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‘TSH Dishonour Roll: Oupa Magashula, Ex-C › TSH › 124TSH2013.pdf · SARS speech 08 May 2012:...

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* Not his real name. © 2013 C Divaris/The Electronic Publishing Corp CC Postnet Suite 72 Private Bag X87 BRYANSTON 2021 Phone 011-234-2434 Fax 086-515-0955 [email protected]. To subscribe (free), e-mail ‘subscribe’ to [email protected] . By supplying your e-mail address, you agree to receive e-mail notifications of forthcoming seminars and related offers from Bsp Seminars®. You can unsubscribe at any time by e-mailing ‘unsubscribe’ to the same address. —An irreverent newsletter designed to keep you up to date— Senior security consultant: KeithE Kelly* Comrade General the rev Dr Prof Prince François ‘Papa Doc’ Duvalier-Leckett, spokesperson in the Office of Costa Divaris: TSH Dishonour Roll: Oupa Magashula, Ex-CSARSWell, whaddya know? You can pay your taxes and send in your returns on time yet still be a cad. MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue # 123 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 on DVD by post for R161 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 (9 ed): http://www.bspseminars.co.za/BspStylebook.pdf SARS guide September 2011: eFiling user guide for value-added tax VAT 201.* SARS tsatske 2012: Applying for an advance tax ruling (ATR).* (sort of) Updated SARS tsatske 2012: Registering for the ATR service.* (sort of) SARS tsatske 2012: Advance tax ruling application procedure.* (sort of) SARS tsatske 2012: ATR system—process flow.* (sort of) SARS tsatske 2012: Example of a binding ruling application.* (sort of) SARS tsatske 2012: Engagement letter.* (sort of) SARS speech 17 April 2012: Ex-CSARS on official opening of the SARS Nelspruit branch.* SARS speech 08 May 2012: Ex-CSARS to SCOF on the SARS strategic plan 2012/13–2016/17 & the 2012/13 SARS annual performance plan.* SARS presentation 08 May 2012: SARS strategic plan 2012/13–2016/17, presented to SCOF .* Sunday Independent 03 June 2012: SARS strives to secure a prosperous SA—fairly & confidentially. By the ex-CSARS. Listed by SARS as a ‘speech’.* SARS speech 13 June 2012: Ex-CSARS to SCOF on the bilateral legal framework in support of a one-stop border post between SA & Mozambique. SARS speech 25 September 2012: Ex-CSARS at 2 nd ATAF general assembly.* High Court case 24 October 2012: Ntsele v MEC for Health, Gauteng Provincial Government (2009/52394) [2012] ZAGPJHC 208; [2013] 2. I am greatly indebted to adv Terri-Lee Dix, who sent me a link to this remarkable case, in which judgment was delivered by Mokgoatlheng J, already noted in this newsletter for a careful judgment on a cus- toms tariff-classification case (98 TSH 2011). Like Buthelezi v Ndaba (below), it in- volved the res ipsa loquitur doctrine, but from a radically different angle. See the Monthly Notebook. SARS guide 2013 (undated): Guide for registration as a tax practitioner via eFiling. The filename (but not the guide itself) includes the reference GENELEC–10–G01.* SARS brochure 2013 (undated): Tax season 2013.* SARS tsatske 2013 (undated): Source codes.* BCR 040 14 May 2013: Investors acquiring rights in a completed film.* SARS speech 14 May 2013: Ex-CSARS to SCOF on the SARS strategic plan 2013/14–2017/18.* SCA case 22 May 2013: City of Tshwane Metropolitan Municipality v Mathabathe & Another (502/12) [2013] ZASCA 60. On municipal rates-clearance certificates under s 118 of the Local Government Municipal Systems Act (restraint on transfer of property): Municipalities are obliged to collect moneys that become payable to them for property rates and taxes and for the provision of municipal services (s 96). They are assisted to fulfil that obligation in two ways: first, they are given security for repayment of the debt, in that it is a charge upon the property concerned (s 118(3)); and, second, they are given the capacity to block the transfer of ownership of the property until debts have been paid in certain circum- Issue: 124 Tax Shock Horror Database items: 12 362 3,11 GB Subscribers: 6 237 July 2013
Transcript
Page 1: ‘TSH Dishonour Roll: Oupa Magashula, Ex-C › TSH › 124TSH2013.pdf · SARS speech 08 May 2012: Ex-CSARS to SCOF on the SARS strategic plan 2012/13–2016/17 & the 2012/13 SARS

* Not his real name. © 2013 C Divaris/The Electronic Publishing Corp CC

Postnet Suite 72 Private Bag X87 BRYANSTON 2021 Phone 011-234-2434 Fax 086-515-0955 [email protected]. To subscribe (free), e-mail ‘subscribe’ to [email protected]. By supplying your e-mail address, you agree to receive e-mail notifications of forthcoming

seminars and related offers from Bsp Seminars®. You can unsubscribe at any time by e-mailing ‘unsubscribe’ to the same address.

—An irreverent newsletter designed to keep you up to date—

Senior security consultant: KeithE Kelly* Comrade General the rev Dr Prof Prince François ‘Papa Doc’ Duvalier-Leckett, spokesperson in the Office of Costa Divaris:

‘TSH Dishonour Roll: Oupa Magashula, Ex-CSARS’ Well, whaddya know? You can pay your taxes and send in your returns on time yet still be a cad.

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue # 123

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 on DVD by post for R161 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 (9 ed):

http://www.bspseminars.co.za/BspStylebook.pdf

SARS guide September 2011: eFiling user guide for value-added tax VAT 201.* SARS tsatske 2012: Applying for an advance tax ruling (ATR).*(sort of) Updated SARS tsatske 2012: Registering for the ATR service.*(sort of) SARS tsatske 2012: Advance tax ruling application procedure.*(sort of) SARS tsatske 2012: ATR system—process flow.*(sort of) SARS tsatske 2012: Example of a binding ruling application.*(sort of) SARS tsatske 2012: Engagement letter.*(sort of)

SARS speech 17 April 2012: Ex-CSARS on official opening of the SARS Nelspruit branch.* SARS speech 08 May 2012: Ex-CSARS to SCOF on the SARS strategic plan 2012/13–2016/17 & the

2012/13 SARS annual performance plan.* SARS presentation 08 May 2012: SARS strategic plan 2012/13–2016/17, presented to SCOF.* Sunday Independent 03 June 2012: SARS strives to secure a prosperous SA—fairly & confidentially. By

the ex-CSARS. Listed by SARS as a ‘speech’.* SARS speech 13 June 2012: Ex-CSARS to SCOF on the bilateral legal framework in support of a

one-stop border post between SA & Mozambique. SARS speech 25 September 2012: Ex-CSARS at 2nd ATAF general assembly.* High Court case 24 October 2012: Ntsele v MEC for Health, Gauteng Provincial Government

(2009/52394) [2012] ZAGPJHC 208; [2013] 2. I am greatly indebted to adv Terri-Lee Dix, who sent me a link to this remarkable case, in which judgment was delivered by Mokgoatlheng J, already noted in this newsletter for a careful judgment on a cus-toms tariff-classification case (98 TSH 2011). Like Buthelezi v Ndaba (below), it in-volved the res ipsa loquitur doctrine, but from a radically different angle. See the Monthly Notebook.

SARS guide 2013 (undated): Guide for registration as a tax practitioner via eFiling. The filename (but not the guide itself) includes the reference GEN–ELEC–10–G01.*

SARS brochure 2013 (undated): Tax season 2013.* SARS tsatske 2013 (undated): Source codes.* BCR 040 14 May 2013: Investors acquiring rights in a completed film.* SARS speech 14 May 2013: Ex-CSARS to SCOF on the SARS strategic plan 2013/14–2017/18.* SCA case 22 May 2013: City of Tshwane Metropolitan Municipality v Mathabathe & Another

(502/12) [2013] ZASCA 60. On municipal rates-clearance certificates under s 118 of the Local Government Municipal Systems Act (restraint on transfer of property):

Municipalities are obliged to collect moneys that become payable to them for property rates and taxes and for the provision of municipal services (s 96). They are assisted to fulfil that obligation in two ways: first, they are given security for repayment of the debt, in that it is a charge upon the property concerned (s 118(3)); and, second, they are given the capacity to block the transfer of ownership of the property until debts have been paid in certain circum-

Issue: 124 Tax Shock Horror Database items: 12 362 3,11 GB Subscribers: 6 237 July 2013

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124 Tax Shock, Horror 2010—July—2

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stances (s 118(1))…. The upshot is that a municipality owed ‘historical debt’ (more than two years over-

due) only cannot refuse transfer. SCA case 29 May 2013: Buthelezi v Ndaba (575/2012) [2013] ZASCA 72. In plain sight of four

of his learned brothers, Brand JA, massively misquotes the judgment of Wessels JA, as he then was, in Van Wyk v Lewis 1924 AD 438 (121 TSH 2013):

To me that seems reminiscent of an application of the res ipsa loquitur maxim, which the court a quo quite rightly found inappropriate in this case. I say quite rightly because, as was pointed out in the locus classicus on medical malpractice, ie Van Wyk v Lewis 1924 AD 438 at 462, that maxim could rarely, if ever, find application in cases based on alleged medical negligence. The human body and its reaction to surgical intervention is far too complex for it to be said that because there was a complication, the surgeon must have been negligent in some respect.

The passage he is referring to is reproduced in 121 TSH 2013. It says nothing of the sort. Did he (or counsel) draw his comments on the case from a textbook? It is not seemly for a top judge to be caught out by a free tax newsletter. I am disillusioned.§

FATF report June 2013: Money laundering & terrorist financing vulnerabilities of legal profes-sionals. Download it from the FIC site.§

SARS guide June 2013: Guide to bulk & additional payments on eFiling GEN–ELEC–11–G01 rev 0. Does anyone at SARS care about making files unnecessarily large?*

SARS tsatske June 2013: Taxpayer centricity (client-approach functionality on eFiling. The file-name includes the reference GEN–ELEC–03–G01. *(I pass.)*

SARS tsatske June 2013: How to eFile your income tax return (ITR 12). The filename includes the reference IT-AE-36-G06.*

SARS release 07 June 2013: SARS enforcement & customs operations for May. I stumbled across this item by accident. Reportedly, ex-SARS employees N Molibeli & E Frederick, & A Carelse & D Nkabinde, not necessarily in the same actions, have been found guilty & sentenced for tax-related crimes. Dogs are doing so well in customs matters that I wonder whether they might not enjoy an expanded role throughout SARS.*

NPA forfeiture list 09 June 2013: Anti-corruption task team—forfeiture/confiscations in priority cases: As part…of its work on corruption and the Anti-Corruption Task Team, the AFU has forfeited a total of R83,6 million over the past 3 years as set out below. In addition, it has now frozen more than R1 billion in corruption cases.

High Court case 12 June 2013: Meadowglen Homeowners Association and Others v City of Tshwane Metropolitan Municipality and Another (31565/2012) [2013] ZAGPPHC 157. I still can-not access this case report. Will someone please tell SAFLII?

SAICA AGM 27 June 2013: Jari Cerny (Howzit, Jari?), a small practitioner, wrote this report-back (dated 28 June), which somehow fell into my hands. It would appear that SAICA failed to pass a special resolution making the amendments to its constitution neces-sary for its members to qualify as registered practitioners. The other issue he raises is SAICA’s benchmarking of its salaries to those paid in the business sector. It’s CEO, he says, currently earns ‘over R5 000 000’ (& so he does; 123 TSH 2013). Get this:

Up to 2011, KPMG were the auditors of SAICA and charged +- R1,2 m in audit fees in 2010 and reduced this fee in 2011 to R800 000. In 2012 Nkonki Inc Auditors were appointed and charged R1,4 m audit fee. I have never before heard of Nkonki Inc. I looked at Nkonki’s au-dit opinion and found that they had audited the company (?) and the group, but SAICA is not a company. I was assured that this was a typo, but I used my thirty-seven votes as an ab-stention because I could not bring myself to support SAICA financial statements if it was not clear in the audit opinion that the institute had been audited.§

GN 669 GG 36601 28 June 2013: Notice & order of forfeiture under the exchange control regulations. YSIH Importers CC looses a cool R1 479 294,61.

GN R 453 GG 36607 28 June 2013: Appointment of an authorized dealer in foreign exchange—BNP Paribas SA—SA branch.

SARS brochure July 2013: Making eFiling even simpler & easier.* SARS brochure July 2013: eFiling your income tax return (ITR 12).* SARS brochure July 2013: Documents needed when submitting your income tax return (ITR 12) at a

SARS branch.* GN 456 GG 36620 01 July 2013: Determination of the earnings threshold under s 6(3) of the Basic

Conditions of Employment Act at R193 805 (R183 008) as from this date. Tax court search 01 July 2013: The chief registrar of the tax court, MA Mckenzie (SARS), has written

to professional organizations looking for CVs from candidate commercial members: In order for us to have our demographics in place we urgently need to appoint coloureds and Indians, especially females.

The appeal cites s 83(4) of the Income Tax Act, which was repealed in 2011.

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124 Tax Shock, Horror 2010—July—3

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Draft rules 05 July 2013: This is the date the second round of draft rules under s 103 of the Tax Administration Act (123 TSH 2013) was published.*

Draft bill & EM 05 July 2013: The SARS What’s New page claims that the draft Tax Administration Laws Amendment Bill, 2013 & its memorandum of objects ‘have been replaced with new versions’. Yet no similar claim is made on the Treasury website. And I can find no obvious difference between the originals & these alleged replacements. Just to be safe, I’ll treat them as being different in the Tax Shock, Horror Database.*

GN R 470 GG 36635 05 July 2013: Determination of safety permit fees under s 23(2)(a) of the National Railway Safety Regulator Act. A hugely expensive, annual impost I have never pre-viously encountered. As luck would have it, no sooner have I decided to cancel my physical subscription to the Government Gazettes (see below) than I find this item in hardcopy form—& it is not included in Government Online! I am glad to report that I was able to access it effortlessly on the GPW’s eGazette service.

ITAC release 08 July 2013: Provisional safeguard duties imposed on frozen potato chips. The Times 10 July 2013: Fired SARS official jailed for fifteen years for R6 m fraud. Bronwyn

Tanya Masters Goldman & her husband Neil Goldman reportedly pleaded guilty. Updated SARS IN 10 July 2013: Issue 3 of interpretation note no 15. Exercise of discretion in case of

late objection or appeal. Seemingly cast in a far more restrictive mode than before, & including some waffle on ‘exceptional circumstances’ (coming soon to the Monthly Notebook). The desire is currently very evident that every possible obstacle should be placed in the path of taxpayers, & sod the Constitution.*

Withdrawn SARS guide 10 July 2013: Quick guide to advance tax rulings. This has been withdrawn.* Updated SARS guide 10 July 2013: Comprehensive guide to advance tax rulings.* NPC speech 12 June 2013: Minister Trevor Manuel in the Presidency Budget vote debate. An

extremely rare addition to this ordinarily static website. Treasury release 11 July 2013: Charges in SA retirement funds. On the latest discussion paper. Treasury presentation 11 July 2013: Charges in SA retirement funds. Treasury paper 11 July 2013: Charges in SA retirement funds. A technical discussion paper. GN 484 GG 36649 11 July 2013: Agreement with Gibraltar for the exchange of information relating to

tax matters.* GN R 487 GG 36657 11 July 2013: Amendment of rules (DAR 122) under ss 119A & 120 of the Customs

& Excise Act (eFiling for excise duty, fuel levy, RAF levy & environmental levy): Note that manual submissions will only be accepted for a period of three months from 11 July 2013. Thereafter all submissions must be done through eFiling only.*

Updated summary 11 July 2013: Summary of all tax information agreements & mutual administrative assistance agreements.*

Treasury release 12 July 2013: SARS commissioner Oupa Magashula resigns: In summary, the key findings [of the fact-finding inquiry] are as follows. 1) In relation to the terms of reference number 1 and 2, the key findings are that Mr Ma-

gashula: Had by his conduct placed the reputation and credibility of SARS at risk: Was much less frank with the committee than the committee would have expected of the

person who had the integrity essential to his position; Caused the Minister to make an incorrect statement to the public with regards to the

CA’s CV not having been sent to SARS. An interview had been arranged, but the CA can-celled because she preferred a job based in Durban, which did not meet SARS’s re-quirements. Interacted with Mr Marimuthu more times than he had initially admitted to the Minister

and the committee; and that He told the Minister and the committee (during his first appearance before it) that he had

had no further communication with the CA. It later transpired that she had sent five e-mails to the Commissioner’s private SARS e-mail address.

2) The allegations of Mr Marimuthu’s influence over Mr Magashula could not be probed be-cause Mr Marimuthu did not respond positively to the request for an interview.

3) The committee was unable to pronounce on the precise number of people who may have been involved in what the committee sees as the attempt to blackmail the SARS Commis-sioner.

4) The committee found no evidence that Mr Magashula committed a crime. Blackmail? Through offering a honey pot? Why was the ex-CSARS meeting someone

whose phone was being tapped? Who leaked the recording to City Press? Why, & why now? Is it true that there’s bad blood between…. Whoa, there!*

Treasury report 12 July 2013: Report on fact-finding inquiry into the alleged improper conduct of the CSARS, Oupa Magashula, requested by the MOF. By retired judge Zak Yacoob & adv Muzi Sikhakhane. Some ugly stuff here:

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124 Tax Shock, Horror 2010—July—4

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6.18. We had been told that the Deputy Minister [for finance, Nhlanhla Nene] too, had been approached by a certain person in Pietermaritzburg and told about the existence of the re-corded conversation. The Deputy Minister confirmed a meeting with a certain gentleman who told him that there was a recorded conversation whose content was compromising to the Commissioner and that the Commissioner was indeed ‘in the pocket’ of Mr Marimuthu. 6.19. The Deputy Minister gave us the name of the person he had met. We made our own enquiries about this person, whose identity is withheld at his request because he says he fears for his safety…. …. 6.21. We were also told a number of other things by this person, including that the Com-missioner had a much closer relationship with Mr Marimuthu than we had been told. We were also told that when the conversation was recorded the Commissioner and Mr Mari-muthu were actually in Mr Marimuthu’s house. 6.22. We treated the statements from this person with caution because of its hearsay na-ture. 6.23. On 28 May 2013, we interviewed the Commissioner for the fourth and final time to put to him matters arising from this new material…. We informed him that we had visited the restaurant in Umhlanga Rocks where the Commissioner said the recorded conversation had taken place and that our view, after experiencing the environment was that, the quiet clarity of the recording, made it improbable that the call had been made from that restau-rant. The Commissioner attributed the quiet clarity of the recording by speculation that the recording had been cleaned. We have considerable doubt that the Commissioner was at that restaurant when the recorded conversation took place.

Treasury report 12 July 2013: Annexures A to L. Codes of conduct for SARS & its managers, amongst other stuff. The main COC cannot be downloaded but I found it on the SARS website. There’s a code of conduct at SARS? You could have fooled me. Too large for inclusion in the Tax Shock, Horror Database, thus:§

City Press 14 July 2013: Magashula: I regret my actions. City Press 14 July 2013: Who is Ivan Pillay? On the new acting CSARS. Sunday Times 14 July 2013: ‘Please forgive me’. Oupa Magashula, from his hospital bed. Eyewitness News 15 July 2013: Magashula clarifies resignation:

Magashula says Judge Yacoob didn’t accept his version of events. He was responding to Yacoob's assertions that he was much less frank than expected in the commission. ‘What surprises me is I was the one who admitted to having the telephone call. When City Press came to us and said they have a recording. I was the first one to say that the conversation had taken place In the following setting. Why would I hide it? Magashula however says he respects the Judge and the findings.

Really? Well, then, why not shut up? You had your chance to defend yourself.§ Treasury release 17 July 2013: Minister Gordhan announces further details of the tax review commit-

tee & the terms of reference: The terms of reference for the Tax Review Committee are to inquire into the role of the tax system in the promotion of inclusive economic growth, employment creation, development and fiscal sustainability.

The members are judge Dennis Davis (chair), prof Annet Wanyana Oguttu, prof Matthew Lester, prof Ingrid Woolard, Nara Monkam, Tania Ajam, prof Nirupa Padia, Vuyo Jack, Cecil Morden (ex officio, Treasury) & Kosie Louw (ex officio, SARS). I guess that we can give up waiting for the last report of the Katz Commission.*

SATRC 17 July 2013 (undated): Terms of reference for the SA tax review committee. SATRC 17 July 2013 (undated): Tax review committee—brief biographies. I thought long &

hard about the composition of the SATRC, & discussed it with colleagues. In the end, the kindest thing I could find to say is that not one of its members appears to be a subscriber to this free newsletter (although, to be fair, for a great many subscribers, we have nothing more than an e-mail address on record).

NPC speech 17 July 2013: A keynote address by minister Trevor Manuel to the 2013 Metropolis Annual Meeting. Much as I admire the man, he is presently the minister of ideas, & in SA ideas, as opposed to effective action, are a glut on the market.

PCC 22 18 July 2013: Client identification & verification requirements in relation to interna-tional or foreign privacy & data protection laws. Illegally marked ©. Get this:

The Centre is of the view that should a foreign national refuse to provide an accountable in-stitution with the necessary FIC Act required information, the accountable institution may not proceed to establish a business relationship or conclude a single transaction with such cli-ent.

Treasury release 18 July 2013: Moody’s Investors Service affirms SA’s credit ratings & maintains the negative outlook. Based on four promises by government, three of which are proba-

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124 Tax Shock, Horror 2010—July—5

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bly undeliverable. Is Moody’s suddenly dumb or is it breaking the news gently? SARB statement 18 July 2013: Statement of the monetary policy committee (5%, unchanged). High Court case 18 July 2013: Shuttleworth v South African Reserve Bank and Others (30709/2010)

[2013] ZAGPPHC 200. A very complex case on the constitutionality of the excon regu-lations arising from a 10% exit levy—a fee paid to export blocked rands—amounting to R250 474 893,50. All parties ‘substantially succeeded’, although I don’t read the judgment as ordering a repayment of the levy.

SAICA notice 18 July 2013: Proposed amendment to the Tax Administration Act 2011: Implications for tax practitioner registration:

SARS will not take action against a person who did not register as a tax practitioner in antici-pation of the outcome of the proposed changes to legislation regarding persons working under the direct supervision of a tax practitioner.§

Business Day 18 July 2013: Gordhan sets a standard for all to uphold. David Lewis (Corruption Watch) displaying his naïveté?

Mail & Guardian 19 July 2013: SARS boss Magashula trapped by spying: The taped phone call that ended the career of South African Revenue Service (SARS) com-missioner Oupa Magashula was a product of a crime intelligence surveillance operation targeting former police commissioner Bheki Cele, evidence gathered by amaBhungane suggests.§

The Star 19 July 2013: Europe & SA in face-off over trade policies. By Peter Fabricius. We have unilaterally cancelled bilateral investment treaties with Luxembourg, Belgium & Spain. The Netherlands is next.

The Economist 20 July 2013: Rewarding work. On an independent report into MPs’ pay, as a multi-ple of a country’s GDP per person. In a list of the top-paying twenty-eight countries, mighty little SA came out fifth, with members of the National Assembly reportedly be-ing paid more than ten times our GDP per person.§

Business Report 22 July 2013: Magashula’s parting shot to the public. ‘An open letter to SA govern-ment and taxpayers & my former colleagues at SARS.’ Arrogant bugger.

dti release 23 July 2013: The dti’s director-general calls for the adoption of the Monyetla Work Readiness Model (I pass) to stimulate economic growth:

According to October the success factors for growing the South African economy is to have a vision of where the country wants to go, create Public Private Partnerships and build insti-tutions to drive the industry.

A breathtaking abstraction from reality. SARB speech 23 July 2013: The role of the accounting & auditing profession in SA’s economic

growth & development. By deputy governor Francois Groepe. An unfortunate topic; might that be why the economy is doing so badly?

SARB release 23 July 2013: Annual economic report—2013. SARB report 23 July 2013: Annual economic report—2013.§ The Times 23 July 2013: Fraudster ordered to pay SARS R8 m. I should love to read this deci-

sion of the Cape Town Regional Court, since it deals with underinvoicing of exports to Namibia. How, I always wonder in such matters, do they recover the real price?

BCR 041 24 July 2013: Dividends distributed by a foreign company.*

BPR 149 24 July 2013: Disposal of an asset that constitutes an equity share in a foreign company.*

BPR 150 24 July 2013: Tax treatment relating to a credit linked deposit.* SAICA notice 24 July 2013: Proposed changes to the SAICA constitution. After decades of suffer-

ing unfair & improper competition from this lot, I look forward to this new rule: The entity may not have a share or other interest in any business, profession or occupation which is carried on by its members.

It remains to be seen how SAICA means to comply. See the Monthly Notebook.§ FIC release 25 July 2013: Law societies join the financial intelligence fold:

The four statutory provincial Law Societies—the Cape Law Society, the KwaZulu-Natal Law Society, the Law Society of the Free State and the Law Society of the Northern Provinces—pledged their commitment to combating money laundering and the financing of terrorism today when they signed Memoranda of Understanding (MoUs) with the Financial Intelli-gence Centre (FIC) in terms of Section 45(1D) of the Financial Intelligence Centre Act….

The law societies are now supervisory bodies under the FICA. It appears that a seemingly large number of attorneys have yet to register with the FIC. But don’t be fooled—registration is the least of your problems.

Business Day 25 July 2013: SA acted rashly in ending EU treaty. Letter to the editor by Peter Leon. SARB speech 26 July 2013: Governor’s address to shareholders. GN R 520 GG 36684 26 July 2013: Cancellation of an authorized dealer in foreign exchange—Calyon. BN 148 GG 36682 26 July 2013: Increase under s 17(4)(c) of the Road Accident Fund Act of the

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124 Tax Shock, Horror 2010—July—6

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threshold for claims for loss of income & loss of support to R210 192 (R207 528) with effect as from 31 July 2013.

SARS website notice 26 July 2013: Cancellation/finalization of third party appointment (AA 88): To ensure employees are not negatively impacted, deductions of AA 88s should be stopped when an employee has sorted their tax affairs and paid the outstanding AA 88 debt. Em-ployers are requested to continuously synchronise the e@syFile™ Employer software, to ensure the latest information concerning AA 88s is received from SARS.*

If SARS could deliver the notifications in the first place, how come it can’t deliver a termination notice? This notice is improperly delivered.

Sunday Times 28 July 2013: ‘We did not allow Kebble to dodge taxes’. This is very odd. Are we being introduced to the next CSARS? It’s by Gene Ravele, SARS chief officer of tax & customs enforcement operations.

Sunday Times 28 July 2013: SARS offered me a tax deal, says Malema. A lot of stuff here I could believe, but, I hasten to add, read on.

dti release 29 July 2013: Mpumalanga creative industry encouraged to formalize. Artists should register their businesses & operate formally—to ‘help them in growing as brands & also to access incentives from the dti & other government departments’. An invita-tion to untalented chums to a reserved place at the trough? Alternatively, the ANC knows as much about art as it does about economics—sweet Fanny Adams.

The Times 29 July 2013: Zuma denounces ‘evil capitalism’. And so he should. The system he espouses gives him a R250 m house, a private jet to fly to King Shaka International Airport & daily SAAF helicopter flights from there to Inklanda (Business Day 31 July 2013). It beats capitalism any day of the week.

dti release 30 July 2013: Minister Davies requests a detailed report on NLV transaction. The National Empowerment Fund lent a whopping R34,1 m to Ndalo Luxury Ventures to open the Luminance store in the ultra-exclusive Hype Park Corner shopping centre in Gauteng. Ordinarily, only a harassed, rich husband would finance yet another lux-ury dress shop (R25 k a pop), & no bank would ever lend into an untested retail concept. There is no way a single store can carry finance of this magnitude.

SARB speech 31 July 2013: Employment & the economics of job creation. By the governor. Not up to her usual standard, but it was a labour-law conference. You can’t mention Thanksgiving to an audience of turkeys. Yet the press thought she was tough.

Draft rules 02 August 2013: Draft amendment of rules under ss 77H & 120 of the Customs & Excise Act (internal administrative appeal).

Draft form 02 August 2013: Draft of revised DA 51—internal administrative appeals under the Customs & Excise Act.

SARS release 02 August 2013: Responding to JS Malema: SARS is still involved in various aspects of litigation with Mr Malema and entities associated with him. Mr Malema was afforded a period of 48 hours to rectify the following false allega-tions—• That there was an agreement in principle between him and SARS to repay out-standing tax liabilities and that the agreement was [breached] by SARS due to political inter-ference • That a request for a compromise was declined by SARS due to political interfer-ence • That SARS was part of a ‘concerted effort’ to discredit Mr Malema and caused the farm Schuilkraal to be sold to remove all means for Mr Malema to generate an income.

An invocation of s 67(5) of the Tax Administration Act (right of reply by SARS).* Auditor-General 30 November 2013: According to an ad in the Sowetan, this is the day that the term

of office of the Auditor-General ends. His impending termination is perhaps the rea-son why his not inconsiderable presence on the AGSA website has been withdrawn & why his deputy now has a DAG’s column (123 TSH 2013). Is this how it is done in the public sector—you swan about on private business pending your departure?§

* 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 TSH Database This month ninety-nine 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. C&E consultants Since 1 January 2002, the CSARS has failed under the Customs & Excise Act to ga-

zette requirements for the registration of consultants to principals. SARS website Incredibly, there are now in existence ‘tax practitioner applicable tax products’. SARS website A welcome consequence of the defenestration of the CSARS is that you are no longer

confronted with his image every time you use the website. SARS website As I fully expected, SARS is far too unruly an organization to add new items to its

new website in an orderly fashion. This issue proves that stuff is added, without no-tice, by various internal fiefdoms, & presented in a variety of styles. I am not break-

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ing my neck to uncover these hidden items but will include them opportunistically. Subscriptions Our newspapers have degenerated so terribly that I have cancelled all my subscrip-

tions, barring one, & now read the New York Times instead. Although I still find some use in a subscription to the Government Gazette, I am cancelling that, too, since the service offered by Government Online is (almost) comprehensive.

MONTHLY NOTEBOOK

TAA: I f inally understand ‘pay now argue later’ 

I never like adversely criticizing the ANC without pointing out how closely they resemble their prede-cessors, the Nationalists. I see them both as fascist organizations, in their death throes, reckless in their disregard for the well-being of the economy.

Yet, while the Nats were essentially indifferent to the collection of tax, the ANC sees the collection and spending of taxes as the be-all and end-all of all policy. That line of thinking is celebrated in the corrupt and incompetent Tax Administration Act, which serves an equally corrupt and incompetent taxation authority in the promotion of the collection of alleged ‘tax debts’ by any means—fair or foul.

Those who have been attending our seminars on the act will know how useless and amateurish it is in its treatment of defined terms, which make any understanding of the law hugely difficult. And no-where is the act more confused—whether deliber-ately or through outrageous ignorance—than in its delineation of what is a debt due to the state.

Creditor-debtor relationships In its simplest characterization, tax is a liability im-posed by the state—the creditor—upon the tax-payer—the debtor. What we know about creditor-debtor relationships is that two dates play a critical role in their common affairs:

Dies cedit—the time when a right is due or ow-ing. This is equivalent to the income tax con-cepts of the date of accrual/incurral. At this mo-ment the creditor can establish his claim.

Dies venit—the time for enjoyment arrives. This is equivalent to the PAYE concept of payable. At this moment the creditor can demand payment.

An analysis of the act yields the following identities:

Dies cedit Debt due to the state = Liability for tax/Tax liability = Tax

chargeable = ‘Tax’ = Tax imposed = Tax liability = ‘Tax debt’ = Tax due = Tax debt due to SARS = Tax due un-der an assessment = Liability to pay that tax (that is,

tax due under an assessment)

Dies venit Tax payable = Obligation to pay tax = Right of SARS to

receive and recover tax = Time for payment of tax = Unpaid tax

Someone who purports to write a statute with so little self-control or discipline ought never to have been entrusted with the task, unless the object was to confuse the hell out of anyone genuinely trying to understand the law. The critical definition is that of a ‘tax debt’, in s 1:

‘[T]ax debt’ means an amount of tax due by a person in terms of a tax Act;

This is clearly a dies cedit issue, and in my view is established under s 100, on the finality of an as-sessment. In keeping with the common law and rules of court, your actual liability to the state will be established only when you have exhausted all op-portunities for appeal.

Yet an entirely different picture is painted by s 169(1):

Debt due to SARS 169. (1) An amount of tax due or payable in terms of a

tax Act is a tax debt due to SARS for the benefit of the National Revenue Fund.

Thus does the idiot draftsperson create two, con-flicting definitions of what is a tax debt, since s 169(1) conjures with both dies cedit (tax due) and dies venit (tax payable), while the official definition of a ‘tax debt’ is confined to dies cedit (tax due).

Unsurprisingly, and in typically cack-handed, cross-referring style, it is proposed, in the draft Tax Administration Laws Amendment Bill, 2013, to cor-rect the blunder by changing the definition of a ‘tax debt’ to read as follows:

‘[T]ax debt’ means an amount referred to in sec-tion 169(1);

You can be in no doubt, therefore, that in SA you can be obliged to pay one particular creditor—SARS—even before it is established that you have incurred a debt due to the state!

And that, precisely, is the message of the pay-now-argue later rule:

Payment of tax pending objection or appeal 164. (1) Unless a senior SARS official otherwise di-

rects in terms of [s 164(3)]— (a) the obligation to pay tax; and (b) the right of SARS to receive and recover tax, will not be suspended by an objection or appeal or

pending the decision of a court of law pursuant to an appeal under section 133.

If like me you have spent most of the past two or three years dealing with illegal or possibly even criminal assessments issued by SARS officials, you will wonder at a business community that has al-lowed such a state of affairs to develop.

My explanation is simple. That very same com-munity is so heavily engaged in tax evasion and fraud that it doesn’t care how unconstitutional and dishonest SARS is. The situation represents a standoff between two rival groups of gangsters.

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SAICA’s constitutional changes—a curious omission 

Regular contributor Michael Stein writes:

SAICA has given an undertaking to SARS to request its members to approve amendments to its consti-tution to make it comply with the requirements of the exemption provided by s 30B of the Income Tax Act. It is required to qualify for this exemption in order to achieve recognition by SARS as a ‘recog-nized controlling body’ under the Tax Administration Act, so that its members are allowed to act as tax practitioners.

In motivating the proposed amendments to its constitution, SAICA states that:

Following a recent amendment to the Income Tax Act (the addition of a new section 30B), SAICA now needs to make certain amendments to its Constitution to maintain its current tax-exempt status….

It is a statutory requirement that SAICA meet the requirements of section 30B of the Income Tax Act in order to be recognized by SARS as a controlling body.

The ‘recent amendment’ inserting s 30B of the In-

come Tax Act, under which SAICA has apparently been claiming exemption from income tax, in fact took effect as from 2 November 2010!

SAICA proposes several amendments to its con-stitution to meet the requirements of s 30B, some of which were mentioned in my last Briefing (123 TSH 2013). But there is a notable omission, namely, the requirement provided by s 30B(2)(b)(ix), which states that a body’s constitution must provide that

[s]ubstantially the whole of the entity’s funding must be derived from its annual or other long-term members or from an appropriation by the government of the Repub-lic in the national, provincial or local sphere,

which is meant to limit trading activities. Unless SAICA’s constitution already contains such

a clause, which is unlikely, since it has been trading for many years, it has, at least since 10 November 2012, not complied with s 30B. And it will continue to be noncompliant, unless it also inserts the clause into its constitution together with the other proposed changes.—MLS

TAA: it takes a country to pay for a taxpayer 

If, like the ANC, you believe that state expenditure can of itself build an economy, you will see the col-lection of taxes as a primary goal, both to fund such expenditure and to service and repay loans raised when tax revenues are inadequate to meet current spending goals.

The next step is to pretend that, in SARS, you have a responsible taxation authority capable of raising notices of assessment that, despite being untested under the law, ought to be immediately

executed and liquidated. Then, just in case the twerp taxpayer puts up a resistance, you go one step further and hugely expand the range of victims you can mulct for the amount you merely allege the twerp owes.

But you are in such a state of gibbering excite-ment to sock to it to the twerp that you lose your way in your typically parallel (as opposed to linear) drafting of the applicable law and create the follow-ing, inadequate matrix:

Taxpayer’s alter

egos Vicarious liability Personal liability Personal liability

discharges tax-payer’s debt

Recovery from taxpayer

Representative taxpayer—s 153

In representative capacity—s 154

s 155 s 157(2) s 160(1)

Withholding agent See charging acts s 157(1) See charging acts s 160(1) Responsible third party

Contemplated in s 158 but…

s 159 See below s 160(1)

These are ‘responsible third parties’ (seemingly, the only ones, but see s 158) Third party ap-pointee

? s 179(3) s 179(1) s 160(1)

Financial man-agement

? s 180 ? s 160(1)

Shareholders ? s 181(2) Jointly & severally liable Secondary to company’s liabil-ity—s 181(3)

? s 160(1)

Transferees ? s 182(1) ? s 160(1) Dissipaters ? s 183

Jointly & severally liable

? s 160(1)

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In every instance the taxpayer’s alter ego may recover an amount paid from the taxpayer but it is not always clear whether SARS may recover from both parties! Joint and several liability is mentioned just twice, and only once is it made clear which

party gets attacked first. The effective and terribly confusing definition of a

‘responsible third party’ in s 158 contemplates such a party as being liable in a representative capacity but that idea is nowhere fleshed out.

TSHD—a neglected treasure trove of tax & related law 

So very few people take the Tax Shock, Horror Database that I know that only a handful must be aware that it includes an archive of the items pub-lished in this Monthly Notebook from January 2007 to June 2013, updated, DV, every six months.

What is surprising about this 5 MEG-cache of data and comment is that so much of it is still as rele-vant as it was on the day it was published.

Each year includes its own contents page, and the entire ‘Archive’ directory is searchable.

VAT: a proliferation of pro forma invoices 

Alas, it’s not just SAICA that resorts to pro forma invoices (123 TSH 2013). The Institute of Account-ing and Commerce is equally guilty.

I see so many defective invoices being issued by vendors that I am convinced that many of them believe that, unless they issue a formal tax invoice, they are not liable to account for output tax.

See if you can work out the truth for yourself from these extracts from the Value-Added Tax Act:

‘[I]nvoice’ means a document notifying an obligation to make payment;

Time of supply 9. (1) For the purposes of this Act a supply of goods or

services shall, except as otherwise provided in this Act, be deemed to take place at the time an invoice is is-sued by the supplier or the recipient in respect of that supply or the time any payment of consideration is re-ceived by the supplier in respect of that supply, which-ever time is earlier.

Still don’t get it? By issuing a demand for payment, you trigger a time of supply and so become liable to account for output tax.

Has your trust company screwed your trust, permanently? 

In the space of just more than a week I have heard from two, well, trusted sources that some trust companies have fallen into the extraordinary prac-tice of appointing more than a single member of staff to act as trustees of the same inter vivos trust.

The Trust Property Control Act, in s 1 defines a ‘trustee’ essentially as a person. Since that word is not defined in that act, it most probably bears its meaning in s 2 of the Interpretation Act:

‘[P]erson’ includes— (a) any divisional council, municipal council, village

management board, or like authority; (b) any company incorporated or registered as such

under any law; (c) any body of persons corporate or unincorporate;

This conclusion is supported by s 6(4) of the Trust Control Property Act, which envisages the granting of authorization to a trustee which is a corporation. And the new J 417 form issued by the doj&cd (123 TSH 2013) allows for an application for trusteeship by the representative of an organization.

Finally, the case law includes many instances of corporations acting as trustees.

But a company has ‘no body to kick and no soul to damn’ and thus must be represented by a natu-ral person, usually an employee. An employee act-ing for a company is neither an agent nor an inde-pendent service-provider. He or she will be the company’s representative, the active legal persona being the company.

When a trust deed calls for more than a single trustee it is calling for multiple legal personae, and

for obvious reasons. Multiple representation of the same persona just will not cut it.

But if several people come to be trustees, pur-portedly as representatives of the same company, their appointment as such was invalid. The trust ends up purportedly being run without the required complement of trustees, and its decisions are being taken without any quorum required by the deed. I know of no legal principle or authorative decision of the courts under which such a situation may be rectified after the event.

In my view, the issue of letters of authority by the Master a trustee does not make, in that a trustee must first be properly appointed under the deed. Although the Master might have been expected to be more vigilant in issuing letters of authority, the functus officio maxim (123 TSH 2013) is going to make it difficult for the Master to intervene, even in the unlikely event that the appetite to do so exists in the Master’s office.

Are the supernumeraries personally liable? An alternative construction of the situation would be to ignore the express terms of the appointment of more than a single employee of the trust com-pany and to regard the surplus appointees as act-ing in their personal capacity. (In my view, it would take a court ruling to achieve such an outcome.)

Yet, apart from the issue of personal accountabil-ity and liability, and the loss by the trust company of vicarious liability, the employees concerned could hardly claim to act as trustees if they were all tak-ing instructions from their employer!

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Tax practitioners: on joining 

I happen to be a South African because my father and my mother’s parents immigrated here, with nothing, in pursuit of a better life. I suppose I ha-ven’t often marvelled at their bravery and willing-ness to put up with hardships but I cannot remem-ber ever not being grateful that they made the trip.

As a direct consequence, I am a member of the Greek Orthodox Church, and went to South African schools and a South African university, ending up with a decent tertiary education, another thing I am grateful for. Every bit as inevitable was a compul-sory, lengthy stint in the Citizen’s Force bit of the SADF, the full-time portion of which I enjoyed even at the time, and have never regretted.

I cannot say the same for SAICA, which I joined as part of becoming and, for many years, being a CA(SA). As I have often related in these pages (5 TSH 2004, 17 TSH 2004, 50 TSH 2007, 60 TSH 2008, 76 TSH 2009, und so weiter), I long ago resigned from SAICA, and thus ceased to be a CA(SA), mainly in order to report it to SARS (and the national treas-ury; 123 TSH 2013) for tax evasion over an ex-tended period, for which it has never been pun-ished. Not for a minute have I ever regretted either decision.

One good thing that my membership, while it lasted, did spawn, however, was a Toastmasters’ chapter in Cape Town, which I helped to bring into existence and belonged to for several years.

Much more recently, I joined the Computer Soci-ety SA (112 TSH 2012), and am still ridiculously proud of being accepted as a member, especially since people appear to be intimidated when I (modestly…well, sort of) happen to mention that factoid.

Since this is a full and fair listing, I must add that an unnamed SARS employee once included me in the SARS Users of Statutory Rates (68 TSH 2008), a no doubt select group that, alas, seems since to have been disbanded.

It was in 2005 that I was compelled to register with SARS as a tax practitioner (112 TSH 2012), for the astonishing reason I reported upon in 26 TSH 2005 (there was, you see, a black tax adviser in the Durban area giving bad advice).

The ex-commissioner who is now the minister of finance (not the one who is now so ignominiously out on his ear) surprised me not at all with his out-rageous attempts in 2006 and then again in 2008 statutorily to regulate tax practitioners. No doubt it was he who was behind the draft Tax Administra-tion Amendment Bill, 2012, which, on 2 July 2012, first introduced the alternative idea that tax practi-tioners be compelled to join a ‘recognized control-ling body’. That draft became an actual bill on 25 October 2012, and an act, the Tax Administra-tion Laws Amendment Act, on 20 December 2012.

The deadline for registration with such a body was first set (by the bill) at 1 April 2013 and then advanced (by the act) to 1 July 2013.

Apart from IRBA, the law societies and the bar

councils, hoi polloi were meant to belong to an outfit recognized by the ex-commissioner (the out-on-his-ear chappie). Despite his busy schedule, he managed to get a media release out on 14 May 2013, listing IAC, ICSA, SAICA, SAIPA and SAIT as riff-raff refuges, all of six weeks before the deadline.

With the much-appreciated help from a col-league, I selected IAC, and began the surprisingly lengthy process of completing and submitting an application for membership. I haven’t seen my qualifications for at least thirty-five years! And my departure from SAICA was such a low-key affair that I still have my certificate of membership of PAAB (I cannot remember why I ever needed that).

While surprised at having to supply an original tax clearance certificate, I was relieved to discover that SARS had initially insisted also on a police clearance. Perhaps as a result, SAIT, I am told, re-quires applicants to submit a criminal history, or whatever you call it when you don’t have one—a criminal record, that is. It wouldn’t surprise me if this brownnosing story were true.

I managed to get my application in more or less at the last minute but IAC, to its undying credit, at least in my eyes, approved my application in time for me to register on 1 July 2013, except that the SARS website was down, and remained down for some days, at first, seemingly, as far as registrants were concerned, and later for all eFilers, poor sods. I suppose the ex-commissioner (see above) didn’t anticipate a big rush at the time of the dead-line. His salary was safe (little did he know).

My guess is that perhaps as many as 15 000 erstwhile tax practitioners cannot now practice as such. I have already heard of at least one who will ignore the law and another, a justly famous con-sultant and someone I really admire, who cannot register, owing to some footling technicality.

Clearly, it cannot possibly be constitutional to treat people in this fashion. Having itself encour-aged perhaps tens of thousands to hold them-selves out as tax practitioners, it is a disgrace that SARS now purports summarily to deprive them of their livelihoods.

Nor can it treat those like myself who deserved to be catered for by way of a ‘grandfather clause’ in such an insulting fashion. Fortunately, I am in a position to return the insult with (compound) inter-est.

But sufficient unto the day is the evil thereof. What I now most want to know is more about

SARS staffers. What are their pay scales? How many have a secondary education? A tertiary edu-cation? How many have criminal records? What sort of training do they enjoy? How many are regis-tered tax practitioners? Is there a rule that the commissioner and ‘senior SARS officials’ (whoever they might be) must be registered tax practitioners?

By definition, we registered tax practitioners are now the good, honest guys. Where does that leave SARS staffers?

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When judges are regarded as bureaucrats 

That judges are regarded as bureaucrats leads to unusual consequences when the litigation involves the government. Some government offices of equal or higher bureaucratic rank than that of a judge see no reason to consider themselves bound by that judge’s orders; on the contrary, government office-

holders tend to consider themselves bound only by order issued by their superiors. [Footnote sup-pressed.] —Kenneth W Dam in The Law-Growth Nexus—The

Rule of Law and Economic Development 2006 Brook-ings Institute Press at 215, discussing China, not SA.

Words & phrases: ‘deemed’ 

This citation comes from the minority judgment of Dendy Young JA in Taxpayer v COT, Botswana 43 SATC 118, 1980 (BCA) (see elsewhere in this issue):

…. In St Aubyn (LM) v Attorney-General [1951] 2 All ER 473 (HL), Lord Radcliffe said at 498F:

The word ‘deemed’ is used a great deal in modern legislation. Sometimes it is used to impose for the

purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particu-lar construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive de-scription that includes what is obvious, what is un-certain and what is, in the ordinary sense, impossi-ble.

Interpretation: more on what is a proviso 

I am sticking to my guns in arguing that it is a waste of time to try and define exactly what a pro-viso might be. The point is to acknowledge, rather, all the forms that the idiot draftsperson classifies as provisos, by using wording such as ‘provided that’.

And these, I say, comprise:

Excepting stipulations. Qualifying stipulations. Conditional stipulations. Additional stipulations. Stand-alone stipulations.

The first two possibilities are widely recognized. I dealt with them in 104 TSH 2011 (Thulo v Road Accident Fund) and 116 TSH 2012 (Strydom v En-gen Petroleum Limited).

You cannot—it is a fallacy of interpretation—treat the first two, pukka types as constituting independ-ent enacting clauses (116 TSH 2012, 118 TSH 2013).

Now hear this:

Whilst the regulation on which the Fund relies in ad-vancing its claim takes the form of a proviso and it is convenient to use that term to describe it, in truth it is not a proviso properly so-called. A proviso would serve to qualify and limit the scope of the definition to which it was appended [Mphosi v Central Board for Co-operative Insurance Limited 1974 (4) SA 633 (A) at 645C–F,] but this is an independent provision dealing with the power of the committee of the Superannuation Fund to direct a local authority to pay an adjusted con-tribution….

Tick off the last item in my list! The provision re-ferred to, which started off so learnedly with the words ‘provided further that…’ was, said Wallis JA, in Natal Joint Municipal Pension Fund v Endumeni Municipality (920/2010) [2012] ZASCA 13 (15 March 2012) (114 TSH 2012, 122 TSH 2013, 123 TSH 2013), ‘an independent provision’.

What does it take to strike an attorney off the roll? 

In Law Society of the Northern Provinces v Moima (10881/2011) [2013] ZAGPPHC 213 (24 July 2013), Ebersohn AJ said (footnotes suppressed):

It is trite law that applications such as this one, are sui generis and of a disciplinary nature. There is no lis be-tween the Law Society and the Respondents[.] The Law Society, as curator morum (genitive singular) of the profession, places facts before the Court for con-sideration.

The question whether an attorney is a fit and proper person in terms of Section 22(1)(d) of the [Attorneys] Act is not dependent upon a factual finding, but lies in the discretion of the Court.

In exercising its discretion, the Court is faced with a three stage inquiry:

(a) The first inquiry is for the Court to decide whether or not the alleged offending conduct has been es-

tablished on a preponderance of probabilities; (b) The second inquiry is whether, as stated in Sec-

tion 22(1)(d) of the Act, the practitioner concerned ‘in the discretion of the Court’ is not a fit and proper person to continue to practice. This entails a value judgment;

(c) The third inquiry is whether in all the circum-stances, the practitioner in question is to be re-moved from the roll of attorneys or whether an or-der suspending him from practice for a specified period will suffice. Ultimately this is a question of degree.

The Court’s discretion must be based upon the facts placed before it and facts in question must be proven upon a balance of probabilities.

The facts upon which the Court’s discretion is based should be considered in their totality. The Court must not consider each issue in isolation.

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More on the functus officio principle 

In Frederick Coenrad Daniel v President of the Republic of South Africa and Another CCT 34/12 [2013] ZACC 24 the Constitutional Court said: The general principle is that once a court has duly

pronounced a final order, it becomes functus officio and has no power to alter the order. However, Rule 42 of the Uniform Rules creates exceptions to this princi-

ple. The Rule empowers courts to rescind or vary or-ders in certain defined circumstances. In this case te applicant relies on only one of the grounds listed in Rule 42. He contended that the order ‘was made in er-ror’. This falls under the first ground listed in Rule 42. It authorizes rescission of an order erroneously granted in the absence of a party affected by it.

VAT: a typical farmer’s will & an inherited bare dominium 

Heaven forefend that a woman should inherit a farm! If you’re going to die too poor to do anything better, leave the old bat a usufructuary interest, while providing for the bare dominium to go to your no doubt shitty but undeniably male sons (120 TSH 2013).

You die as a VAT vendor. Your executor—if he continues to carry on your enterprise—is deemed by s 53 of the Value-Added Tax Act to be a vendor. In fact, your erstwhile vendorship continues seam-lessly, even with the same registration number, under your executor’s direction (s 53(1)(b)).

Only recently did the precise wording of s 53(1)(a) strike me as being highly significant, and I have in the past certainly misconstrued it, at least (and, I hope, only) in casual conversation. Unless the executor continues the enterprise, the de-ceased’s enterprise comes to an end upon his death, and what I have always called the termina-tion tax becomes payable (s 8(2)).

Say the farmer’s only enterprise are his farming operations.

Some farming operations simply cannot end with the farmer’s death (think of a dairy farm; the cows have to be milked and otherwise cared for), and the executor will have no choice but to continue them until being able to dispose of them in accor-dance with the will and the Administration of Es-tates Act.

I am told—although I do not necessarily be-lieve—that other types of farming may simply be abandoned by the executor.

What I believe to be more likely is that the ex-ecutor is unaware of his status and duties under the law. He might think he can simply allow an in-tended beneficiary under the will beneficially to continue farming. Alternatively, he might think that he can let the farm to an outsider, effective as from the date of death. Either way, do I have news for you, buddy! Not that you cannot do these things; you just have to know how to do them.

Say, further, that the executor does continue the deceased’s operations and thus automatically steps into the deceased’s shoes as a vendor.

Supplying the farm Who owns the farm? Actually, the deceased; the executor merely controls it. Who supplies the farm under the will? It can only be the executor. When would the farm be supplied?

Should the executor, following the dictates of the

will and the Administration of Estates Act, dis-pose of the farm on the open market, it will be supplied to the recipient for a consideration, and output tax will have to be accounted for, at either the standard or the zero rate.

Otherwise, there will be adiation under the will, the accounts will lie for inspection, and the farm will pass to the beneficiaries under the will. That, too, will be a supply, but it will be one made for no consideration.

A deceased estate (actually, the executor; 80 TSH 2009) and beneficiaries under the will who were the deceased’s ‘relatives’ are ‘connected persons’.

A wealthy farmer will leave his farm, outright, to his sons, and other assets to the old bat. As long as the sons are registered vendors at the time they take under the will, the supply to them at no con-sideration will be VAT-neutral. That is to say, the application of s 10(4) will not be triggered.

A poorer farmer will bequeath only the bare do-minium to the sons. Even if they are registered vendors at the time, they cannot possibly use that form of property as an enterprise asset, and s 10(4) will have the effect of making the ‘open market value’ of the supply spring into existence, and the estate (actually, the executor) liable to ac-count for output tax on the open market value of the bare dominium.

What SARS says Don’t take my word for it; read the SARS ‘VAT guide—deceased estates’ (VAT 413):

It should also be borne in mind that the remainderman wilt usually not be entitled to claim an input tax credit in respect of the acquisition of the bare dominium in property at the time the supply of the bare dominium takes place. The reason for this is that as the remain-derman does not have the right to use and enjoy the fruits of the property he will not acquire the bare domin-ium in the property for the purpose of consumption or use in the course of making taxable supplies. (The re-mainderman may be entitled to claim an adjustment to input tax under section 18(4)(b) of the Act at a later point in time when the right to use and enjoy the fruits of the property revert to him.

In 120 TSH 2013 I said that a SARS official took a different view about the VAT sequelae of an inher-ited bare dominium. It turns out that what was in-volved was a misunderstanding rather than a dif-ferent view.

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124 Tax Shock, Horror 2010—July—13

—An irreverent newsletter designed to keep you up to date—

Words & phrases: res ipsa loquitur—the facts speak for themselves 

One of the purposes of my reckless venture into the case law on this doctrine in 119, 120 and 121 TSH 2013 was to show that the locus classicus (the leading judgment), Van Wyk v Lewis 1924 AD 438, on the issue is usually horribly misunderstood, even in leading textbooks.

Buthelezi v Ndaba Little was I to know that the misunderstanding was to be celebrated by the SCA in Buthelezi v Ndaba (575/2012) [2013] ZASCA 72 (see the Monthly List-ing).

Ntsele v MEC for Health, GPG Or that I would stumble upon that decision so soon after learning of the remarkable decision of Mok-goatlheng J in Ntsele v MEC for Health, Gauteng Provincial Government (2009/52394) [2012] ZAGPJHC 208; [2013] 2 (24 October 2012) (again, see the Monthly Listing).

What happened in Ntsele The facts of Ntsele are extraordinary. The alleged incident of medical negligence occurred fifteen years and five months earlier.

Altogether unsurprisingly, the plaintiff’s evidence was imprecise, and several facts were unproven. All the clinic and hospital files were missing (a not uncommon occurrence, I am led to believe).

Thus there was not evidence of but the probabil-ity of negligence, obliging the defendant to dis-prove that probability.

An important case on this topic cited by Mok-goatlheng J is Naude NO v Transvaal Boot and Shoe Manufacturing Co 1938 AD [15]. His judgment is also useful for its citations on the duties of an expert witness.

Mokgoatlheng J on res ipsa But here is the portion that interested me most (the headings in bold type are mine):

THE APPLICATION OF THE DOCTRINE OF RES IPSA LOQUITUR

In the alternative, the circumstantial matrix encapsu-lates the occurrence of an eventuality which carries a high probability of negligence regarding the defen-dant’s employees’ conduct which justifies the invoca-tion of the doctrine of res ipsa loquitur.

No prohibition in Van Wyk Since the seminal case of Van Wyk v Lewis 1924 AD

438 it has been generally assumed that the maxim res ipsa loquitur is generally not applicable in medical neg-ligence cases, because ‘A doctor is not held negligent simply because something goes wrong. It is not right to invoke against him the maxim of res ipsa loquitur save in extreme cases. (my emphasis) per Lord Denning in Huck v Cole 1993 4 MED LR 393.

However, a careful consideration of the ratio enunci-ated in the abovementioned judgment shows that the Appellate Division (as it then was) did not totally pro-hibit the application of the maxim in cases like the pre-sent where there are exceptional circumstances justify-

ing such application. In Van Wyk v Lewis (supra) at p 445 [Innes] CJ held:

‘No doubt it is sometimes said that in cases where the maxim applies the happening of the occurrence is in it-self prima facie evidence of negligence…there has been no shifting of onus.’

Van Wyk—Kotze JA Kotze JA at page 452 in a dissenting judgment also

aligned himself with the same notion when he re-marked: ‘not infrequently a plaintiff may produce evi-dence of certain facts which, unless rebutted, reasona-bly if not necessarily indicate negligence, and in such cases the maxim res ipsa loquitur is often held to ap-ply.’

Van Wyk—Wessels JA Wessels JA at page 464 echoed the same sentiment

in when he remarked ‘…it seems to me that the maxim res ipsa loquitur has no application in cases of this kind…. The onus therefore of proving negligence in a case of this kind is on the plaintiff from the beginning of the trial to the very end.’

‘The doctrine must be invoked with caution and only where the defendant’s employees were in absolute control over the patient, the treatment and all the in-struments used, and where the injury results in a com-plete discord with the recognized therapeutic, objective treatment and technique involved, and suggests no other explanation possible…. The doctrine, constitutes nothing more than a particular species of circumstantial evidence. What is sought to be proved is negligence and the evidence of the occurrence itself because it carries a high degree of probability of negligence, it provides its own circumstantial evidence as to the exi-gency of the negligence in question and the facts upon which the inference is to be drawn and derived from.’

The application of the doctrine does not shift the plaintiff’s a prima facie factual inference that does not shift the burden of disproving negligence, but may call for some degree of proof in rebuttal of that inference.

The constitutional imperative On the ‘constitutional imperative’, Mokgoatlheng J

said:

Consequently, because the knowledge of the treatment accorded to the plaintiff on the 7 September 1996 is peculiarly within the knowledge of the defendant’s em-ployees, and the defendant has not adduced any direct cogent evidence to discharge the evidential rebuttal burden of probable negligence, the invocation of the maxim res ipsa loquitur in this kind of exceptional case given the critical missing clinic and hospital records pertaining to the plaintiff’s treatment on 7 September 1996, is legally justifiable having regard to the Sec-tion 27 of the [Constitution].

…. Because the defendant has failed to discharge the

evidential burden disproving a causal connection be-tween the negligence of his employees and A’s cere-bral palsy, the summation that the eventuality speaks for itself is unanswered.

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124 Tax Shock, Horror 2010—July—14

—An irreverent newsletter designed to keep you up to date—

Income tax: you can’t cede the fruits of your personal labour—I 

Admittedly, you can sell anything. After all, in some countries you can sell one of your kidneys, and anywhere in the world you can sell your soul. The point, rather, is whether you can dispose of, say, your salary in such a way that it never at any stage belongs to you.

Put aside benefits of various types, such as leave pay, and the essential thing that stands out about remuneration is that you earn it—and your employer is liable for it—on an hourly or even min-ute-by-minute basis, as is proven by the drop-dead test.

Should you die at end of business on the sev-enth day of the month, your executor will claim seven days’ pay from your no doubt grieving, erst-while employer. Any legal process that purported to make those seven days’ pay belong to someone else would have to be pretty powerful to insinuate itself—and break the bond—between you and the steadily accumulating fruits of your labour.

As an old tax hand, my simple take on the issue is simply this: your remuneration first has to accrue to you before you are in a position to dispose of the amount concerned. Thus you remain liable to ac-count for tax on the accrual, while having to find some reason why the cost of the subsequent dis-posal might offer you fiscal relief of one form or another.

For example, should you undertake to tithe 10% of your remuneration to your church, you will be liable to normal tax on the full remuneration and then be compelled to search the Income Tax Act for any provision allowing you to claim the cost of the tithe as a deduction for normal tax purposes. Hint: s 18A won’t cut it.

Somewhere along the line (in fact, during 2008), I became, for want of a better word, a patrimonial-ist, in that I began interpreting fiscal law to a large extent in patrimonial (property) terms, starting with the famous yet hugely misunderstood Lategan case.

Thus income accrues to you when you own it (patrimonial object; cash in hand) or have a right to claim delivery of it (patrimonial right; debt due to you). Before you can dispose of remuneration, you have to earn (own) it first.

Can I agree to pay you 10% of my remuneration as I earn it? Of course I can, as long as we both realize that I am agreeing to pay you what I hope to earn, since a continuing stream of remuneration depends, amongst other things, upon the contin-ued existence of both myself and my contract of employment.

What is the precise nature of our contract? Am I disposing of property to you? No, since I don’t cur-rently own the property in question and thus cannot currently pass ownership to you; nor do I intend to acquire a particular property in order to dispose of it to you. I am undertaking, rather, to deliver to you an amount of cash that will (actually, might) come into my possession in the future. Thus I am not

disposing of property in the form of a patrimonial object (actual cash notes) but promising perform-ance under our contract, which is property in the form of a patrimonial right. You acquire a personal right against me, should I earn remuneration, to claim payment from me of an amount equivalent to 10% of that remuneration.

This line of thinking is mind-blowing in the con-text of VAT and the CGT, but I want to get to the cur-rent point.

Which is Taxpayer v COT, Botswana (1980) 43 SATC 118 (BCA), brought to my attention (since var-sity days) by regular contributor Duncan McAllister (SARS). It dealt with the common business practice of requiring a director to cede his director’s fees to a group company. The practice is accommodated in the SARS Practice Note 4 of 1985.

The decision of the majority turned on the inter-pretation of the equivalent of s 7(1) of our Income Tax Act, a provision that I regard as a dead letter. Dendy Young JA, in his minority judgment, regarded this merely deeming provision as being irrelevant. Here is part of what he said:

It is now accepted Roman Dutch law that personal rights in the form of rights to performance are transfer-able by cession. The transfer takes place by means of a real agreement of cession in which there is an inten-tion on the part of the transferor to divest himself of the ownership in the right and an intention on the part of the transferee to be the new owner….

However, at the time of the cession in the appel-lant’s case, no right to director’s remuneration had ac-crued to him. The company had not yet taken the nec-essary action. All the appellant had at the time was a hope or expectation (a spes) that action would be taken which would confer upon him an entitlement—a right—to fees. In these circumstances, the cardinal question in this case then is whether the purported ab-solute cession of the fees to X was effective to exclude the fees from the appellant’s gross income…. Here a notional problem arises: Nemo potest dare quod ipse non habet (No one can give that which he himself does not have). Logically, therefore, there must be a vesting in the appellant before he can convey anything to X.

…. In my view, logic, basic principle and the weight of

authority are all against the legal possibility of a ces-sion (in the sense of a transfer of ownership in a right) of a spes. I would, with respect, decline to follow [Schreuder v Steenkamp 1962 (4) SA 74].

…. But be that as it may, a vesting of the director’s fees

in the appellant was, I think, a sine qua non of the transfer of ownership in the fees to X. In my judgment, there was an accrual to the appellant for the purposes …of the Income Tax Act, even if momentarily….

I justify my going with the minority judgment in this case by what was said about the cession of a spes in Erasmus v Michael James (Pty) Ltd… 1994 (2) SA 528 (C).—To be continued.

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Feature Supplement to 124 Tax Shock Horror 2013

Cases

July 2013

Winners & Losers In That Other Beautiful Game Current & Past SATC Case Reports

by Julian Ware © 2013 J Ware ([email protected]

Zero-rated supply— VAT Master Currency (Pty) Ltd v CSARS

Supreme Court of Appeal (2013)—75 SATC 113 (judgment delivered by Malan JA; Leach JA, Southwood AJA, Schoeman AJA & Van der Merwe AJA

concurring): There are no surprises here. Commissions and fees levied by the taxpayer as a bureau de change in the duty-free area of the then Jo-hannesburg International Airport upon outbound-nonresident airline pas-sengers on the exchange of their currency are liable to VAT at the standard rate. The taxpayer’s argument that the Value-Added Tax Act did not apply to a supply of goods or services within a duty-free area was misplaced. Section 7 clearly imposed VAT upon such transactions. Its attempt to place reliance upon ‘section 72’ rulings granted by SARS to other duty-free shops within the airport had no merit. The rulings were linked to a supply of goods only. Its weak arguments that s 11(2)(l) zero-rated the supply of the service came to nought. The service was rendered by it to nonresident persons who were present in South Africa at the time the service was rendered. (See 65 TSH 2008 for a SARS comment on the situation, and 104 TSH 2011, 114 TSH 2012 and 120 TSH 2013 for more—Ed.)

Miscellaneous issues— deductions & income Taxpayer v SARS

ITC 1863 (Pretoria Tax Court—Case 12906 (2012))—75 SATC 125 (judg-ment delivered by Mokgoatlheng J): May I never have the misfortune to have to read a judgment like this again. Life is far too short to have to wade through such crud. The judgment is incoherent; the facts vague and elusive. The taxpayer’s arguments appeared to be undeveloped and often disingenuous. The former CEO’s knowledge of commercial, company and tax law was nonexistent, or perhaps he was just economical with the truth. The court certainly questioned the veracity of his evidence. The then current CEO seemed out of his depth and oblivious of his fiduciary duties to the company. A flunky to say the least. The issues: capital gains tax, donations tax, oversea travel deductions, accrual of management fees, capital expenditure, additional tax under the now-repealed s 76 of the Income Tax Act and interest chargeable under s 89(2). But for the accrual of management fees, which turned upon a timing issue in the tax-payer’s favour, the case was dismissed with costs against it. Perhaps, upon reflection, one important point did emerge from the judgment: SARS may not glibly state that, since additional tax is not being levied at the maximum rate, its failure to impose the maximum is evidence that it exer-cised its discretion appropriately. A competent consultant would have argued this point as a matter of course. I should just love to know who counsel for the taxpayer was. It’s about time the editor of the reports re-vealed this information. I have, on a few occasions, requested the pub-lisher, LexisNexis, to unleash this information but, sadly, my requests have fallen upon deaf ears.

t s h

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Feature Supplement to 124 Tax Shock Horror 2013

Briefing

July 2013 Voyager miles—unjustified discrimination

by Michael Stein © 2013 M L Stein ([email protected])

History Since I have dealt with airport taxes in two (much) earlier issues (76 TSH 2009, 77 TSH 2009), the mat-ter is obviously one that interests me—both as a passenger and as an observer.

When I last researched the matter six different imposts were collectively but somewhat disingenu-ously referred to by airlines as ‘airport taxes’. But two of them were levied at the discretion of the airlines and for their benefit, and so in truth are not statutory taxes.

Voyager rules An SAA Voyager (frequent flier) member who accu-mulates sufficient air-miles is entitled to a free flight. I say ‘free’ with tongue in cheek, since SAA expects the passenger to pay these airport taxes and quasi-taxes even if he or she is fortunate enough to claim a so-called free flight. I can under-stand the imposition of the statutory taxes, but the charging of the other, non-statutory amounts on a so-called free flight jars.

And there is another issue. My personal experi-ence has taught me that SAA reserves only a limited number of seats for Voyager awards. I once tried to use my Voyager miles to book a flight almost a year in advance and was advised that there were no seats available for Voyager awards, since only a limited number of seats were allocated for this pur-pose.

CPA on loyalty programmes But what does the Consumer Protection Act say on the subject? Sections 1 and 35 deal with so-called loyalty programs. Section 1 defines a ‘loyalty programme’ as follows:

‘[L]oyalty programme’ means any arrangement and or scheme in the ordinary course of business, in terms of which a supplier of goods or services, association of such suppliers, or other person on behalf of or in asso-ciation with any such suppliers, offers or grants to a consumer any loyalty credit or award in connection with a transaction or an agreement.

The Voyager programme would seem to comply with this definition. Then s 35 provides that

the sponsor of a loyalty programme, or a supplier who offers or holds out a willingness, to accept any loyalty credits or awards as consideration or in exchange for any particular goods or services, must [amongst other things] ensure that the supply of those particular goods or services available at any time is sufficient to ac-commodate all reasonably anticipated demands for those goods or services in exchange for loyalty credits or awards.

Furthermore, it must not

limit or restrict capacity to supply those particular goods or services in exchange for such credits or awards on any basis other than it applies to such a supply in exchange for any other form of consideration.

Finally, it must

accept any tender of sufficient loyalty credits or awards as adequate consideration for the price of those par-ticular goods or services if, at that time, it has capacity available for supply in exchange for any other form of consideration.

Exception Section 35(5) provides an exception to these re-strictions. It allows the sponsor or supplier to im-pose a partial or complete restriction on the avail-ability of goods or services in exchange for loyalty credits or awards during a specific period if it has directly or indirectly given written notice to mem-bers at least twenty business days before the be-ginning of that period. But the total of all these pe-riods must not exceed ninety days in a calendar year.

Although I do not claim much familiarity with the Consumer Protection Act, it seems to me that the sponsor or supplier may not discriminate against claimants of Voyager awards and must treat them in the same way as paying customers. The only exception arises when it gives the re-quired prior notice of a restriction on availability.

Unless the exception applies, if I understand the act correctly, SAA cannot discriminate against appli-cants for Voyager awards in selling seats on a flight.

t s h

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Feature Supplement to 124 Tax Shock Horror 2013

Davey’s Locker

July 2013 Trust tax issues A reprieve for trusts

by Tony Davey © 2013 A H Davey ([email protected] www.tonydavey.com)

In 120 TSH 2013 I commented on the Budget proposal that the tax treatment of trusts be reviewed, the Treasury’s perception being that trusts were being used for tax-avoidance purposes, a view I consider to be superficial, given the 1 000-year pedigree of trusts. Yet the 2013 Taxation Laws Amendment Bill contains no amendments to the taxation of trusts.

I understand from a meeting between the Treasury, SARS and various professional bodies that any amendments to trust taxa-tion in the future will be holistic, as distinct from ad hoc, and un-dertaken in the context of a re-view of estate duty, the CGT and other taxes to be undertaken by the recently appointed Tax Commission.

Amnestied offshore trusts This year marks the tenth anni-versary of the 2003 tax and forex amnesty, which included relief on foreign assets held by off-shore trusts. A condition for am-nesty was that income and capi-tal gains of such trusts are at-tributable to resident amnesty applicants but not estate duty.

The UK tax authorities have a birthday surprise for some of

these trusts—those directly hold-ing qualifying UK ‘situs’ assets. Such assets, which include cash in a UK bank and shares in UK registered companies (but ex-cluding wrapper-structures, for example, endowment policies and collective investment schemes) are subject to UK in-heritance tax every ten years.

In essence, the nil-band amount (exempt threshold) is £325 000, while the balance attracts inheritance tax at the rate of 30% of the lifetime gift rate (20%).

Limited exemptions apply, which may be viewed on the UK Tax Authority website www.hmrc.gov.uk/inheritancetax.

A band-aid solution is for the trust to realize the foreign assets before the tenth anniversary of the holding and to reinvest in an exempt wrapper.

One consequence will be that a CGT disposal will be triggered, and the SA tax authorities will then take their slice of the birth-day cake from the resident, on the basis of the amnestied for-eign trust attribution rules.

t s h

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Feature Supplement to 124 Tax Shock Horror 2013

Shortcut Keys in Word by Duncan S McAllister ©2013

July 2013

Disabling protected view

MS Office 2010 contains a security feature called Protected View, which opens documents downloaded via e-mail or the Internet in read-only mode. This mode prevents macros from opening and installing malware in your Office programs.

Microsoft does not recommend disabling this fea-ture but I just find it an irritation. Here I describe how to disable it. If you are paranoid about security or one of those gullible types who can’t wait to click on that attachment providing details of your tax refund or £100 million UK Lottery winnings, then read no further. You need Protected View and a lot more.

To disable it, ALT, T, O to bring up Word Options. Press T for Trust Centre, TAB once, ALT + T to acti-vate Trust Center Settings, press P twice to get to Protected View and then TAB through the check boxes and deactivate those that you do not want

by pressing the spacebar. TAB to OK and hit ENTER. The choices are:

Enable Protected View for files originating from the Internet.

Enable Protected View for files located in poten-tially unsafe locations.

Enable Protected View for Outlook attachments. Enable Data Execution Prevention mode.

I have kept the unsafe locations and Data Execu-tion Mode check boxes ticked, and have disabled the other two.

These instructions also work with MS Excel and PowerPoint.

t sh

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Feature Supplement to 124 Tax Shock Horror 2013

July 2013

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

The admissibility of DNA material obtained against the will of a suspect

by Andrew Paizes © 2013 A Paizes ([email protected])

Can the police remove genetic material from a suspect against his wish and will for the purpose for DNA profiling? Legislation (in the form of ss 37 and 225 of the Criminal Procedure Act) suggests that they can and that the ensu-ing evidence will not be inadmis-sible against the accused at his trial, although the issue is not altogether clear in that legislation.

The question recently fell to be decided by the United States Supreme Court in Maryland v King 569 US 1 (2013).

The accused in that case, who was arrested on first-degree and second-degree assault charges, was processed at a facility where booking personnel used a cheek swab to take a DNA sample under a Maryland legislative provision.

The swab was matched with an unsolved rape six years earlier, and he was charged with that crime. He argued that the legisla-tion violated his rights under the Fourth Amendment.

The majority of the Supreme Court (per Kennedy J) held that when officers make arrests sup-ported by probable cause to hold for a serious offence and bring the suspect to the station to be detained in custody the taking and analyzing of a cheek swab of that person’s DNA is, like finger-printing and photography, a le-gitimate police booking procedure that is reasonable under the

Fourth Amendment. The reasoning of the majority

rested on these pillars: the high probative force and matchless accuracy of DNA testing; the fact that it was quick, painless, re-quired no surgical intrusion and posed no threat to an arrestee’s health or safety; the fact that, in such cases, the governmental interest in identifying wrongdoers was not outweighed by the ar-restee’s privacy interests, espe-cially since the practice did not increase the indignity already attendant in normal incidents of arrest; and the important benefits of receiving such evidence so as to—ensure the safety of facility staff and other detainees; allow the withdrawal of suspicion from any other suspects (some, per-haps, wrongly imprisoned); and allow for proper decision in bail applications, where it is important to know whether the accused would be a danger to the public if released on bail.

The majority took note that the processing was done in such a way that it did not reveal the per-son’s genetic traits and was unlikely to reveal any private medical information. They added, however, that, even if it could provide such information, the loci (chromosomal positions of genes) were not, in fact, tested to that end. The Maryland Act, moreover, provided statutory pro-

tection to guard against such invasions of privacy.

Yet this view prevailed by the narrowest of margins (by a major-ity of five to four). A powerful dis-sent was voiced by Scalia J, who pointed out many regrettable (in his view) aspects of allowing sus-picionless searches, questioned the logic of restricting these to ‘serious crimes’, and warned that this limitation, based as it was on faulty premises, would soon be lost. He issued this ominous warning to the American people (at 17):

Make no mistake about it: As an entirely predictable consequence of today’s decision, your DNA can be taken and entered into a national DNA database if you are ever ar-rested, rightly or wrongly, and for whatever reason.

In South Africa, it seems, legisla-tive intervention is imminent. The Criminal Law (Forensic Proce-dures) Amendment Act 6 of 2010 did not introduce any procedures specifically related to DNA. It was decided that DNA procedures would be dealt with in separate legislation, which would, as with Act 6 of 2010, again amend the Criminal Procedure Act.

The process has begun in the form of the Criminal Law (Foren-sic Procedures) Amendment Bill [B 9—2013] (published in GG 36415 of 26 April 2013). This

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July 2013

Feature Supplement to 124 Tax Shock Horror 2013

Bill, should it become law, will bring our criminal justice system closer to the position of having detailed rules governing all as-pects of DNA evidence. It covers a range of matters, including the taking of bodily samples and the establishment of a National Fo-rensic DNA Database.

Until this legislation material-izes, however, it is likely that the position at common law (and subject to the Constitution) will be similar to that applying to finger-prints, body prints and voice samples taken involuntarily from an accused.

It has been held by our courts that the taking of an accused’s fingerprints by compulsion does not violate his constitutional rights.

The same has been held in re-lation to voice samples—see Levack & others v Regional Mag-istrate, Wynberg & another 2003 (1) SACR 187 (SCA), where it was held that such evidence is ‘autop-tic’ (based on one’s own observa-tion), and that the compulsion of an accused to produce a voice sample did not violate his right against self-incrimination or the right to a fair trial.

In S v Orrie & another 2004 (1) SACR 162 (C) the court held that, although there could be little doubt that the involuntary taking of a blood sample for DNA profiling was an invasion of the accused’s right to privacy and to bodily se-curity and integrity, it was a prac-tice that was both reasonable and justifiable.

Section 37 of the Criminal Pro-cedure Act, read with s 225, which seem to render such evi-dence admissible, thus constitute a reasonable limitation of those rights.

t s h

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