The Gauteng High Court (Pretoria) has ruled that SARS must honour the last leg of a three-year wage deal signed with unions in 2019, which a Business Day report calls setback for one of the entities facing a funding shortfall as the Treasury trawls its coffers to make up for the mismatch between spending and revenue.

Dismissing SARS’ argument that it could not afford to do so because of the Covid-19 pandemic and low revenue collection, the court ordered it to pay the consumer price index (CPI) plus 2% salary increases to members of the Public Servants Association and the National Education Health and Allied Workers Union, who together represent a majority of SARS employees.

Judge Elizabeth Kubushi also ordered SARS and Commissioner Edward Kieswetter to pay the unions’ legal costs, including the costs of senior counsel.

SARS signed the wage deal in 2019, pledging to its workers an increase of 8% in the first year, and CPI plus 2% in the second and third years. The inflation rate was 3.75% in 2021.

While SARS implemented the wage deal in the first two years, it failed to honour the last year of the agreement, prompting the unions to approach the courts.

In her ruling on Wednesday, Kubushi granted the relief sought by the unions and dismissed a counter-application by SARS and Kieswetter, which sought an order declaring the wage deal unlawful and invalid.

The Business Day report says SARS submitted in its court papers that it was unable to honour the final part of the wage deal due to ‘impossibility of performance’.

The judgment read in part: ‘Its argument is that it is not able to pay the salary increases in accordance with the wage agreement. It submits, in its papers, that it is objectively impossible for it to pay the salary increases as demanded. On that basis, it, as such, submits that the wage agreement is void and unenforceable and must be declared as such by the court.’

The reasons SARS relied on for its defence of impossibility of performance were the economic downturn and Covid-19.

‘In essence, the only reason SARS has advanced for the non-payment of the salary increases is that it was allocated less money than it requested. The low growth on revenue collection was considerable. In 2019, government collected R63.3bn less revenue than was projected at the time of the 2019 budget,’ the judgment read.

Full Business Day report