churches speak out at last · 2020-05-05 · 170 . tax shock, horror . 2017—may—3 —an...

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Churches Speak Out At Last There were brave religious leaders who spoke out against Apartheid governments.

There is a grave need for them to be heard now, as the ANC drags us all, save for a privileged few, to perdition.

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue #169

This is a free publication devoted to unearthing what is going on in the SA tax field. If it isn’t here, it never happened.

Unless otherwise indicated (‘§’), every document listed is cumulatively included in the Tax Shock, Horror Database, which is available monthly, quarterly or even individually, zipped on DVD, by post, for R250 a month inclusive of VAT at 14%.

This is perhaps the only newsletter in the world with its own stylebook (also free), by Costa Divaris & Duncan McAllister (2015 ed). Bsp Seminars® publications—tax and tax-related acts, books, databases and newsletters by and compiled by Costa Divaris.

All past issues from 2012 to date. All cases listed in this section from 2006 to date. Visit our website.

Tax act 07 July 1964: The Income Tax Act 90 of 1964. Replaces my MS Word copy. FICAB case 28 November 2016: Ayoba Foreign Exchange (Pty) Limited v Financial

Surveillance Department of the South African Reserve Bank Appeal no 12/3/1/5. Decision of the appeal board of the FIC. Financial penalties under s 45C of the FICA confirmed.§

EDD release 14 February 2017: NEF to be incorporated into IDC to guarantee funding for black entrepreneurs:

In a landmark breakthrough for South Africa’s quest for inclusive growth and radical economic transformation, the Ministers of Trade and Industry and of Economic Development announced in Cape Town today that the National Empowerment Fund (NEF) will become a wholly-owned subsidiary of the Industrial Development Corporation (IDC) in order to meet the considerable demand for funding by black entrepreneurs.

For pure bullshit, this release is hard to beat. How did I miss such a gem? Treasury speech 01 April 2017: Speech by MOF, Malusi Gigaba, on his new portfolio. Each

paragraph is more embarrassing than the next, but try this one for size: We can no longer pretend that growing the economy, as it is currently constituted, will improve the lives of all South Africans.

High Court case 20 April 2017: VIP Consulting Engineers (Pty) Ltd and Others v Minister of Finance Mr PJ Gordhan and Others (24799/2013) [2017] ZAGPPHC 147. A state supplier successfully fights to keep its listing.§

DTI IPAP 26 April 2017: Industrial policy action plan 2017/18–2019/20. CIPC notice 26 April 2017: Notice 30 of 2017—Transitional period of conditional licences. Bill 27 April 2017: Legal Practice Amendment Bill, 2017 [B 11—2017]. CIPC website May 2017: Upgraded, & far less annoying than before. dti website May 2017 (undated): Should you care to do so, you can download the twenty-

eight-page policy document confidently entitled ‘Black industrialists—towards full-scale industrialization & inclusive growth’.§

Tax practitioners May 2017: Introduction of improvements to the dispute management process. Tax practitioners May 2017: Enhancements to the income tax return for a trust (ITR 12T). FIC release 02 May 2017: FIC welcomes President’s signing of the FIC Act amendments. Act 02 May 2017: Financial Intelligence Centre Amendment Act 1 of 2017. SARS BPR 273 02 May 2017: Binding private ruling 273—Waiver of a contractual right. You ATR

chaps must really insist on receiving bribes. Otherwise, why bother with ex cathedra statements? But maybe you are receiving them.*

Draft rules 03 May 2017: Draft of the customs control rules, clean copy, 614 pages. Plus draft track changes copy. Plus draft explanatory note:

The third draft of the Customs Control Rules made under the Customs Control Act 31

Issue: 170 Tax Shock Horror Database—17 234 items (4,57 GB)—3 583 subscribers May 2017

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170 Tax Shock, Horror 2017—May—2


of 2014, has been published for sight. As previously explained to stakeholders, this draft has been ‘frozen’ for purposes of SARS systems development. Please note that the draft is not published for public comment.*

Treasury speech 03 May 2017: Inventing Africa’s venture capitalist communities & constructing the capital bridge to Africa’s deal pipeline. This week’s MOF. Waffle deluxe.

doj&CD release 04 May 2017: Judge Mabel Jansen tenders her resignation: …. Judge Jansen was on special leave following comments she made which gave rise to a complaint to the Judicial Services Commission (JSC). The JSC was busy processing the complaint when she tendered her resignation. Her resignation will obviate a protracted disciplinary process….

GCIS release 04 May 2017: Parliament praises SIU for saving billions of rands: The Committee heard that that during the 2016/17 financial year, the SIU prevented contracts and/or set aside administrative decisions or actions amounting to over R3,9 billion.… However, the Committee expressed grave concern after the SIU indicated that 43 government department or institutions still owe it money. At the end of February 2017, more than R418 million was payable to the SIU and the bulk of this debt is older than 90 days.

Why should the SIU stand ahead of other state creditors? GCIS release 04 May 2017: Gauteng Health saves R61 million in medico-legal claims:

The Gauteng Department of Health saved about R61 million in medico-legal claims through mediation. This amount accounts for various cases which were taken through mediation process instead of following the legal route.

GN 331 GG 40830 04 May 2017: National Energy Regulator Act: Public hearing for municipalities applying for average tariff Increase above guideline of 1,88%. Tax increases.

SARS BGR 41 04 May 2017: Binding general ruling (VAT) 41 (issue 2)— VAT treatment of non-executive directors.*

Step Industry News 04 May 2017: European Parliament's Panama Papers inquiry estimates cost of offshore tax schemes at over EUR 200 billion.§

SARS release 05 May 2017: Further clarification on the VAT registration of nonexecutive directors.*

LSSA release 05 May 2017: Law Society urges Judicial Service Commission to scrutinize judicial candidates for racist tendencies. On the resignation of High Court judge Mabel Jansen.

SARB speech 05 May 2017: Daniel Mminele, at the Managing capital flows: challenges for developing economies conference:

…. In a nutshell, South Africa has a relatively hands-off approach to managing capital inflows while monetary policy is not focused on the exchange rate but rather on the possible inflationary implications of exchange rate changes. However, during periods of sustained inflows, the authorities accumulated foreign exchange reserves, without in any way seeking to influence the exchange rate towards a particular level or range.

High Court case 05 May 2017: Vogel NO v Melamed and Others (35494/16) [2017] ZAGPJHC 127. A disgraceful matter involving the abuse of trust funds, confidently disposed of by Bham AJ. The trust was established to administer funds arising from a divorce. One of the founding trustees, an attorney, failed to transfer the funds into the possession of the trustees. He was removed from his position by the Master yet still retained possession. His defence was that the sole remaining trustee, Vogel, lacked authority to claim them, since the deed required there to be three trustees. Footnotes suppressed:

There is another way to state the proposition. It would seem to me absurd to suggest that if a party who is not entitled to be in possession of funds of the Trust but is in possession of the funds of the Trust (such as is the case with the first respondent), and upon a request made by the remaining trustee of the Trust to transfer those funds into a bank account of the Trust refuses to do so. the remaining trustee even if he is in default of the obligation to appoint an additional trustee Is left impotent in taking steps to obtain possession of the funds of the Trust.…

A punitive costs order was granted against the attorney & the ex-husband, who unwisely chose to join the attorney in opposing the application:

…. There is then no reason for him to escape the cost consequences of his conduct In this regard. And, he could have been under no illusion, having been party to the circumstances which resulted in the formation of the Trust for the benefit of his own children, that property of the Trust cannot be held by anyone but the trustee of the Trust, even at a time when there is only a single trustee.

GN 400 GG 40827 05 May 2017: License fees payable by licensed generators of electricity. Under the Electricity Act.

Draft rules 05 May 2017: Under the Customs & Excise Act (I couldn’t find these on the



SARS website): Draft amendments— for various technical amendments in Part 1 of Schedule No 1 to create separate

8-digit tariff subheadings classifiable in Chapters 2, 29, 38, 39, 73 and 87; in Part 1 of Schedule No 1 to insert additional Note 1 as well as the creation of

separate 8-digit tariff subheadings in Chapter 76; in Part 2A of Schedule No 1 to amend the description of item 104.17/2206.00; in Part 3E of Schedule No 1 is amended as a consequence of the insertion in

Part 1 of Schedule No 1 to provide for road wheel and rims fitted with tyres; in Part 1 of Schedule No 2 to insert anti-dumping item 201.02/0207.14.92/-

01.08 as a consequence of an insertion in Part 1 of Schedule No 1; and in Part 1C of Schedule No 6 insert refund provisions under 620.22 to make

provision for wine in containers of more than 2 li but not more than 10 li, as a consequence to Part 1 of Schedule No 1 in HS 2017.*§

SARS IN 33 updated 05 May 2017: Interpretation Note 33 (Issue 5)— Assessed losses: companies: the ‘trade’ & ‘income from trade’ requirements. Issue 4 archived.*

SARS IN 51 updated 05 May 2017: Interpretation Note 51 (Issue 4)— Pre-trade expenditure & losses. Issue 3 archived.*

SARS summary 05 May 2017: Summary of all interpretation notes.* ZAeconomist 05 May 2017: Making sense of low JSE returns—& identifying the conditions for

better returns. By Brian Kantor: The Zuma interventions in fiscal policy have reduced the degree of rand strength made possible by an improving global economic outlook. It has moreover undermined the confidence of SA business and households in their economic prospects and their willingness to spend more. Yet the outlook for lower inflation has improved, given the partial recovery of the rand and lower food prices. The case for cutting short term interest rates in SA has therefore become more compelling. Perhaps there is enough of a case for the Reserve Bank to do what it can for the real economy by lowering interest rates. Its influence over the value of the rand remains limited, as one can only hope its Monetary Policy Committee finally realizes.…§

dti release 07 May 2017: Media statement of the special economic zones advisory board regarding the proposed Atlantis special economic zone:

…. Naidoo [chairperson of the SEZ’s Advisory Board] says the disinformation spread over the given period attempts to portray potential victimization and prejudice towards the Western Cape Province.

dti release 08 May 2017: IPAP is critical to radical economic transformation—minister Davies:

The Minister of Trade and Industry, Dr Rob Davies says the Industrial Policy Action Plan (IPAP) is critical to achieving Radical Economic Transformation. Minister Davies was speaking at the launch of the ninth iteration of IPAP which took place in Sandton today.…

‘In the simplest terms, Radical Economic Transformation means putting coherent initiatives together that can begin to shift the productive base of our economy away from the inherited colonial division of labour and create decent sustainable jobs—particularly for the most marginalized and vulnerable groups in our society. It means unequivocal and urgent support for programmes such as the Black Industrialists Programme, which are increasingly being strengthened and deepened, to ensure that ownership, management and control of the economy is increasingly in the hands of black people’, said Minister Davies.

And we all thought it involved frenetic, accelerated looting, ahead of the ANC’s election of a new Thief-in-Chief.

GCIS release 08 May 2017: Transport on launch of new PRASA train service: The new Metrorail (Peoples’) trains are part of the new fleet that will be rolled out by government over the next 10 to 15 years as part of PRASA’s Modernization Programme, creating an affordable, accessible, safe and reliable transport system in the country. With the manufacturing plant for the new trains underway in Nigel, Ekurhuleni, this initiative will create thousands of sustainable jobs and job [sic].

Treasury pamphlet 08 May 2017: The FICA act. Actually, that should be the ‘FIC Act’. SARS release 08 May 2017: Launch of customs preferred trader programme:

Currently, 28 Customs clients have been awarded Preferred Trader accreditation status following a lengthy period of audits and customs competency assessments. The Preferred Trader journey began in 2011 after extensive benchmarking and consultations with trade. It was set up under the World Trade Organisation’s internationally recognized Authorized Economic Operator (AEO) programme. The main objective of the Preferred Trader Programme is to move away from the traditional



Customs gate-keeper approach, to a more risk-based approach. Compliant traders will receive benefits as stipulated in legislation for accredited clients. This will reduce the frustrations and the costs that can be incurred by traders who are operating in the global market.*

Step Industry News 08 May 2017: OECD takes aim at CRS avoidance schemes. My guess is that large numbers of South Africans are relying upon these schemes.§

Treasury release 10 May 2017: Recruitment of national treasury director-general well underway: The process to fill the Director-General position at National Treasury is well underway. The position was relinquished recently by Lungisa Fuzile after six years as Director-General. Fuzile is expected to leave the department sometime in May.

LSSA release 11 May 2017: Law Society strongly condemns disturbing personal attacks on Judge Bashier Vally & on the judiciary:

The Law Society of South Africa (LSSA) once again reiterates its previous condemnation against any attack on the judiciary. In particular, we now again strongly condemn the disturbing personal attack by a branch of the ANC Youth League and by Mr Mzwanele Manyi, on Judge Bashier Vally as a result of Judge Vally’s judgment against President Zuma, in the North Gauteng High Court last week. Such unwarranted attacks appear to have the sole aim of undermining the judiciary and thereby fail to be in the interest of society.

NT affidavit 11 May 2017: Last week’s MOF’s baleful influence endures—the Treasury posts its answering affidavit in its case against Denel. Grow up, please, & either stop this silly practice or publish the other side’s papers as well. Who cares about an argument between two opposed bunches of crooks? Let the courts decide.

SARS release 11 May 2017: Customs officials confiscate 13 kg cocaine worth R3,6 million at ORTIA.*

GN 420 GG 40840 12 May 2017: Permanent residence application submitted prior to 2 June 2014 at the department of home affairs’ local offices. We should have (168 TSH 2017) told you to & how to resubmit.§

Treasury speech 15 May 2017: Black Business Council engagement dinner Rosebank. By this week’s MOF. A speech starting with crap spewed out by Oxfam is hardly worth listing, much less reading.

Treasury release 15 May 2017: Minister Malusi Gigaba thanks DG Lungisa Fuzile for exemplary service to the country. Perhaps after being the reason for his departure.

CRS CAA 15 May 2017: Agreement between the competent authority of the RSA & the competent authority of the Republic of Singapore on the automatic exchange of financial account information to improve international tax compliance.*

SARS summary 15 May 2017: Summary of all Common Reporting Standard (CRS) Bilateral Competent Authority Agreements.*

SARS website 15 May 2017: The filing season for FATCA & CRS is open from 15 May 2017 to 31 May 2017. See the SARS Third party data submission to SARS page.*

SARS website 15 May 2017: SARS introduces changes to the current dispute management process. Let’s hope these are lawful. See the SARS What if I do not agree page.*

SARS website 15 May 2017: SARS introduces enhancements to the income tax return for a trust (ITR 12T). See the SARS The income tax return for trusts (ITR 12T) page.*

SARS form 15 May 2017: Information to create the income tax return for a trust ITR 12T.*

SAGNA release 16 May 2017: R80 billion illicitly flows out of SA annually: ‘A significant amount of cash was detected leaving the South African borders to foreign jurisdictions and this is estimated at R80 billion per annual [sic] in Illicit Financial Flows (IFFs)’, State Security Minister David Mahlobo said on Tuesday ahead of his Budget Vote. A transaction is illicit when the funds are illegally earned, transferred or utilised with the most common methods including trade mispricing, bulk cash movements and smuggling.

Well, If you can measure it, why can’t you stop it? Treasury release 16 May 2017: Provincial budgets: 2016/17 financial year fourth quarter year

to date provincial budgets & expenditure report (preliminary outcome). Treasury release 16 May 2017: Communication on technical difficulties affecting RSA retail

savings bonds. SARS summary 16 May 2017: Summary of all country by country reports (CbC) bilateral

competent authority agreements.* SAGNA release 17 May 2017: Minister eyes R20 bn in med scheme tax credits for NHI Fund:

‘…. The tax credits mentioned in the February 2017 Budget Speech by Treasury is a whooping R20 billion. Yes, R20 billion that in 2015 and annually will leave the fiscus through the SA Revenue Service [and] back to the pockets of people simply because



they are members of a medical aid scheme (sic),” the Minister [of Health] said on Tuesday. Addressing Members of Parliament, the Minister said returning these tax credits back to medical aid schemes, instead of using it for universal health coverage, did not make sense. The Minister said the time has come to use the fund to level the playing fields and provide services that would benefit the less privileged. ‘This is the worst form of social injustice committed in the name of the cream of the South African society with our full participation…. We believe the time to change and move towards economic equity as OR Tambo had declared, has now arrived.’

What an addled imbecile. The basis of the deduction is that those providing for their own health care relieve the state of the burden.

Daily Maverick 17 May 2017: Radical economic transformation—a progressive structural change in the fundamental features of SA’s political economy. By Mcebisi Jonas. Remember him? An accomplished student of dialectics. Here cruising down the middle of the road, sort of.§

dti release 18 May 2017: Minister Davies responds to GM SA’s decision to exit SA: Although we do not welcome this decision, we believe that the future of the industry positive [sic] as automotive industry stakeholders are finalizing a Master Plan for South Africa with a view to growing domestic vehicle production volume and local value addition and an announcement on the final program can be expected early 2018 latest and will cover the period post 2020, Davies said.

After all, it’s only an infant industry, & has been for some sixty years. High Court case 18 May 2017: MD Business Solutions (Pty) Ltd v Ikhwezi Local Municipality

(3304/16) [2017] ZAECGHC 56. The municipality’s primary defence to a claim for payment for services admittedly contracted for & delivered was that, as a result of the complete absence of compliance with the law regulating public procurement, the contracts were invalid. It lost. If you deal with the government, beware. There are scams afoot, aimed, if you ask me, at tenderpreneurs with insufficient connections (insufficiently black).§

SARS website 18 May 2017: Customs & Excise Act: Amendment to rule 101A.12, published in Government Notice R 1874 of 8 December 1995, to amend the time reflected when any amended tariff heading or item to any schedule takes effect on the date of publication.*§

Business Day 18 May 2017: Lawful resistance an option for dejected taxpayers. By Patricia Williams:

Tax rules should be enforced against all (including the politically connected), not only the ‘soft targets’ and people who are voluntarily compliant.§

SACC report 18 May 2017: SACC Report to the church public on the Unburdening Panel Process Regina Mundi Church, Soweto:

It now seems that the problem is far greater than corruption, but organized chaos. We have now come to learn that what appears to be chaos and instability in government may well be a systemic design of the madness that ills our governmental environment—a chaotic design. A careful analysis makes the case for the following observable trends of inappropriate control of State systems through a power-elite that is pivoted around the President of the Republic that is systematically siphoning the assets of the State. They do this by: 1. Securing control over state wealth, through the capture of state-owned companies by chronically weakening their governance and operational structures. 2. Securing control over the public service by weeding our skilled professionals. 3. Securing access to rent-seeking opportunities by shaking down regulations to their advantage, and to the disadvantage of South Africans. 4. Securing control over the country’s fiscal sovereignty. 5. Securing control over strategic procurement opportunities by intentionally weakening key technical institutions and formal executive processes. 6. Securing a loyal intelligence and security apparatus. 7. Securing parallel governance and decision-making structures that undermine the executive.§

GN R 431 GG 40846 19 May 2017: Amendment of rules (DAR/168) under ss 101A & 120 of the Customs & Excise Act. I am missing DAR/167.*

SARS invitation 19 May 2017: External workshops rules to the Customs Control & Duty Acts, 2014.*§

SARS release 19 May 2017: SARS customs bust—7,035 kg rhino horn.* SARB release 22 May 2017: SARB appoints communications manager: Ms Zamandlovu

Ndlovu. Treasury speech 23 May 2017: Address by the MOF, Mr Malusi Gigaba MP, on the occasion of the

budget vote 07 at the extended public committee on finance.



SARS tables updated 23 May 2017: Interest rates—Table 1—Interest rates on outstanding taxes & interest rates payable on certain refunds of tax.*

SARS tables updated 23 May 2017: Interest rates—Table 2— Interest rates payable on credit amounts.*

SARS tables updated 23 May 2017: Interest rates—Table 3— Rates at which interest-free or low interest loans are subject to income tax.*

SARS BGR 31 updated 04 May 2017: Binding general ruling (income tax) 31 (issue 2)— Interest on late payment of benefits. Lump-sum retirement benefits.*

GN 411 GG 40956 24 May 2017: National Youth Development Agency Act: National Youth Development Agency Board: appointments. Read on.§

News24 24 May 2017: SARS investigating Zuma’s Nkandla fringe benefit.§ SARS release 25 May 2017: SARS did not comment on President Zuma’s tax matters:

At no stage during the SCOPA meeting did Advocate Tsholanku make specific reference to the tax affairs of President Zuma. In fact, Advocate Tsholanku’s response to SCOPA was very clear and unambiguous that taxpayer matters are confidential and that SARS does not discuss such matters.*

GCIS release 25 May 2017: Media briefing on newly appointed NYDA board: The institution has moved and matured in leaps and bounds from a place where it was characterized by under performance and irregular expenditures that amounted to millions of rands. The turnaround has seen the Agency achieve its highest performance ever in its history and Clean Audits in two consecutive years.

Perhaps one day we shall even find out what happened to the R2 billion demutualization levy inherited by the NYDA (91 TSH 2010, 120, 127 TSH 2013).

MPC statement 25 May 2017: Statement of the monetary policy committee—unchanged (7%; 156 TSH 2016):

The MPC remains of the view that the current level of the repo rate is appropriate for now and that we are likely at the end of the tightening cycle. A reduction in rates would be possible should inflation continue to surprise on the downside and the forecast over the policy horizon be sustainably within the target range. However, in the current environment of high levels of uncertainty, the risks to the outlook could easily deteriorate, and derail the current favourable assessment.

Almost exactly what the MPC said in March 2017 (168 TSH 2017). MPC assumptions 25 May 2017: Summary of assumptions. MPC forecasts 25 May 2017: Selected forecast results: MPC meeting May 2017. SARB release 25 May 2017: SARB endorses the Bank for International Settlement’s foreign

exchange global code. Research project 25 May 2017: Betrayal of the promise: How SA is being stolen. State Capacity

Research Project. Convenor: Mark Swilling: It has been argued in this report that from about 2012 onwards the Zuma-centred power elite has sought to centralise the control of rents to eliminate lower-order, rent-seeking competitors. The ultimate prize was control of the National Treasury to gain control of the Financial Intelligence Centre (which monitors illicit flows of finance), the Chief Procurement Office (which regulates procurement and activates legal action against corrupt practices), the Public Investment Corporation (the second largest shareholder on the Johannesburg Securities Exchange), the boards of key development finance institutions, and the guarantee system (which is not only essential for making the nuclear deal work, but with a guarantee state entities can borrow from private lenders/banks without parliamentary oversight). The cabinet reshuffle in March 2017 has made possible this final control of the National Treasury.§

Treasury release 26 May 2017: National Treasury position on Denel Asia joint venture application:

We have noted media statements attributed to Denel in relation to the Denel Asia transaction. National Treasury would like to place on record that Minister Malusi Gigaba held a meeting with the Denel chairperson Mr Daniel Mantshe to discuss the Denel Asia joint venture. At the meeting, Minister Gigaba reiterated his opposition to the joint venture with VR Laser Asia given the fragile financial situation that Denel is in. The Minister further invited Denel to withdraw its litigation against National Treasury. The position of the Minister of Finance has not changed in this regard. He remains opposed to the transaction for reasons stated elaborately in the National Treasury affidavit to court.

GCIS release 26 May 2017: President Jacob Zuma appoints Justice Mandisa Muriel Lindelwa Maya as President of Supreme Court of Appeal.

GN 466 GG 40860 26 May 2017: Special Economic Zones Act: East London industrial development zone: amendment.



ZAeconomist 26 May 2017: From underperforming BRICS to the now less Fragile Five. Lessons for Brazil & SA. By Brian Kantor:

South Africa and Brazil have more in common than slow growth and fiscal challenges. They have similar degrees of political difficulty in adopting growth-enhancing reforms. The best they can now do, absent a credible growth agenda, would be to aggressively lower short term interest rates. This would improve the short term growth outlook and help attract capital and, if anything, help rather than harm the exchange rate. It remains for me a source of deep frustration that the SARB remains so reluctant to take the opportunity to improve growth rates, without any predictable impact on inflation.§

dti release 27 May 2017: Illegal gamblers lose R1 m: In unprecedented court proceedings several illegal gamblers have had their unlawfully obtained gambling winnings confiscated and forfeited to the State. The unlawful winnings to the amount of approximately R1 250 000 were derived from illegal gambling activities specifically online gambling.… The National Gambling Board is the national regulator in the gambling industry in South Africa and in terms of Section 16 of the National Gambling Act, 2004 is obliged to investigate the circumstances of illegal gambling activities including illegal online gambling. Upon determination of such illegal gambling activity, it applies to the high court for an order declaring that the unlawful winnings be forfeited to the state.

Draft SARS BGR 29 May 2017: Draft binding general ruling (employment tax incentive)— Meaning of 160 hours for purposes of s 4(1)(b). Of the Employment Tax Incentive Act. SARS is excluding overtime. An unconvincing argument.*

SARS workshop 29 May 2017: Customs Deferment Model.* SARS workshop 29 May 2017: Comments received on the second draft rules to the Customs

Duty Act.* SARB release 30 May 2017: SARB & National Treasury propose a deposit insurance scheme

for SA—invitation to comment on the discussion paper. SARB paper 30 May 2017: Designing a deposit insurance scheme for SA— a discussion

paper.§ Treasury release 30 May 2017: MOF’s position on SACC report & ANN7 news report:

The Minister of Finance Malusi Gigaba has noted the report by The State Capacity Research Project, commissioned by the South African Council of Churches (SACC), which was released last week. He acknowledges and shares the serious concerns about corruption that were raised in the report. The interest of the people should always be central in the decisions of public officials. Notwithstanding these concerns, there are conclusions made in the report that he does not agree with. Given the serious nature of the issues raised, he will engage with the SACC to address the areas of disagreement.

And then this: The Minister has also noted with concern an ANN7 television channel news report claiming that an internal Treasury audit into government's Integrated Financial Management System had revealed financial mismanagement. The Minister is, together with National Treasury leadership, looking into the issues raised in the news report. ‘It is in the interest of clean governance and the fight against corruption that we closely examine any report that is brought to our attention that relates to any claims of irregularity. Building and maintaining public confidence is key in the work of the National Treasury’, said Minister Gigaba.

Tax court case 30 May 2017: TC 14005. On the date of accrual of proceeds arising from the disposal of fixed property, on which crazy ideas have been floating about lately, emanating, it would now appear, from Cape Town, home of the country’s wildest property cowboys. Fortunately, litigation by way of popular appeal does not work. Bless Binns-Ward J for not mentioning Brummeria:

In the current matter the purchase prices were payable in each of the transactions against transfer of the property into the purchasers’ names. The right to payment thus vested in the taxpayer, and had a value in its hands, as soon as it was in a position to be able to tender transfer to the purchasers in terms of the agreements.

Another string to SARS’s bow was that s 24(1) of the Income Tax Act applied, on which the taxpayer’s argument was delirious. The decision followed Silverglen. This is a judge who should be given more tax cases.

High Court case 31 May 2017: CSARS v Ramoroka NO and Others (Groenewald Intervening) (4049/2016) [2017] ZAGPPHC 232. I have been waiting for a case of this nature. Not at all unusually, the SARS assessments lodged in liquidation proceedings appear to have been unlawful (like nearly all the assessments I deal with daily). The court allowed the sole member of the close corporation involved to intervene, the craven liquidators declining.



SARS release 31 May 2017: Trade statistics for April 2017 (surplus of R5,08 billion).* ZAeconomist 31 May 2017: Staying on a destructive path. By Brian Kantor:

It will probably take an extended period of low inflation to reduce these expectations of inflation and rand weakness. Sacrificing economic growth for an inflation rate that has proved largely beyond the control of the Reserve Bank has never seemed to me to be good monetary policy. And it makes even less sense now that the inflation outlook has improved, even if this should prove temporary.§

DEA release 01 June 2017: Minister Edna Molewa is considering possible withdrawal of the integrated industry waste tyre management plan of the Recycling & Economic Development Initiative of South Africa (REDISA).

SARB speech 01 June 2017: Market conduct & market best practice. By Daniel Mminele. Promotion of guidelines rather than rules by an institution currently ramping up regulation (as in Twin Peaks). Odd, this. The SARB doesn’t usually waffle.

Treasury release 01 June 2017: Fitch Ratings (Fitch) affirmed SA’s long term foreign & local currency debt ratings, outlook remains stable:

Fitch has cited that despite the country’s credit strengths of deep local capital markets, favourable government debt structure and a track record of fairly prudent fiscal and monetary policy, South Africa’s ratings continue to be weighed down by: Low potential economic growth; Sizable contingent liabilities; and Deteriorating governance of state-owned companies (SOCs). According to the rating agency, ‘the March 2017 Cabinet reshuffle that triggered the downgrade of South Africa’s ratings is likely to undermine governance of SOCs, weaken fiscal consolidation and reduce private sector investment as a result of weaker business confidence’.

GN 524 GG 40884 01 June 2017: Consultation on the intention to consider the withdrawal of the approval for the integrated industry waste tyre management plan of the Recycling & Economic Development Initiative of SA. Under the Waste Act.§

Draft public notice 01 June 2017: Draft public notice requiring the submission of CbC, master file & local file returns:

This draft public notice is to be issued in terms of section 25 of the Tax Administration Act, 2011, which enables the Commissioner to by public notice require specified persons to submit returns as provided in the notice.*

Daily Maverick 01 June 2017: amaBhungane & Scorpio #GuptaLeaks: Guptas & associates score R5,3 bn in locomotives kickbacks.§

LegalBrief 01 June 2017: Land Subdivision Repeal Act returns to spotlight: The 1998 Subdivision of Agricultural Land Act Repeal Act was one of two pieces of legislation identified this week by National Assembly Speaker Baleka Mbete in the context of ‘urgently’ addressing the ‘pressing’ land reform needs of ordinary South Africans.§

Treasury release 02 June 2017: S&P Global Ratings (S&P) affirms South Africa’s long term foreign & local currency debt ratings, negative outlook is unchanged:

Government welcomes S&P’s decision of maintaining South Africa’s long term local currency debt ratings of ‘BBB-’; an investment grade rating. The affirmation of the long-term foreign currency rating of ‘BB+’ and the negative outlook on the ratings are also noted.

GN 502 GG 40883 02 June 2017: Special Economic Zones Act: Richards Bay industrial development zone: amendment.

GN 503 GG 40883 02 June 2017: Special Economic Zones Act: Richards Bay industrial development zone: amendment.

GN 504 GG 40883 02 June 2017: Special Economic Zones Act: Saldanha Bay industrial development zone: amendment.

GN 505 GG 40883 02 June 2017: Special Economic Zones Act: COEGA industrial development zone: amendment.

GN 523 GG 40883 02 June 2017: Special Economic Zones Act: Maluti-A-Phofung industrial development zone: amendment.

Draft rules 02 June 2017: Draft deferment rules under the Customs Duty Act.* * Found or to be found on the SARS website. Concurrently on the SARS ‘What’s new’ page. § Not included in Tax Shock, Horror Database.

LOST & FOUND TSHD This month 96 items were added to the Tax Shock, Horror Database. Land subdivision Since 16 September 1998, the President has failed to proclaim the Subdivision

of Agricultural Land Act Repeal Act 64 of 1998. But see above. SARS releases The SARS website is the only one I am aware of making its media releases so

awkward to process, thanks to a lack of text wrapping.



MONTHLY NOTEBOOK All past entries from 2007 to date. All words & phrases from 2009 to date.

Nonexecutive directors and VAT Currently being brought into the VAT net, nonexecutive directors need to be careful about a largely misunderstood feature of the VAT system, often highlighted in this newsletter (as in this issue, below). Once registered as vendors, it is not only their remuneration as NEDs that forms their chargeable outputs but all considerations arising from so-called enterprise activities. And these are to be judged, not solely by the standards of the definition of ‘enterprise’ in s 1(1) of the Value-Added Tax Act, but by the requirements of s 7(1)(a), the charging provision:

7. (1) Subject to the exemptions, exceptions, deductions and adjustments provided for in this Act, there shall be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the value-added tax—

(a) on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him;

While any other salary, interest earned in ordinary circumstances and considerations from other exempt activities (s 12) would arise from nonenterprise sources, anything else would be included, for example, any business venture with turnover under the threshold.

For example, earnings from a hobby are excluded from the definition of ‘enterprise’ and so from the ambit of s 7(1)(a), but considerations associated with any enterprise, no matter how small, fall into s 7(1)(a). It does not matter whether the particular source itself amounts to an ‘enterprise’ under the definition.

Section 7C and your primary residence Here’s the thing. The capital gains tax (CGT) sets it face against trust-owned primary residences. The primary residence exclusion created by Part VII of the Eighth Schedule to the Income Tax Act allows for a modest portion of a capital gain arising from the disposal of a primary residence to be free of the CGT, and so altogether free from normal tax.

The relief, offered by para 45 of the Eighth Schedule, applies to natural persons and ‘special trusts’, not ordinary trusts. To drive the point home, you must have ‘an interest’ in a ‘primary residence’—and ‘an interest’, as defined in para 44, excludes ‘a right or interest of whatever nature in a trust or an asset of a trust, other than a right of a lessee who is not a connected person in relation to that trust’.

Such an interest might consist in a vested right enjoyed by a beneficiary of an ordinary trust in a residence merely controlled, not owned, by the trustees. Or it might be a contingent interest enjoyed by a discretionary beneficiary in a residence both owned and controlled by the trustees, in their fiduciary capacity.

It makes no difference. The idea is to exclude from the primary-residence relief a residence owned or controlled by the trustees of an ordinary trust (as opposed to a special trust).

The crazy s 7C Along comes the author of the extraordinary s 7C of the Income Tax Act, which, for reasons I simply cannot even begin to fathom, purports to impose the donations tax on loans to ordinary trusts (in the current sense). And he dreams up an exclusion from this imposition, in the form of s 7C(5)(d), which excludes, to cut a long story

short, a loan to a trust funding the acquisition of a residence used as a primary residence.

And he defines it as a primary residence ‘as contemplated in paragraph (b) of the definition of ‘primary residence’ in paragraph 44’. It is para (a) of this very same definition that requires a qualifying person to hold ‘an interest’, which would exclude ownership or control by the trustees of an ordinary trust. So, I mean, what the hell is going on here?

SARS has effectively confirmed that this represents yet another illustration of the legal draftsperson’s laziness. What—if he only had the energy, and if only he had been trained to avoid numerical cross-references like the plague that they are—he meant to say is that a potentially qualifying residence owned or controlled by the trustees of an ordinary trust (or even a special trust) is one which

that person—not the person referred to in para (a) (holding ‘an interest’) but any person,

or a beneficiary of that special trust—by analogy, not the special trust referred to in para (a) but any special trust,

or a spouse of that person or beneficiary— ordinarily resides or resided in as his or her

main residence; and uses or used mainly for domestic purposes.

A more idiotic form of legal drafting is hard to imagine. But it is the logic that baffles me. If only special trusts qualify for the primary-residence CGT relief, why should all trusts qualify for relief from s 7C donations tax? Does the draftsperson or perhaps the Commissioner live in a residence owned by a trust? We should be told.

http://www.bspseminars.co.za/newsletters/monthly-notebook/

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Yet another court-ordered ‘trust’ The court is the Free State High court, and the judge handing down the order is Naidoo J. It is an RAF matter, and it is necessary to dispose of the award made in favour of the plaintiff.

The plaintiff is regarded as the natural mother and guardian of the injured party, her son. In my humble opinion, here, already, is an irregularity. The true plaintiff is surely the son.

It is ordered that the very substantial award be paid into the trust account of the mother’s attorneys. Not so humbly, I now become alarmed. The mother is ordered to see to the creation of a trust for the purposes of administering the award for the benefit of the son. Who is its owner?

The trustees are ordered to receive, take care of, control and administer all of the son’s estate. You cannot use a trust in this way without wrongfully depriving him of his rights and violating several statutes.

They are also ostensibly given the power to carry on or discontinue any trade, business or undertaking of the son, thus further depriving him of his rights.

In addition, he is ostensibly deprived of the right to let, exchange, partition, alienate and for any lawful purpose to mortgage or pledge any property belonging to him or in which he has an interest, while the trustees are given the power to mortgage or pledge his immovable property.

They enjoy also the power to incur expenditure to improve his property, by means of building or otherwise, and to expend any monies belonging to him.

And he is ostensibly deprived of the right to institute proceedings for the due and proper administration of his estate.

There is a horrible confusion here between a trust and curatorship, and a terrible ignorance of trust law. There is a good chance that the mother is the owner of the trust funds, but even if the intention is clear that the trustees should intervene, the trust, if valid, would be a single-beneficiary trust. As such, its funds are available to the son’s guardian, his mom, while he is a minor, and they are his property, outright, upon his reaching majority.

Only a fool would accept trusteeship.

Just how low will a deadbeat government go? I have been overlooking developments following Rewayne Hersig v Premier, Health & Social Development (42685) [2011] ZAGPJHC (30 April 2015) (147, 151, 152 TSH 2015), despite their continuing tragic nature. The case involved a proven claim for delictual damages arising from the negligence of the staff of a provincial hospital, on which our rotten government has done its damnedest to welch.

The latest piece of intelligence to come my way simply cannot be ignored. It consists in a letter from the Chief Director: Legal Services Gauteng Province, about ‘the taxed bill of cost court order against the Department [of Health], in the amount R1 162 576,48’.

You need to know that our statutes allow this official to make the following ‘offer’:

The Department relies on money appropriated to it by the provincial legislature. In terms of the applicable laws and regulations, the Department is unable to budget for awards of damages and the legal cost. This means that the awards made against the Department must be paid out of the

budget allocations of other items of the budget, which negatively impact on provision of health care services.

Furthermore, in terms of section 27 of the Constitution of the Republic, the Department has a constitutional mandate to provide health care services, including reproductive health care to everyone. Payment of these substantial lump sums compromises the Department's ability to fulfil its constitutional mandate.

This letter requests you to accept payment of the award in annual instalments over a period of time, as the Department is facing budgetary constraints. Should you be amenable to our request, we propose a meeting to discuss the payment terms and conditions.

In other words, under the Constitution, our government can, while you are in its care, negligently destroy your physical wellbeing but, in the interests of ‘health care’, will do nothing or as little as possible to alleviate your suffering.

Unless, that is, you are white and wealthy, or your lawyers have corrupt access to officialdom.

Words & phrases: ‘due and payable’ The appellant argued that because the debt was repayable on demand, prescription commenced only once payment of the debt had been demanded (ie on 9 December 2013). One must be careful not to conflate the date when a debt becomes ‘due’ and that upon which repayment thereof is demanded. A debt which is repayable on demand becomes due the moment the

money is lent to the debtor—or, to use banking terminology, ‘the advance is made’. The fact that a debtor may be given 30 days within which to repay that which has been demanded does not, in my opinion, alter the principle that the debt became due the moment it was lent and therefore, in terms of s 11(d) of the 1969 Prescription Act, prescription begins to run from



that date. In Deloitte Haskins & Sells Consultants (Pty)

Ltd v Bowthorpe Hellerman Deutsch (Pty) Ltd, this court said (at 532G–I) that for a debt to be ‘due’:

… there has to be a debt immediately claimable by the creditor or, stated in another way, that there has to be a debt in respect of which the debtor is under an obligation to perform immediately.

It is easy for confusion to arise. A debt can be immediately claimable even though a demand may be necessary for it to be payable. The distinction between ‘claimability’ and ‘payability’ was one of which this court was keenly aware in Union Share Agency & Investment Ltd v Spain

where it said:

The distinction between the indebtedness being subject to the happening of an event and the payment being so subject is a vital one and should not be overlooked.

In any event, clause 2.3 refers to the loan being ‘due and payable’. The very phrase ‘due and payable’, ie both ‘claimable’ and ‘payable’ as at a point in time, indicates that ‘due’ and ‘payable’ are not coextensive with one another.

Per Willis JA in Trinity Asset Management (Pty) Ltd v Grindstone Investments (Pty) Ltd (1040/15) [2016] ZASCA 135. Footnotes suppressed.

More on s 7C and your primary residence Before the previous item on this topic raises your hopes too much, you should note the restrictions imposed by the s 7C(5)(d) exemption from the s 7C imposition of donations tax.

The trust must have used the loan, advance or credit wholly or partly for purposes of funding the acquisition of the residence.

Money being famously fungible, how do you determine such a thing?

The only way I know of is to get out the cash book of the trust and follow the entries, hoping you do not start with an overdraft. The rule to follow was established in Volkskas Bpk v Meyer, which was applied to an overdraft (current deposits extinguish the earliest overdraft, regardless of further borrowings) and so would have to be adapted. In my view, with an account in credit, the available balance finances outgoings until it is exhausted. Thereafter deposits are similarly disposed of, on a FIFO basis.

Alternatively, rather than looking to the use of funds, you could, I suppose, despite the clear language of the exemption, use a purposive

approach, as long as a particular borrowing was raised with the particular purpose of the acquisition of a residence. This is not a situation you often come across in trusts.

The amount owed must relate to the part of that loan, advance or credit that funded the acquisition of that asset.

In other words, you have to keep track of the qualifying portion of a particular loan account.

On this leg, a careful historical analysis of the loan account is required, with repayments being allocated not only according to the precepts of Volkskas Bpk v Meyer but on a proportional basis among all the various purposes for which money was borrowed by the trust.

The qualifying person or that persons’ spouse must have used the residence as a primary residence throughout the relevant year of assessment.

In other words, in a year in which you buy, build, sell or let, you are buggered, donations tax wise.

The exemption is as silly as the tax itself.

Cession of future rights Three separate judgments were delivered in First National Bank of SA Ltd v Lynn NO and Others 1996 (2) SA 339 (A), making it a challenging read. It involved the cession to a bank, in securitatem debiti, of a contractor’s rights under a construction agreement, the big question being: Did the cession include the retention payments payable under the agreement, subject to a suspensive condition?

The tie-breaking judgment came from Olivier JA:

The position, in my view, then is that it has been accepted in commerce and by the Courts of our country for more than a century that future rights

can be ceded and transferred in anticipando. The decisions of our Courts have thus been regarded for a very long period of time as being correct. Clearly these decisions have been acted upon and served as the basis for the general and well-known practice of taking security in the form of the cession of book debts (including future debts), cession of existing and future rights in securitatem debiti and factoring of existing and future rights. In these circumstances I am not inclined to hold that these decisions are wrong…. Although there may be considerations of public policy militating against upholding the cedability of future rights…, they have not been canvassed in the present case. If it is considered that the present position needs



review, that is a task that should be undertaken by the Legislature.

Consequently I hold that the cession of 31 December 1984 was a valid one and that, if it had incorporated a transfer in anticipando of the right now under discussion (which only came into being at a much later stage) it would have been legally effective.

Did the cession of 31 December 1984 incorporate a transfer of the right under discussion in anticipando?

The cession sets out that…. In my view, this formulation is wide enough to

indicate an intention of transferring and receiving transfer of the right in anticipando. Especially the words ‘…transfer and make over…’ and the reference to moneys and amounts becoming due and owing in future indicate a present mutual intention of now transferring rights as they will come into existence in the future…

I conclude, therefore, that on 31 December 1984 the bank and the contractor concluded a contract by which the contractor’s right to claim payment of the retention money (even though that right was subject to a suspensive condition), when it came into being on 27 August 1990, was transferred to the bank.

The effect of this cession and transfer is exactly

the same as if the right had been ceded after 27 August 1990 but before 10 June 1991 and, as explained above…, the cedent, the contractor, retained the ‘dominium’ of the right and the cessionary, the bank, acquired the right, subject to the suspensive condition mentioned above, to enforce payment of the retention money if and when it became payable. On the liquidation of the contractor on 10 June 1991, the aforesaid dominium fell into the insolvent estate, and the cessionary became a secured creditor with a preferent claim.

In no way is this a case on the cession of a contingent interest.

Nor does it justify the extraordinary idea that you can divest yourself of the fruits of your personal labours, so as to avoid income tax (they accrue to you first—you enjoy dominium in them; 124, 125 TSH 2013).

In my view, the citation of Lynn in support of this idea in the consenting minority judgment in CIR v Cactus Investments (Pty) Ltd 1999 (1) SA 264 (T) was a slip-up. On appeal, as Cactus Investments (Pty) Ltd v CIR 1999 (1) SA 315 (A), the Appellate Division was very careful to say that it supported the majority decision in the lower court.

The functus officio principle and subordinate legislation In its simplest form, you are functus officio when you have performed your office (123, 124 TSH 2013).

The Tax Administration Act, for example, handles the principle pretty well, generally giving officialdom not only the right to make decisions but also to withdraw, amend and replace them.

Thanks to s 10(3) of the Interpretation Act, the legal draftsperson may adopt a more relaxed

attitude in handling subordinate legislation:

(3) Where a law confers a power to make rules, regulations or by-laws, the power shall, unless the contrary intention appears, be construed as including a power exercisable in like manner and subject to the like consent and conditions (if any) to rescind, revoke, amend or vary the rules, regulations or by-laws.

TAA: access to the High Court and onus (on SARS) In its current form, s 105 of the Tax Administration Act is very much clearer than it used to be in its original form, but is still ambiguous:

Forum for dispute of [assessment] or decision 105. A taxpayer may only dispute an assessment or ‘decision’ as described in section 104 in proceedings under this Chapter [Chapter 9; Dispute resolution], unless a High Court otherwise directs.

If someone who knew anything about legal drafting had written it, it would have applied to ‘notices of assessment’ (which would have included self-assessments), which would have been defined in s 1, and ‘appealable decisions’, which would have been defined in the same place, as a list of decisions now appearing in s 104(2), which is cross-referenced in a confusing multiplicity of ways throughout the act.

The ambiguity arises because it is unclear

whether the High Court may be approached during the course of proceedings under Chapter 9 of the act or entirely independently of Chapter 9.

It has occurred to me that, whatever might be the answer to this minor riddle, s 105 offers the solution to a much greater problem: When and how is SARS meant to discharge the onus resting upon it when that onus goes to the heart of a particular matter?

Take for example, the botched concept of estimated assessments, dealt with in s 91(4) and s 95. Simply by raising an assessment and issuing a notice of assessment, SARS can end life as you and I know it, even if the assessment is outrageously unlawful or flagrantly criminal.

At what stage is s 102(2) meant to kick in?

(2) The burden of proving whether an estimate under section 95 is reasonable or the facts on which SARS based the imposition of an understatement penalty under Chapter 16



[Understatement penalty], is upon SARS.

Sure, you can choose to fight the case under Chapter 9, but, I reckon, you could also challenge SARS to discharge the onus resting upon it in the High Court, while protecting your rights under Chapter 9. Your argument would go

like this:

If I am to pay before I argue, surely SARS must discharge the onus of showing that I must pay. Under Chapter 9, there is no machinery to achieve that safeguard. Hence the High Court must intervene.

VAT: the ‘anchor principle’ and the De Beers case CSARS v De Beers (503/2011) [2012] ZASCA 103 (1 June 2012) was a pretty amazing case, showing that a major business wrongly claimed input tax relief on very substantial foreign and domestic incoming supplies. What I like about the judgment, especially in the form presented by the majority (all five judges found against the taxpayer), is its conformity with a sound theoretical understanding of domestic VAT law (altogether properly, the majority rejected reference to foreign cases).

I have long used a fishing yarn to explain the principle (78 TSH 2009):

Under a VAT system like ours, we register a vendor because it ‘carries on any enterprise’, meaning any particular enterprise, such as selling raw fish caught in the sea. Thereafter we do not ask whether every other activity is an ‘enterprise’ in its own right and include or exclude it on that account. One day the fisherman-vendor hauls up a ship’s anchor and sells it in on the quayside. Unique though it might be, the transaction renders him accountable for output tax. The reason is that, once he is a vendor, he is no longer accountable under the registration standard but under that of the charging provision, s 7(1)(a) of the Value-Added Tax Act, the question he faces daily being whether he supplies goods or services ‘in the course or furtherance of any enterprise carried on by’ him.

Were the inputs enterprise-related? In De Beers, the majority identified the

enterprises in which the taxpayer was engaged— mining, marketing and selling diamonds—and investigated whether the disputed inputs were related to those enterprises. It did not consider the inputs in the context of the definition of ‘enterprise’ in s 1(1) of the Value-Added Tax Act.

Per Southwood AJA:

The question to be answered therefore is whether NMR’s services were acquired for the purpose of making ‘taxable supplies’ in that ‘enterprise’. The answer is clearly no. DBCM acquired NMR’s services because DBCM was the target of a take-over by parties to whom it was related and DBCM’s board had a duty to report to independent unit holders as to whether the consortium’s offer was fair and reasonable and to obtain independent financial advice in that regard. In order to do this NMR was obliged to determine the value of DBCM’s diamond business and then express an opinion that the consideration offered for the shares was fair and reasonable in the light of that evaluation. Such services were not acquired to enable DBCM to enhance its VAT ‘enterprise’ of mining, marketing and selling diamonds. The ‘enterprise’ was not in the least affected by whether or not DBCM acquired NMR’s services. They could not contribute in any way to the making of DBCM’s ‘taxable supplies’. They were also not acquired in the ordinary course of DBCM’s ‘enterprise’ as part of its overhead expenditure as argued by DBCM. They were supplied simply to enable DBCM’s board to comply with its legal obligations.

Commas in the case law—I The American judgment sent to me by a reader, featured in 168 TSH 2017, on the lack of a ‘serial comma’, reminded me of a promise I made to the same reader to see whether our courts have ever seriously had to contend with commas.

The strictest search is for the string “comma” using the SALR search option ‘01. Search in Flynotes only’. This yields only two hits.

In Minister van Wet en Orde v Gedule 1994 (3) SA 1 (A) the part of a regulation falling to be interpreted read like this:

in the carrying out of his duties, or the exercise of his powers or the performance of his functions in terms of these regulations.

These were the circumstances in which a person would be indemnified against the consequences

of his or her actions. Three types of conduct are listed—carrying out duties, exercise of powers, and performance of functions. In order to be indemnified, which types of conduct had to be qualified by the standard ‘in terms of these regulations’? The court held that the comma made no difference; all three types of conduct had to be qualified by the standard. In other words, just by carrying out your duties, you would not be indemnified; you had to carry them out in terms of the regulations.

Per Van Heerden AR:

Die appellant se betoog gaan mank aan ooglopende gebreke. Ek noem slegs die volgende. ’n Bevoegdheid is normaalweg slegs die keersy van ’n plig en daar is geen denkbare rede nie waarom die Staatspresident die uitoefening van ’n bevoegdheid, maar nie ook die uitvoering van ’n



plig nie, met die frase ‘ingevolge hierdie regulasies’ sou wou kwalifiseer. In elk geval is dit gebruiklik om wanneer drie begrippe met ’n ‘en’ of ’n ‘of’ verbind word, ’n komma tussen slegs die eerste en tweede begrippe aan te bring. Die komma waarop die appellant steun is dus van geen betekenis nie by beantwoording van die vraag welke optrede deur die meermaal genoemde frase gekwalifiseer word. Ek meen gevolglik dat én ’n pligsuitvoering én ’n bevoegdheidsuitoefening én ’n verrigting van werksaamhede ‘ingevolge hierdie regulasies’ moet geskied.

Like me, Van Heerden AR was unaware of the concept of the serial comma, whose inclusion between the second and the third items in the list would have obviated any contention.

The other judgment, Pinepipe (Pty) Ltd v Nolec (Pty) Ltd 1975 (4) SA 932 (w), supported the notional inclusion of a comma in a rule of court already recommended in two earlier cases. The rule has to do with the submission of an affidavit made by the plaintiff himself or

by any other person who can swear positively to the facts verifying the cause of action and the amounts.

A comma, according to all three judgments, is to be read into the phrase, after ‘facts’. In other words, the affidavit must verify the cause of action, not the facts. Per Myburgh J:

It seems to me that in the case of an applicant making the affidavit himself it is presumed that he has personal knowledge of his own affairs. In my view, this presumption is not absolute and, in a proper case, the presumption can be rebutted by the defendant. The provisions of the Rule do not mean that the extraordinary remedy of summary judgment is available on hearsay evidence. See the judgment by THERON J, in the Fishereigesellschaft case, supra; this appears particularly at p 109 of the judgment. The Rule cannot possibly mean that the cause of action may be verified by a person who has no personal knowledge of the facts or the cause of action.

VAT: revisiting ‘supply’ (and performance) Shell’s Annandale Farm (Pty) Ltd v CSARS 2002 (3) SA 111 was a VAT case involving the expropriation of a so-called enterprise asset, which SARS ought never to have lost. It had two results, first, that the definition of ‘supply’ in what is now s 1(1) of the Value-Added Tax Act was replaced (in 1999), and, secondly, the old definition was held to apply only to the active—as opposed to the passive—ordinary meaning of ‘supply’.

Old definition—active supplies only ‘[S]upply’ includes all other forms of supply, irrespective of where the supply is effected, and any derivative of ‘supply’ shall be construed accordingly;

New definition—active and passive supplies ‘[S]upply’ includes performance in terms of a sale, rental agreement, instalment credit agreement and all other forms of supply, whether voluntary, compulsory or by operation of law, irrespective of where the supply is effected, and any derivative of ‘supply’ shall be construed accordingly;

In 94 TSH 2011, I used this historical development to come to several tentative conclusions about the definition and its significance.

But, as I have intuitively realized but never specifically articulated over the years, I made at least one, big mistake, in my suggested resolution of the inherent ambiguity of the definition.

The old definition addressed, equally, supplies of both goods and services. The new definition, in dealing first with sales, rental agreements and instalment credit agreements, is, by

definition, dealing specifically with goods, and so must cover services in the remainder of the definition. On that basis, there can be no warrant for restricting the reference to ‘performance’ to the supply of goods—it must apply across the entire definition, and thus to the supply of services as well.

Here is how the definition is to be understood:

All supplies require performance by supplier ‘[S]upply’ includes performance in terms of…

Active supplies of goods requiring performance …a sale, rental agreement, instalment credit agreement…

Other active and passive supplies, including of services, also dependent upon performance (insofar as performance might be relevant) …and all other forms of supply, whether voluntary, compulsory or by operation of law,

Generally applicable irrespective of where the supply is effected, and any derivative of ‘supply’ shall be construed accordingly;

But I continue to maintain that, for the purposes of the definition of ‘supply’, performance is required only of the supplier, and that it has to be performance in full—so-called complete performance. It has to release the supplier from any contractual duty at a particular point in time.

Because the definition of ‘supply’ was changed so late in the day, it is entirely possible that the deemed time-of-supply rules in s 9 may be misunderstood or even be partly or even wholly unworkable.

Feature Supplement to 170 Tax Shock Horror 2017

Cases

May 2017 Winners & Losers In That Other Beautiful Game

Current & Past SATC Case Reports by Julian Ware 2017 J Ware ([email protected])

Wine farming—produce / Avenant v / CSARS

Supreme Court of Appeal (2016)—78 SATC 343 (judgment delivered by Swain JA; Ponnan JA, Theron JA, Saldulker JA & Mbha JA concurring): A misguided appeal from the Western Cape Tax Court (146 TSH 2015). Did the pulp of crushed and pressed grapes, which were naturally fermenting as part of the winemaking process and were mixed with the pulp of fellow co-operative members, constitute produce held and not disposed of at the end of the year by the taxpayer, a wine farmer? Since pulped grapes are not essentially different from the harvest, the pulp is as much produce as is the harvested grapes before crushing. ‘Grapes-in-process’ that are in the possession of a co-operative are jointly held in undivided shares by the members, and form part of their closing stock. Did the pulp have a value at the taxpayer’s year-end? Despite the taxpayer’s protestation that the pulp was valueless, realistically, he would not have parted with it for nothing. Based upon evidence presented by sars, the distilling price as reflected in wine statistics and publications was accepted as an industry standard by farmers and sars alike. The method was practical, and placed a fair and reasonable value upon stock. The taxpayer conceded that, if his appeal failed, which it did, the tax court correctly referred the assessment back to sars for reassessment in accordance with its judgment.

Tax administration—appealable decision Wingate-Pearse v cSARS

Supreme Court of Appeal (2016)—78 SATC 360 (judgment delivered by Wallis JA; Lewis JA, Cachalia JA, Tshiqi JA & Theron JA concurring): A technically complex judgment dealing with the question whether an interlocutory ruling by a tax court dealing with the onus and duty to begin proceedings was an appealable ‘decision’ under the Tax Administration Act. The taxpayer had lodged an appeal against partially revised assessments with the tax court, and had raised these issues as points in limine with it. Under s 129, a right of appeal arises only when an appeal on its merits is finalized. The appeal was struck from the role, with costs. Tax litigation requires a sound knowledge of the act and the dispute ‘rules’.

VAT—commercial accommodation Respublica (Pty) Ltd v CSARS

Gauteng Division, Pretoria (2016)—78 SATC 368 (judgment delivered by Semenya AJ): The taxpayer, a landlord and VAT vendor, let a building to a university for the purpose of accommodating its students. The taxpayer sought and obtained a declarator, to the effect that the supply was ‘commercial accommodation’ and that VAT was to be calculated upon 60% of the rent. Accommodation is a complex and tricky area of VAT law. I wonder whether the matter was appealed. [I was much less kind to SARS and the judgment in 156 TSH 2016.—Ed]

Allowances—future shipping repairs Taxpayer v CSARS

ITC 1887 (Cape Town Tax Court—Case 13753 (2016))—78 SATC 375 (judgment delivered by Dlodlo J): Section 14(1)(c) of the Income Tax Act, now repealed, allowed taxpayers to claim an allowance for future expenditure for repairs to ships used for the purposes of trade. Were the projected future costs of in-house repairs, which were based upon standard engineering costing methods, subject to the allowance? The provision did not differentiate external expenditure on repairs from internal expenditure. The allowance is now contained in s 24P.

t sh



Davey’s Locker

May 2017 Loans between trusts Yet more on s 7C of the Income Tax Act

by Tony Davey © 2017 A H Davey ([email protected] www.tonydavey.com)

In essence, s 7C of the Income Tax Act subjects to an annual donations tax, effective as from 1 March 2017, an interest-free or low-interest loan to a resident trust. The effect of applying the 20% donations tax rate to the 8% ‘official rate’ (less the interest paid), is a maximum annual donations tax of 1,6% of the loan.

Nature of lender Section 7C applies to a loan provided by either a natural person or a company, if the natural person is the company’s ‘connected person’, as defined for this particular purpose.

It follows that, if a trust lends monies to another trust, prima facie, s 7C(1)(a) and (b) do not apply, since the lender is not a natural person or a company.

Directly or Indirectly But s 7C refers to a loan made by a natural person or company ‘directly or indirectly’.

Thus, according to the relevant Explanatory Memorandum, if a natural person provides a loan to Trust A, which in turn provides a loan to Trust B, the loan, being an indirect loan, is subject to the application of

s 7C. On the other hand, if Trust A

uses its own capital and reserves (capitalized investment earnings and trade income), I see no indirect loan being advanced.

Conclusion Inter-trust loans are unaffected by s 7C, provided the lender trust uses its own capital and reserves. To the extent the capital and reserves are insufficient to fund such loans, SARS might challenge the loan as being indirect and subject to the application of s 7C.

Given the facts that this is new legislation and that there is currently no decided tax case law or any published rulings illustrating the approach of SARS to inter-trust loans, I would adopt a prudent, cautious approach by confining such loans to an amount equal to a trust’s own capital and reserves.

[And I would be questioning why and at whose instance Trust A has come to be lending money

to Trust B.—Ed]

T S H

http://www.tonydavey.com/


Shortcut Keys in Word by Duncan S McAllister ©2017

May 2017

Disabling programs at start-up While I was researching last month’s article on how to generate a table of all shortcut keys in Word 2016 (169 TSH 2017), my screen reader became extremely sluggish when in the large table, refusing to read out the table contents.

The consultant from the software vendor recommended that I disable all applications at start-up except the screen reader, in an effort to speed up my computer. I was sceptical about this advice, since, once my computer has booted up, it is quite responsive, as it should be, having a 6th generation core i7 processor, 32 GB of RAM and a 1 TB SSD.

After following the advice and restarting the computer, I was horrified to lose all sound and internet connectivity. Without sound, I was unable to re-enable the disabled programs, and had to seek sighted assistance. A tech-savvy colleague from the office kindly helped me re-enable all the start-up applications, resulting in a return of sound and internet connectivity.

In the end I decided that it would be better not to disable programs at start-up. A few days later I decided to check if there were any Word 2016 updates available (In Word 2016: ALT, F, D, R, enter). It turned out that there was indeed a large update available, and, after I ran it, my screen reader read the large table without a hitch, so the problem lay with Word 2016 and had nothing to do with my computer’s processing power.

But for the more adventurous who would like to speed up their computers at start-up, here is the procedure:

In Windows 8 and 10 the programs launched at start-up can be accessed via Task Manager. To launch it, press CTRL + SHIFT + ESC. In Windows 10 press CTRL + TAB three times to get to the Startup tab. Then press TAB once and use the down arrow to scroll down the list of applications. You can also use first-letter

navigation to get to a particular application. For example, pressing ‘R’ takes me to Realtek HD Audio Manager, and pressing it a second time takes me to REGISTRYCONTROLLER.EXE.

To enable or disable an application, navigate on to it, press the applications key (next to right-hand CTRL key) or use SHIFT + F10 to bring up the context menu. It contains the following options:

Disable (D) or Enable (E) Open File Location (O) Search Online (S) Properties (I)

To enable or disable an application, scroll on to enable or disable respectively and press ENTER or press the letter shown in brackets (E = Enable; D = Disable).

The Search online option will enable you to search the Internet for details of the application and to ascertain whether it would be safe to disable. Selecting Properties will enable you to get the exact name of the application (handy for a Google search) as well as identifying the main program (see under Location). One website I visited recommended not disabling anything to do with your antivirus software (for example, Avast! has an application called AvLaunch.exe), any applications dealing with audio, wireless or touchpads (for notebooks), Intel or AMD, and Microsoft services. I strongly recommend that you first research each application online before disabling it.

In Windows 7 and below type WIN + R to launch the Run command, type “msconfig” and hit ENTER. This action will bring up the System Configuration dialog box, from where you should be able to find the Startup tab using CTRL + TAB.

Note: For security reasons many employers disable the Run command or do not permit access to “msconfig”.

TSH

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May 2017 Evidence Corner—evidence could make a welcome change to tax cases

The onus of proof in criminal cases: some pitfalls and dangers

by Andrew Paizes © 2017 A Paizes ([email protected])

The accused in S v Quayiso 2017 (1) SACR 470 (ECB) had been charged with two counts of assault with the intention to cause grievous bodily harm. He allegedly stabbed two men with a knife after they had allegedly robbed him of his cell phone the previous day.

The magistrate found the evidence of the second complainant to be unreliable, and acquitted the accused, on this count. On the first count, the magistrate convicted the accused, even though she accepted that his version—that he had acted in justifiable self-defence—was reasonably possibly true, on the basis that he had exceeded the bounds of self-defence by causing excessive harm to the first complainant.

This, said Mbenenge J (with whom Van Zyl J agreed), the magistrate was not entitled to do.

By accepting the accused’s version that he had acted in lawful self-defence, she could no longer reject it, on the ground that he had gone beyond the bounds of that defence. The prosecution had not made this point in its case and, moreover, it contradicted the accused’s version, which the magistrate accepted as reasonably possibly true, that he had been threatened by the complainants and had even

received a stab wound to his thigh from one of them.

Mbenenge J, relying on what had been said in this regard in S v Sithole & others 1999 (1) SACR 585 (W) at 590 g–i, stressed that a corollary of the standard of proof in criminal cases—proof beyond a reasonable doubt—is the notion that an accused is entitled to be acquitted if there is a reasonable possibility that an innocent explanation given by him might be true.

These, said the court, are not two independent tests but rather the statement of one test, viewed from two perspectives. In order to convict, there must be no reasonable doubt that the evidence implicating the accused is true, which can only be so if, at the same time, there is no reasonable possibility that the evidence exculpating him is not true. And, in order for there to be a reasonable possibility that an innocent explanation given by him might be true, there must, at the same time, be a reasonable possibility that the evidence which implicates him might be false or mistaken.

These propositions set out in Sithole and repeated in Quayiso may be axiomatic and even obvious. But, surprisingly, they are often overlooked or wrongly applied. It may be helpful, then, to set out this further

elaboration of the test by Nugent and Schwartzman JJ in Sithole at 590–1, this time not repeated in Quayiso:

Whichever way one phrases the test, it is to be applied upon an assessment of all the evidence, and not by a process of piecemeal reasoning. In other words, it cannot be applied by looking only at the evidence of the State, or the accused, in isolation. It may be that the evidence of the State is such that the conflicting evidence of the accused must, by a process of logical reasoning be untrue, or it may be that the evidence of the accused is such that the possibility that it may be true cannot be said to be excluded by the State’s evidence; but in either event a court must bear in mind all the evidence when reaching the appropriate conclusion. Thus, for example, where there is evidence that the accused committed a particular act, and his evidence is that he was not present at the time the act was committed, quite obviously the two assertions cannot both be true. There cannot even be a reasonable possibility that they are both true. There can only be a reasonable possibility that the accused’s alibi is true if there is at the same time a reasonable possibility that the State’s evidence is false or mistaken.

May 2017


The dangers of compartmentalized or fragmented reasoning in this regard have been emphasized frequently by the courts.

In S v Ramulifho 2013 (1) SACR 388 (SCA) at [7] and S v Hadebe & others 1998 (1) SACR 422 (SCA) at 426 f–h, for instance, the Supreme Court of Appeal warned that, although the breaking down of a body of evidence into its component parts was obviously a useful aid to a proper understanding and evaluation of it, courts had to guard against a ‘tendency to focus too intently on the separate and individual parts of what is, after all, a mosaic of proof’. Thus, once there has been a detailed and critical examination of each component in a body of evidence, it was necessary to

‘step back a pace and consider the mosaic as a whole’, or else one might not ‘see the wood for the trees’ (see Moshephi & others v R (1980–1984) LAC 57 at 59 F–H).

A dictum often referred to by the courts in this regard is that of Nugent J, as he then was, in S v Van der Meyden 1999 (1) SACR 447 (W) at 449–50:

Some of the evidence might be found to be false; some of it might be found to be unreliable; and some of it might be found to be only possibly false or unreliable; but none of it may simply be ignored.

In S v Mc Laggan [2013] ZASCA 92 (unreported, SCA case no 084/13, 3 June 2013) the court cited the above dictum, once again, with approval. It

approved, too, of the approach taken in S v Chabalala 2003 (1) SACR 134 (SCA) at [15], that ‘a trial court (and counsel) should avoid the temptation to latch on to one (apparently) obvious aspect without assessing it in the context of the full picture presented in evidence’.

In short, a conspectus of all the evidence is required. Evidence that is reliable should be weighed alongside such evidence as may be found to be false. And it must be evaluated against the backdrop of the onus of proof—either on a particular issue or in respect of the case in its entirety (see S v Trainer 2003 (1) SACR 35 (SCA) and S v Mia & another 2009 (1) SACR 330 (SCA) at [12]).

t sh

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