court granted the interdict, insisting that the RAF had satisfied all necessary criteria for such a ruling, and moreover awarded costs against SARS on a substantial scale.
The ruling marks a significant turn in the ongoing disputes between governmental bodies regarding funds and settlements, highlighting the weight of legal obligations to transparency and the potential impact such decisions can have on public service institutions. The RAF's battle stands as a reminder of the complexities involved in the interplay between tax law and the need for organisations to protect their operational integrity.
This ruling is not just a victory for the RAF but also for the individuals reliant on the services and compensation that the Fund provides, ensuring that vital resources remain intact to assist those most in need.
IOL