South African Revenue Service Faces Legal Challenges Over Dismissal and Vehicles

The South African Revenue Service (SARS) is facing heightened legal scrutiny following a Labour Court ruling that overturned the dismissal of an auditor and a looming class-action lawsuit from motorists over vehicle declaration rules.

In the labor dispute, the Labour Court overturned the termination of a VAT auditor who had been fired on September 2, 2021, for alleged gross negligence. The case stemmed from an April 2019 tax period audit regarding a R3.6 million VAT refund claim submitted by the Muslim Judicial Council Land Trust.

SARS had accused the employee of failing to follow audit procedures and properly record findings, arguing this caused financial loss. However, Judge Makhura delivered a judgment on August 11, 2026, stating that the evidence showed the amount was legally due and paid to the trust, meaning SARS suffered no financial loss. Furthermore, the judge noted that negligence cannot be assumed as gross without objective evidence and pointed out that the employee continued her duties for 18 months post-incident without further misconduct allegations.

The court declared the dismissal substantively unfair and ordered SARS to reinstate the employee retrospectively without loss of benefits, provide backpay within 15 court days, and issue a valid five-month written warning. The employee was ordered to report for duty no later than August 17, 2026.

Simultaneously, SARS is encountering pushback from nearly 2,900 motorists who have signed up for a planned class-action lawsuit organized by Lesotho Import Cars Warriors. The dispute centers on a requirement introduced in June 2026 that mandates all foreign-registered vehicles, including those from Southern African Customs Union (Sacu) members like Botswana, eSwatini, Lesotho, and Namibia, be declared on the Traveller Management System to obtain a six-month temporary import permit.

Motorists and legal representatives, such as Mkhosi Radebe of MC Radebe Attorneys, argue that demanding temporary import permits for vehicles from common customs union members violates the Sacu agreement, which generally prohibits levying further duties on goods moving between member states. Critics claim the policy creates an unlawful two-tier system and serves to penalize or extort money from border community residents who frequently drive vehicles registered in neighboring nations.

Plaintiffs plan to formally launch their court challenge once SARS announces Phase 2 of its declaration campaign, which will target foreign-registered vehicles already in South Africa before June 1, 2026. Phase 1 currently targets vehicles crossing borders.

In response to the mounting criticism, SARS defended its enforcement responsibilities, asserting that the regulations protect the domestic motor vehicle manufacturing sector and that South African residents are legally prohibited from unlawfully operating foreign-registered vehicles on local roads.