Sars blocked from using RAF funds to pay Eskom

The South African Revenue Service (Sars) has been interdicted and prohibited from deducting R5.1 billion – or any part of this amount from the Road Accident Fund (RAF) levies it collects – to pay Eskom in terms of a settlement agreement between the tax collection authority and the power utility.

This forms part of an order in a judgment handed down in the High Court in Pretoria by Judge Ronel Tolmay on Wednesday to an application by the RAF for an interim interdict against Sars.

The application was prompted by a dispute between the RAF and Sars related to “diesel refunds” claimed by Eskom in terms of the Customs and Excise Act (CEA).

In terms of Judge Tolmay’s order, Sars will still be entitled to make statutory monthly deductions as provided for in the RAF Act and the CEA that are not related to the R5.1 billion that is in dispute.

Tolmay said the interim interdict will remain operative until such time as the dispute that was declared between the RAF and Sars in terms of the Intergovernmental Relations Framework Act (IRF) has been resolved or the process has been terminated.

She ordered that the process to be followed in terms of the IRF must be finalised within 45 business days from the date of her judgment.

Tolmay said that if the dispute is not resolved within this period, or the process is terminated, the RAF will be entitled to institute proceedings against Sars to prohibit it from deducting/recouping the R5.1 billion from the fund, along with any other legal proceedings to recover from Sars any deductions/recoupments already made.

Sars was ordered to pay the RAF’s costs.

ALSO READ: R25.5 billion deficit over five years — Can RAF afford to pay out claims?

Turns out Sars had already deducted R1.2bn …

Tolmay referred to Sars’s attitude in her judgment.

She said despite the RAF declaring a dispute with Sars in December 2024 in terms of the IRF Act and the ongoing dispute resolution process, it transpired that Sars has recouped/deducted the first tranche of about R1.2 billion from the RAF monthly levy payments.

Sars submitted that it had no choice but to proceed with deducting/recouping the money because, if it did not, the National Treasury’s records would not be accurate.

Tolmay said the RAF became aware of the deduction on 26 February 2025.

“To add insult to injury, I was informed by counsel representing Sars that the certificate to Treasury regarding the second tranche [would] be issued on the same day that I was hearing the matter.

“This led to me granting an interim order pending the judgment which I undertook to deliver on or before 28 March 2025.

“The attitude of Sars, which I find rather difficult to comprehend, created even more reason to hear this matter on an urgent basis,” she said.

She said Sars has the authority to decide whether diesel refunds claimed by taxpayers (such as Eskom), including the RAF levies, should be paid to taxpayers.

She said Sars decided that Eskom is not entitled to the diesel refunds for a period of about 30 months between 2019 and 2021, resulting in the dispute between Sars and Eskom.

ALSO READ: Economists say they are confident in Sars

Settlement agreement

Sars and Eskom then entered into a settlement agreement in terms of which Sars contends that it is obliged to pay Eskom an amount of about R5.1 billion.

Sars and Eskom entered into the settlement agreement on 17 October 2024 but Sars only informed the RAF about the agreement on 12 November 2024 and that it would recoup/deduct the R5.1 billion from the RAF levies over a two-month period, which was subsequently extended to five months.

The matter was set down to be heard on 24 February 2025 but on that day the parties agreed it should proceed for facilitation in terms of the IRF Act and it stood down until 28 February 2025 for the purposes of facilitation before two retired judges.

The process started on 28 February 2025, but on 14 March 2025, Eskom filed an application for intervention, and the affidavit and settlement agreement concluded between Eskom and Sars formed part of Eskom’s application.

Tolmay said this impacted the approach of the parties significantly.

The RAF said that if the application for the interim relief was not granted on an urgent basis, the fund would not receive adequate redress in the normal course and the intended deductions would render it unable to perform its core statutory duty.

Tolmay said the operations of the RAF nationwide would also be severely prejudiced, with the intended deductions of R5.1 billion constituting about 10% of the RAF’s annual income.

ALSO READ: Nersa slashes Eskom’s tariff hike – but consumers could pay the price in taxes

Secrecy around the agreement

She said the RAF was aggrieved “and rightly so” by the non-disclosure of the taxpayer and the content of the settlement agreement.

Tolmay said Sars refused to provide the agreement to the RAF and contended that the secrecy provision applies to the settlement agreement and it is not entitled to disclose it to the RAF.

However, she said this is directly contrary to a clause in the settlement agreement that makes specific provision that the contents of the settlement agreement may be disclosed to the RAF.

She said this conduct by Sars must have had an effect on the dispute resolution process followed in terms of the IRF Act, as the settlement agreement could not be made available to the parties during that process.

ALSO READ: Expert accuses RAF of misrepresenting itself and its purpose

Consequences for fund and accident victims

Tolmay said the court is ill-equipped to come to any final decision in the matter because it not only involves the interpretation of complex legal issues but will also have far-reaching consequences not only for the RAF but more importantly for motor vehicle accident victims.

She said in her view the court was obliged, especially in circumstances where it is only called upon to grant an interim interdict, to express only a prima facie view, and on this basis she was persuaded that the RAF established the existence of such a right.

ALSO READ: Almost R140 billion paid out by Road Accident Fund in three years

Then things got messy …

Tolmay referred in her judgment to developments after judgment was reserved and indicated that she was informed by her registrar on 24 March that Sars emailed an application to file a further supplementary affidavit but was informed this would not be allowed.

She said the essence of Sars’s affidavit is that the facilitation process has been terminated and her order will be rendered moot as a result.

Tolmay said new factual issues were also raised while a letter filed on behalf of the RAF indicated that it does not agree that the facilitation process should be terminated.

“The goal posts in this matter are constantly being shifted,” she said.

“I have heard the matter and I make an order based on what was argued before me.”

RAF CEO Collins Letsoalo said the fund is happy it got the relief it was seeking from the court.

Sars said it is still studying the judgment and will communicate its decision when it has finalised its internal engagement process.

This article was republished from Moneyweb. Read the original here.