Tax fairness : the test applicable to the Contra Fiscum rule

Abstract

The contra fiscum rule is a presumption that statute law is not unjust, inequitable or unreasonable and applies to the interpretation of fiscal legislation. It seeks to prevent undue hardship on the part of a taxpayer where the provisions of a taxing statute are not clear. Courts have invoked the contra fiscum rule when there existed an ambiguity in a particular taxing provision and where there existed two reasonably possible interpretations. The consideration of ‘ambiguity’ vis-a-vis ‘two reasonably possible interpretations’ implies the use of two different tests when considering the contra fiscum rule. MAIN PURPOSE OF STUDY: The purpose of the study is to establish if there exists any support for the application of two different tests when invoking the contra fiscum rule by having regard to case law and academic works. Part of the purpose of this study is to establish whether the use of different tests might lead to different results and what the resulting impact might be on a taxpayer. METHOD: A systematised review of existing case law and academic papers on the topic of the contra fiscum rule was considered in seeking to ascertain whether courts have invoked both tests when dealing with taxation legislation specifically. The method of applying the two different tests were then specifically considered against the backdrop of the facts and judgment of the Supreme Court of Appeal in Commissioner of the South African Revenue Service v Daikin Air Conditioning South Africa (Pty) Ltd, 2018 where the minority considered the test of ‘ambigiuty’, in order to establish whether a different judgment might have followed. FINDINGS: Authority in the form of case law and academic articles exists, which is premised on the use of the tests of both ‘ambiguous’ and ‘two reasonably possible interpretations’ when applying the contra fiscum rule. CONCLUSIONS: Having applied the latter test to the minority judgment in Commissioner of the South African Revenue Service v Daikin Air Conditioning South Africa (Pty) Ltd, 2018, it was concluded that a different result might have followed, being one that favoured the taxpayer.