It is important to realise that the dispute resolution process starts with the first SARS query. The response must be drafted in a manner which considers the possibility of the end game being witnesses giving evidence under cross-examination in court.
Therefore, any incorrect factual allegation in the response to the query, however innocently made, may come back to bite the taxpayer later in the dispute resolution process. In addition it is important that any factual statement can be proved by the taxpayer. This requires an understanding of who the relevant witnesses may be, where they are and what they are going to be able to say to support the various factual allegations in the response to SARS.
In respect of the court process, no-one wants to go to court. It is costly, time consuming and absorbs senior management resources. There are plenty of opportunities to settle a tax dispute matter before court. These include the alternative dispute resolution process as well as other settlement meetings with SARS.
An understanding of the tax technical aspects of the dispute by the taxpayer is simply not sufficient at these meetings. They also require people skilled in dispute resolution and with a proper understanding of the prospects of success at trial. For example, it is not possible to understand whether a proposed settlement is a good or bad settlement for the taxpayer unless it has an understanding of its prospects of success at trial. This, in turn, requires an understanding not only of how strong the tax technical position of the taxpayer is in relation to the tax dispute, but also the ability of the taxpayer to prove its case through its witnesses.
South African taxpayers are now following the rest of the developed world in understanding the complexity of the tax dispute process and using law firms to provide the relevant expertise in these matters.