Tax legislation and the right to equality : does section 23(m) of the Income Tax Act 58 of 1962 rationally differentiate between salaried individuals and individuals who earn their income mainly from commission?

Abstract

The authors speculate how a court should deal with a tax matter that implicates the right to equality. Section 23(m) of the Income Tax Act 58 of 1962 squarely raises an equality dispute — in the context of rational/irrational differentiation, not fair/unfair discrimination. The aim of this article is to evaluate if section 23(m) rationally differentiates between salaried and nonsalaried individuals — if the differentiation created by section 23(m) is constitutionally permissible. First, the authors discuss the influence of the Constitution of the Republic of South Africa, 1996 on tax legislation with reference to selected cases where provisions in tax legislation came under constitutional scrutiny. Secondly, the operation of section 9 of the Constitution is explained. Thereafter, the authors interpret section 23(m) in considering whether the differentiation therein falls foul of section 9 of the Constitution. Having regard to those deductions which are not available to a salaried individual in terms of section 23(m) and to the number of individuals who are listed by SARS as salaried and nonsalaried individuals in SARS's statistics from 2015 to 2018, the conclusion is reached that the differentiation between salaried and nonsalaried individuals appears to be rational as it might lead to a significant increase in the administrative burden of SARS and of the salaried individuals in question.