“I recently discussed a certain tax approach applied by SARS with my auditors and they informed me that the approach applied by SARS comes from an Interpretation Note that SARS issued in respect of a specific section of the Value Added Tax Act. I was taken aback that SARS could interpret the law and apply it as they deem fit. Is this constitutional?”
It is quite common practice for administrative bodies that are established and function by way of statute to, from time to time, issue guidelines and interpretations in respect of legislation that governs them or which they are required to enforce, collectively referred to as “Interpretative Documents.” The question you rightly raise, is to what extent these Interpretative Documents are binding when it comes to the interpretation of relevant legislation.
Our Constitutional Court recently had an occasion to consider this exact question. In general, the interpretation of legislation is the mandate of our courts and any interpretive finding by our courts is binding, including on administrative bodies. But, to what extent must the court take account of, or comply with, Interpretative Documents issued by administrative bodies and can such notes be considered valid evidence to be considered by our courts when deciding on the correct interpretation?
In considering the question, it was found that any court’s interpretation of legislation must always be objective and independent. However, in evaluating whether to consider Interpretative Documents of an administrative body, the following principle should be applied:
“When a legislative interpretation of an administrative authority is evidence of a consistent and impartial interpretation over a prolonged period by all those involved, then such administrative authority’s interpretation is persuasive authority that a Court may take into account when objectively and independently interpreting the meaning of legislation.”
Applying this principle, the court found that where a certain interpretation issued by an administrative authority like SARS has been used over a prolonged period of time, the court may consider this interpretation and consider it as a valid form of evidence. The court is, however, not confined to this interpretation and is ultimately the most appropriate body to consider the interpretation of any Act.
What we can take from this is that Interpretative Documents are relevant and can apply to the interpretation of legislation. However, although the Interpretative Documents can be persuasive of a certain interpretation, ultimately our courts have the final say. This gives us the comfort that administrative bodies cannot just make up their own rules to play by and always remain subject to the watchful eye of our courts.