SA Government: It’s Slimeball v Slimeball · SA. tax field. If it isn ... locus standi. to bring an application for the taxpayer’s liquidation. ... forms by national departments

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

SA Government: It’s Slimeball v Slimeball The ship of state is sinking. Guess what the rats are doing. None of them deserves any credit

for suddenly worrying, publicly, where the next billion is going to come from.

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue #162

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

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Act 22 August 1984: Income Tax Act 121 of 1984. Replaces my MS Word copy. High Court case 05 January 2016: Van Driel Boerdery Vennootskap 2004 t/a Die Groene Oase v CSARS

(1901/2015) [2016] ZAWCHC 1. Customs duty & VAT on prefabricated buildings. SARS lost. High Court case 08 March 2016: Siyaghopa Trading 233 (Pty) Ltd and Others v SARS, In re: SARS v

Siyaghopa Trading (Pty) Ltd and Others (88980/2014) [2016] ZAGPPHC 135. A temporary interruption, decided in favour of SARS, of an effort to prove that business rescue proceedings constituted an abuse of process. The longer our courts take to address this issue, the more fees will be earned by those peddling magical remedies against claims by SARS. See, for example, the Lifman case (147 TSH 2015). Read on for similar cases.

High Court Case 29 April 2016: Malema v CSARS (76306/2015) [2016] ZAGPPHC 263. Did Julius Malema & SARS enter into a compromise agreement under the Tax Administration Act? The court refused to make a declaratory order, referring the matter to trial.

High Court case 10 June 2016: Annique Health and Beauty (Pty) Ltd v CSARS (36127/15) [2016] ZAGPPHC 413. Yet another indictment of disgraceful behaviour on the part of SARS. Having wrongly made the taxpayer pay on a customs issue—under the (outrageously unconstitutional) ‘pay now argue later’ doctrine—resolved in the taxpayer’s favour, SARS refused to repay the money paid. All about mora interest. Read on for a similar case.

dti notice 25 July 2016: Compliance to the B-BBEE Amendment Act, 2013 s 10(1)(e): This notice serves to address the introduction of a minimum standard of compliance to the requirements of the Broad Based Black Economic Empowerment (B-BBEE) Act, 2013 across all of the Incentive Development and Administration Division (IDAD) programmes.

The independent state-within-a-state that Dr Red Rob is building continues to grow.§ Reuters 26 July 2016: SA needs to rethink austerity: finmin:

‘What’s very clear is that austerity, which we in some parts of the G 20 thought was absolutely necessary…is no longer the answer’, Gordhan told business leaders. ‘In South Africa, as well, we have some austerity fans amongst our public commentators and its time to rethink.’§

Huh? Shurely shum mistake here. High Court case 23 August 2016: CSARS v Primrose Gold Mines (Pty) Ltd and Others (A932/14) [2016]

ZAGPPHC 737. SARS was successful in arguing that business rescue proceedings were at an end; that the previous business rescue practitioners therefore lacked locus standi; & that SARS enjoyed locus standi to bring an application for the taxpayer’s liquidation.

Updated SARS guide September 2016 (undated): Voluntary disclosure GEN–VDP–02–G01 revision 2.* GN 984 GG 40247 02 September 2016: Revised draft policy & bill on preservation & development of

Issue: 163 Tax Shock Horror Database—16 446 items (4,21 GB)—3 669 subscribers October 2016

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163 Tax Shock, Horror 2016—October—2


agricultural land—invitation to consultation workshops & public comments. Am I the only one alarmed at what the daft DAFF is doing to the economy (162 TSH 2016)? The early ANC liberated agriculture, to the great benefit of the economy, but it has since then steadily undone its own work, with destructive vengeance.

High Court case 07 September 2016: Okuli Security Services CC v City of Cape Town and Another; In re: Comwezi Security Services (Pty) Ltd v City of Cape Town and Another; In re: Command Security Services SA (Pty) Ltd v City of Cape Town and Another (19871/2015, 19872/2015, 19873/2015) [2016] ZAWCHC 117. The CSARS was second respondent in all of these matters. A previous order of the court (I am unable to find it) dealt with tax clearance certificates declared to be fraudulent & invalid. Per Donen AJ:

The narrow interpretation presently urged upon me by the applicants would not advance the efficient administration of justice. Decisions appealed against may be the product of lengthy and complex litigation. What the applicants are now suggesting is that an acting judge whose period of appointment has expired may competently adjudicate upon an application for leave to appeal against that decision if it has not yet been disposed of at the expiry of his/her period of appointment; but anterior thereto the interlocutory decision, concerning whether or not to allow the operation or execution of the decision pending the application for leave to appeal, would have to be considered afresh by another judge. The intention of the legislature could never have been to fetter the administration of justice in this way.

High Court case 14 September 2016: Daikin Air Conditioning SA (Pty) Ltd v CSARS (50781/2015) [2016] ZAGPPHC 854. A customs duty tariff-classification case. The taxpayer won.

Treasury report 14 September 2016: NT annual report— 2015/16. CIPC notice 20 September 2016: Notice 45 of 2016—Objection regarding certification of documents.

You ain’t certifying them properly. Financial Mail 22 September 2016: Moyane’s mission. By Natasha Marrian. Several astonishing

allegations made here.§ SARS website 26 September 2016: The MPR has been enhanced with paperless benefits, for more

information visit Manifest Processing System (MPR) & Registration of MPR. (I pass.)*§ AGSA report 27 September 2016: Integrated Report 2015–16:

Every year we produce an annual report to account to Parliament for our performance during each financial year, which begins in April and ends in March of the following year. The last annual report was tabled in Parliament on Wednesday, 2 September 2015.§

AGSA report 27 September 2016: Integrated Report 2014–15. Er, you were saying?§ AGSA report 27 September 2016: Integrated Report 2013–14. I pass.§ On these items 27 September 2016: I have no idea what is going on here with these increasingly

overproduced documents. But the principal function of the Auditor-General & the National Treasury seems to be to record & celebrate impunity.§

Treasury release 27 September 2016: Publication of draft regulations for tax-free savings accounts.* PSC release 29 September 2016: Inaccurate reporting regarding submission of financial disclosure

forms by national departments & provinces for the 2015/16 financial year: Table 1 above shows that out of 10237 SMS members [senior managers, I think], a total of 10 001 financial disclosure forms were submitted by both the national and provincial departments as at the due date of 31 May 2016. The national departments recorded 5 840, whereas the total in respect of provincial departments was 4 161 by the due date. The Table further shows that five (5) Provinces achieved the 100% compliance rate by the due date.

SCA case 29 September 2016: CSARS v Van der Merwe NO (598/2015) [2016] ZASCA 138. Now listed by SARS (162 TSH 2016).*

dti policy 30 September 2016: Final liquor policy paper. In its early days, the ANC gave Johannesburg business a noticeable boost by liberalizing the issue of liquor licences for restaurants. Now it strives to outdo the Nationalists of yore in alcoholic insanity.§

LSSA release 30 September 2016: Law Society offers services of attorney mediators to resolve education impasse.

GN R 1204 GG 40318 30 September 2016: Establishment of statutory measure & determination of guideline prices: levies relating to wheat & barley. Under MAPA.§

GN 1206 GG 40319 30 September 2016: Draft Liquor Amendment Bill, 2016.§ SARS report 30 September 2016: Annual report—SARS 2015–16 RP 232/2016. Draft regulations 30 September 2016: Publication of proposed regulations made in terms of s 12T(8) of

the Income Tax Act, on the requirements for tax-free investment.* IRBA, come in IRBA October 2016: For the second month running, Firefox does not believe I should try to

connect to IRBA’s website—www.paab.co.za.§ SSA website October 2016: A new logo & an even snazzier website. What a pleasure.§ SARS electronic leaflet October 2016 (undated): Managing your tax compliance status with SARS. Tax practitioners October 2016: ETI validation rules for employer interim reconciliation & correction of

201702 submissions. SARS guide October 2016 (undated): GEN–PEN–05–G02 rev 2—How to submit a dispute via eFiling. dti release 02 October 2016: SA & Egypt signed an MOU on investment.



LSSA release 02 October 2016: Law Society joins calls for investigation into fitness for office of SABC board members.

Daily Maverick 02 October 2016: amaBhungane: Jonas Makwakwa, then SARS no 2 executive, secured a job for his girlfriend.§

SCA case 03 October 2016: CSARS v Marshall NO (816/2015) [2016] ZASCA 158. Poorly presented but sound. Or, at least, that was what I thought about the judgment in Marshall NO and Others v CSARS (39219/2014) [2015] ZAGPPHC 304 (6 May 2015) (146 TSH 2015), now reversed, in favour of SARS & against the South African Red Cross Air Mercy Service Trust, a tax-exempt PBO. On qualification under s 8(5) of the Value-Added Tax Act for the s 11(2)(n) zero-rating, denied by SARS in a seemingly unreported BPR. The SARS argument I see at last, was that s 8(5) refers to deemed, not actual supplies of services (it, itself, is a deeming provision). The court bought it, bolstered by the relevant SARS Interpretation Note dealing with—I kid you not—grants. If this decision is correct, I am Farouk, returned from the dead, poorer (certainly) & thinner (well, relatively). Prepare yourself for rereading the entire act, on the basis of an entirely imaginary distinction between real & deemed supplies. Appeal, valiant trustees & pilots of mercy, appeal!*

SCA case 03 October 2016: XO Africa Safaris v CSARS (395/15) [2016] ZASCA 160. The appeal from TC VAT 969 (30 March 2015), a decision I thought to be correct, albeit for the wrong reasons (145 TSH 2015). Alas, I like the decision of the SCA no better, even though agreeing with the outcome. On the nonapplication of the s 11(2)(l) zero-rating to a VAT vendor offering package tours.*

GN R 1240 GG 40323 03 October 2016: Increase in respect of grants. Under the Social Assistance Act. As from 1 October 2016.

Mail & Guardian 03 October 2016: Tax chief Makwakwa secured SARS post for his girlfriend.§ Business Day 03 October 2016: SARS chief’s lover put on suspension.§ SARB speech 04 October 2016: The outlook for monetary policy. The governor:

Our most recent policy statement reflects the sense of the committee that monetary policy actions have helped to better contain inflation expectations and that the outlook has improved for some of the external factors impacting on the inflation forecast. We still face considerable uncertainty, but we believe downside and upside surprises are now about equally likely, allowing the committee to assess the balance of risks to be neutral.

Bloomberg 04 October 2016: SA’s Gordhan says probe is ‘political mischief’.§ Treasury release 05 October 2016: Allegations against chief procurement officer:

National Treasury hopes that Mr Manyi is raising this matter in good faith and in accordance with laws like The Protection of Personal Information Act. We also note that in reporting this matter to the law enforcement authorities, he at the same time saw it fit to go public with information that has not been tested and by doing so may be implicating an innocent person. National Treasury hopes that, this is not a deliberate attempt to sow seeds of suspicion on the integrity of the National Treasury, and casting aspersion on the character of Mr Brown who has a longstanding record of serving the public service with great dedication.

Fin24 05 October 2016: Treasury to probe chief procurement officer claims: Last week Manyi said during an SABC interview that his [Decolonization] foundation has received a dossier which shows large sums of money had been deposited into the bank account of Treasury's chief procurement officer Kenneth Brown. Manyi said he forwarded the dossier to the Hawks for investigation.§

Treasury report 05 October 2016: 2015/16 Debt management report. Times LIVE 05 October 2016: Zuma ‘sponsor-in-chief of corruption’ must go: Sipho Pityana’s speech

to the Mining Indaba.§ dti release 06 October 2016: Entry into force of the SADC-EU Economic Partnership Agreement (EPA):

Preparations for the smooth implementation of the Agreement are underway. The Agreement will be administered by SARS once the legislation has been approved and published in the Government Gazette and will be applied on a retrospective basis.

BPR 251 06 October 2016: Binding private ruling 251—Cancellation of reinsurance agreement.*

Daily Maverick 06 October 2016: New civil society coalition calls for President Zuma to resign.§ Business Day 06 October 2016: Taxpayers fume as SARS sits on refunds, asks them to jump through

extra hoops.§ Business Day 06 October 2016: Scorpion’s scrapping comes back to sting a looted nation. By Paul

Hoffman.§ GN 646 GG 40334 07 October 2016: Tax Ombud’s language policy document, under s 4(2)(h) of the Official

Languages Act. GN 1228 GG 40334 07 October 2016: Publication of explanatory summary of the Tax Administration Laws

Amendment Bill, 2016.* GN 652 GG 40339 07 October 2016: The design for the current 22-carat gold Krugerrand series:

The introduction of new Krugerrands to the current 1 oz, ½ oz, ¼ oz and 1/10 oz 22-carat gold series required that new master tooling be manufactured for the existing range to ensure that all



Krugerrands are minted to the same standard and to adjust to newer, improved manufacturing processes.

GN 653 GG 40339 07 October 2016: The dimension of, design for, & compilation of the year 2016 colour coin series.

GN 654 GG 40339 07 October 2016: The 2017 Natura coin series. GN 655 GG 40339 07 October 2016: The 2017 sterling-silver crown & tickey coin series. GN 656 GG 40339 07 October 2016: The 2016 sterling silver coin series. GN 657 GG 40339 07 October 2016: The 1967/2017 vintage Krugerrand. GN 658 GG 40339 07 October 2016: The 2017 Krugerrand series. GN 659 GG 40339 07 October 2016: The 2017 platinum Krugerrand. GN 660 GG 40339 07 October 2016: The 2017 fine-silver Krugerrand. SARS release 07 October 2016: Viagra worth R8 million intercepted at OR airport.* SARS release 07 October 2016: Woman busted with R14,9 million at OR Tambo airport. A R1 m bribe

was refused. If you miss an opportunity for doing good, you forget it, but, if you miss an opportunity for doing evil, you regret it for the rest of your life (Marquis de Sade?).*

SARS guide 07 October 2016: Guide: special voluntary disclosure programme (v 1.2).* Business LIVE 07 October 2016: SARS explains refund delays & extra admin for irate taxpayers.§ Treasury release 09 October 2016: SA named best country for debt management/sovereign bond

issuance in sub-Saharan Africa. By Emerging Markets. Meant as an insult, surely? City Press 09 October 2016: Magashula wants answers:

Former SA Revenue Service (SARS) commissioner Oupa Magashula is demanding answers from the police and intelligence services about who was responsible for making the recording that cost him his job as taxman.§

City Press 09 October 2016: SARS boss’ bombshell affair ignored for more than a year.§ Rapport 09 October 2016: Bank wil nie sê oor Zuma se lening.§ SARB release 10 October 2016: Art scholarship is for a final year Fine Art student, to the value of

R50 000. BPR 252 10 October 2016: Binding private ruling 252—Donations tax & capital gains tax

consequences of the part waiver of a loan & reduction of the interest rate. Waiver of loan to employee share trust:

In terms of Regulations published under the Precious Metals Act, the Applicant is, amongst others, required to provide ‘meaningful economic participation’ to the beneficiaries of the Trust, in order to maintain the licence. In view of the current anticipated repayment period, two empowerment agencies have confirmed to the Applicant that the Trust may not provide the required meaningful economic participation. Accordingly, there is a risk that the Applicant will lose its licence.

What it is like to live in the land that Dr Red Rob built.* news24 10 October 2016: SARS wants ‘rogue unit’ docs barred from labour case.§ Business Day 10 October 2016: Lackay [former SARS spokesperson] to use hearing to put facts in

public domain.§ CIPC release 11 October 2016: Identities of public companies found to be under-disclosing or not

disclosing proper turnover values & hence not paying the correct annual return fees to the CIPC revealed (see 162 TSH 2016):

The companies implicated were requested to inform the market by issuing SENS statements. This has not occurred.

The release ends with a list of the twenty-one listed companies involved. NA release 11 October 2016: Justice portfolio committee applauds correctional services for

receiving its first unqualified audit post democracy: The Portfolio Committee on Justice and Correctional Services has commended the Department of Correctional Services for receiving its first unqualified audit opinion in 22 years. The Committee learned about this during its meeting yesterday which was held to deal with the department’s annual report for the 2015/16 financial year.

SARB release 11 October 2016: SARB whistle blowing hotline: The South African Reserve Bank (SARB) has established a facility that enables whistle-blowers to report wrongdoing related to the business of the SARB. The whistle-blower facility has been available to SARB employees for a number of years and is now open to members of the public to report any wrongdoing and to obtain follow-up information when necessary. The SARB is committed to treating allegations of wrongdoing seriously and will always investigate fully. In such cases, the SARB will take all reasonable precautionary measures to protect an individual’s identity. There is, however, an anonymous reporting option, and the SARB’s independent external hotline service (Deloitte Tip-offs Anonymous) guarantees employees and members of the public their anonymity, if they so choose.

Treasury release 11 October 2016: Summons issued against Minister Pravin: At the press conference, Advocate Shaun Abrahams chose to dwell extensively on allegations concerning the SARS investigative unit under question, which he is not yet able to prosecute. He then turned to the content of the summons, which is concerned with the matters of an administrative—not criminal—nature. It is quite clear that these legal proceedings are contaminated by abuse for political ends. Speaking at the Gauteng Open Tender Seminar this



morning—Minister Gordhan said, ‘This is a moment where all South Africans need to ask whose interests these people in the Hawks, the NPA and the NDPP are advancing. Where do they get their political instructions from and for what purpose.’

Treasury statement 11 October 2016: Statement by Gildenhuys Malatji [attorneys] on behalf of minister Pravin Gordhan:

The charges now preferred against Minister Pravin Gordhan are charges of fraud alternatively theft insofar as it relates to Mr Pillay’s early retirement. Fraud is defined as ‘the unlawful and intentional making of a misrepresentation which causes actual prejudice or which is potentially prejudicial to another’. In order to succeed in proving the crime of fraud, the State must establish the elements of the crime which are defined as first, a misrepresentation, second, prejudice or potential prejudice to another, third, unlawfulness and lastly an intention to show prejudice.

Treasury audio 11 October 2016: A couple of audio files, even, presumably to do with this fracas.§ Summons 11 October 2016: Summons in criminal case. The accused being the MOF. High Court case 11 October 2016: Statusfin Finansiale Dienste (Edms) Bpk v Die Trustees van Tyd tot Tyd

van die IET Trust en Andere (13156/2011) [2016] ZAGPPHC 898. Was a trust bound under an agricultural loan? Yes, said the court, while misunderstanding what Cameron JA actually said about the Turquand rule in Land And Agricultural Bank.§

SARS release 11 October 2016: SARS offices to close at 17:00 on 14 October 2016 due to scheduled IT maintenance.*

SARS draft IN 11 October 2016: Draft interpretation note—Unclaimed benefits: This Note explains the treatment of unclaimed benefits that accrued to members (both before and from 1 March 2009) for income tax purposes.

This Note replaces General Note 35 dated 8 April 2004.* Business News 11 October 2016: Charging Gordhan is a disaster for the economy—DA.§ Daily Maverick 11 October 2016: SARS wars: The scope creep of a malicious prosecution—same case,

different charges . By Marianne Thamm.§ CIPC notice 12 October 2016: Notice 49 of 2016—Accurate customer profile information. Did you

supply a bogus cell phone number or email address? CIPC notice 12 October 2016: Notice 51 of 2016— Filing of financial accountability supplements

(COR 30.2) by companies & close corporations. Gobbledegook deluxe. GN R 1240 GG 40343 12 October 2016: Amendment of rules under ss 49 & 120 of the Customs & Excise Act

(economic partnership agreement between the SADC EPA states & the EU & its member states). Should have been DAR 159, by my reckoning, but who’s counting?*

news24 12 October 2016: Gordhan slams Moyane for keeping Makwakwa investigation under wraps.§

Eyewitness News 12 October 2016: Abrahams: I’m prepared to review Gordhan’s fraud charges.§ EXCON circular 13 October 2016: Exchange control special voluntary disclosure programme: extension

of window period & the procedure for the reporting of levy payments. Daily Maverick 13 October 2016: Convicting Gordhan: Hurdles, Olympic level. By Pierre de Vos.§ Daily Maverick 13 October 2016: SARS wars: Makwakwa scandal: Gordhan has serious concerns about

Moyane’s stewardship of vital fiscal institution. By Marianne Thamm.§ The Star 13 October 2016: Gordhan fires salvoes at Moyane.§ ZAeconomist 13 October 2016: Power play. By Brian Kantor:

There is a more important lesson to be learned about the business of capturing the state from the citizens who pay for the state and its failures—intentional or not. The opportunity for corrupting the state is only as big as the state itself. There is no good technical reason to place airlines, electricity or water production, ports and railways, toll roads, hospitals and schools in the hands of the state. The reason why the state as supplier, rather than private producers, is so strongly supported by the politicians, is because they can so easily be captured by the suppliers of all kinds to these organizations, at the cost of the consumers of the essential services and the taxpayers who pay for them. South Africans watching the stage unfold might wise up to these facts of life.§

NA release 14 October 2016: Post Office still face challenges, committee hears: Ms Kubayi advised the Chief Executive Officer, Mr Mark Barnes, that in light of the fact that most of the challenges from the post office emanated from internal systems failure, the CEO needs to make sure that his team of executive and middle managers share his vision. She cautioned him not to be absorbed by the system that failed to produce results at the post office for many years now. The Committee thus noted Mr Barnes’ response, in which he said the post office is on the right path to make at least R1 billion profit by 2018. He said with the right technology and infrastructure, the entity could grow the GDP by 2%.

NA release 14 October 2016: Public Protector report: The Speaker has an obligation in terms of the Rules of the Assembly to table all documents received for the information of Members, in order to ensure that the business of the Assembly is conducted in an open and transparent manner. This report however cannot be handled in the same manner. The report will accordingly be returned to the Office of the Public Protector.

But read on. MOF notice of motion 14 October 2016: Notice of motion & founding affidavit in the matter of the MOF v

Oakbay Investments (Pty) Ltd and Others.



Oakbay stuff 14 October 2016: All sorts of supposedly private & confidential correspondence & legal material. Although I’ll keep a personal copy, §.

Statement obo MOF 14 October 2016: Statement by Gildenhuys Malatji [attorneys] on behalf of minister Pravin Gordhan:

The National Director of Public Prosecutions (‘NDPP’), Adv Shaun Abrahams, advised the Parliamentary Portfolio Committee on Justice and Correctional Services on 12 October 2016 that Minister Pravin Gordhan is welcome to approach him to make representations regarding the charges that have been preferred against him. Minister Gordhan has taken legal advice on the matter and decided not to make representations to the NDPP. The main reason for his decision is that he does not have any confidence in the NDPP’s ability or willingness to afford him a fair hearing. First, we repeatedly asked the NPA to afford the Minister an opportunity to make representations to them before they decided whether to prosecute the Minister but they spurned our requests. Second, the NDPP’s conduct at his press conference announcing the decision to charge the Minister made clear his commitment to the prosecution. Third, having now had an opportunity to study the charges against the Minister, it is also clear to us that they manifest a resolute and not well founded determination to prosecute the Minister at all costs. Any representations to the NDPP would accordingly be pointless.

One day the MOF will perhaps discover what it is like to be a taxpayer in a system created largely in his image. The NDPP is providing a mere introductory course. Wait until he is corresponding with a SARS official or appears before an ADR or the tax board.

GN 661 GG 40346 14 October 2016: Proposed inspection fees. Under the Agricultural Products Standards Act.§

GN 1255 GG 40346 14 October 2016: Designation of commissioners of oaths under s 6 of the Justices of the Peace & Commissioners of Oaths Act. For the IAC, accounting officers, financial accountants in commerce & certified tax practitioners added.

Mail & Guardian 14 October 2016: Plum contract for SARS chief’s nephew.§ Mail & Guardian 14 October 2016: Hawks probe leaves Brown unfazed§ SARS release 14 October 2016: SARS response to M&G article titled ‘SARS chief Tom Moyane nephew

linked to plum R220 million tax debt collection contract’: On 18 August 2016, SARS received a media query on the relationship between SARS Commissioner and Mr Ndhlela. SARS was not aware of the relationship and instituted an investigation into the tender award. The SARS investigation revealed that LTC failed to disclose the relationship between 1 (one) of its shareholders, Mr Nhlamulo Ndhlela, and the Commissioner on the required National Treasury mandatory SBD 4 (Declaration of Interest) form, despite the SBD 4 form specifically requesting such disclosure. Upon the matter being brought to the [attention] of the Commissioner, he immediately instructed to initiate the process to cancel the award to LTC with immediate effect.*

Not to mention that the whole idea is a criminal breach of the secrecy provisions governing SARS (160 TSH 2016). The Commissioner’s nephew is lucky he didn’t have to deal with me.

SARS website 14 October 2016: VAT disputes: Enhanced dispute management process for VAT. No doubt SARS will now refuse to accept ADR forms for VAT objections & appeals. The issue of the appropriate forms for such purposes has long been disastrously handled.*

SARS website 14 October 2016: Automation of provisional payments for customs imports declaration & activation of preferential codes. A couple of documents here.*§

NA release 15 October 2016: Statement on request by Public Protector: Yesterday the Speaker of the National Assembly, Ms Baleka Mbete, received a letter from the Public Protector requesting that she preserves and keeps safe the report on an ‘investigation into complaints of alleged improper and unethical conduct by the President and other state functionaries relating to alleged improper relationships and involvement of the Gupta family in the removal and appointment of Ministers and Directors of State Owned Entities (SOEs) resulting in improper and possibly corrupt award of State contracts and benefits to the Gupta family’s businesses’ until her successor assumes office. The report was received and kept safe. The new Public Protector assumes office today, 15 October. The report will be returned on Monday to the Office of the Public Protector as the new Public Protector has now assumed office. Therefore, it is not true as reported in some online publication that the report was rejected.

Rapport 16 October 2016: Pravin los bom oor Guptas.§ Rapport 16 October 2016: Pravin onder skoot ‘om te keer dat hy Moyane kelder’.§ SARB release 17 October 2016: Monetary policy committee meeting dates for 2017. SARS website 17 October 2016: ETI [employment tax incentive] validation:

Employers with recent ETI issues can check the ETI Validation rules.* SARS website 17 October 2016: VAT disputes:

VAT disputes can now be lodged via eFiling. This supposed facility is a huge disadvantage for independent professionals (eg moi).

For rent-seeking SARS officials, the ability, without clear legal backing, to veto a taxpayer’s choice of form for an objection or an appeal is highly prized.*

SARS website 17 October 2016: SVDP:



SVDP can now be submitted at SARS branches in addition to eFiling. Now that’s what I call good news. If only I could lay my hands on the form….* SARS website 17 October 2016: Customs provisional payments:

Customs Provisional Payments were automated, read more.* SARS website 17 October 2016: Updated customs provisional payments external guides. A multitude of

documents.*§ SARS website 17 October 2016: EMP 501 training & consultations:

EMP 501 (e@syFile™ Employer) consultations & training schedule for October 2016 is now available. I just love that ™ thingee.*§ new24 17 October 2016: Gordhan, Ntlemeza, Moyane given representations deadline.§ Business Day 17 October 2016: Optimum Trust is the nexus of Guptas, tax commissioner & mining

minister. By Stuart Theobald.§ Bill 18 October 2016: Red Tape Impact Assessment Bill, 2016 [B 13—2016]. Don’t worry, it’ll

never see the light of day as an act.§ news24 18 October 2016: Thanks, but no thanks, Gordhan tells Abrahams.§ fin24 18 October 2016: Guptas list why Gordhan’s application is fundamentally flawed.§ NA release 19 October 2016: Committee defers BMA customs differences to relevant cabinet

members. (The portfolio committee on home affairs.) (The Border Management Agency.) BPR 253 19 October 2016: Binding private ruling 253—Donations tax consequences of a

transaction to introduce a BEE shareholder into a group.* SARS release 19 October 2016: More than 4 million tax returns already received.* Business Day 19 October 2016: Officials clash over customs tax collection—Home Affairs & Treasury

butt heads on bill [BMA, again].§ CIPC notice 20 October 2016: Notice 52 of 2016—Great news. CIPC accredits IAC & SAIPA under

s 138(1) of the Companies Act. To do with business rescue practitioners. On the IAC, see above. Did I miss the equivalent for SAIPA?

SARB speech 20 October 2016: At the Annual Convention of the SA Chamber of Commerce & Industry. The governor. Much as I admire him, I just don’t get the SARB’s ‘price stability’ shtick:

Since the beginning of 2011, the real effective exchange rate has depreciated by 26,8 per cent, in contrast to the nominal effective depreciation of 41,9 per cent.…

SARS website 20 October 2016: Tariff amendments 2016. Details of the many amendments made this month, involving MERCOSUR–SACU & the EPA with the EU.*§

SARS release 20 October 2016: SARS takes urgent court action to terminate Lekgotla Trifecta Consortium (LTC) contract:

SARS issued a media statement on the 14 October 2016 to communicate its intention to approach the High Court with the aim to declare the contract between SARS and LTC invalid should the parties fail to do so amicably. This follows LTC’s failure to declare the potential conflict of interest between its director Mr Nhlamulo Ndlhela and SARS Commissioner, Mr Tom Moyane as this constitutes material irregularity and breach in the award of the tender. This court proceeding is intended to interdict LTC from any further steps to implement the Master Service Agreement and any and all Service Request agreements concluded between SARS and LTC.*

Daily Maverick 20 October 2016: Deliverance: NPA’s Shaun Abrahams & the incredible shrinking case against Pravin Gordhan.§

DEA release 21 October 2016: Cabinet approves submission of the Paris Agreement on Climate Change to Parliament for ratification:

The South African-led Durban international climate change talks in 2011 marked the beginning of the 4-year negotiating process that culminated in the Paris Agreement.

For some reason, the government has forgotten that it agreed to join this particular parade only if we received a very big piece of change in return.

doj&cd release 21 October 2016: Briefing to the media by Minister Michael Masutha on the matter of International Criminal Court & Sudanese President Omar Al Bashir:

In the matter of the Minister of Justice and Constitutional Development v The Southern African Litigation Centre (867/15) [2016] ZASCA 17 (15 March 2016) [156 TSH 2016], the Supreme Court of Appeal confirmed that in terms of customary international law, heads of state enjoy immunity against arrest. However, the Supreme Court of Appeal found that in enacting the Implementation of the Rome Statute of the International Criminal Court Act, 2002, South Africa had expressly waived the immunity of such heads of state and that South Africa was obliged to arrest persons wanted for crimes committed against humanity. In essence, the Supreme Court of Appeal identified the problem which needs to be addressed. The effect of withdrawal from the Rome Statute as well as the repeal of the Implementation Act thus completes the removal of all legal impediments inhibiting South Africa’s ability to honour its obligations relating to the granting of diplomatic immunity under international law as provided for under our domestic legislation. This therefore removes the necessity at least in so far as this aspect is concerned of continuing with the appeal.

Treasury release 21 October 2016: Oakbay attacks on Treasury court application: The National Treasury notes the numerous attacks launched by the lawyers representing the Oakbay Group of companies on the affidavit filed by the Treasury in the Oakbay litigation as well as the contradictions contained therein. National Treasury has no intentions of conducting the case in



the court of public opinion and will provide a comprehensive and appropriate response in court once the Oakbay respondents have filed their answering affidavits. We would also like to urge the Oakbay to respect the court process.

Really? And all the stuff publicly released by the MOF? It’s part of due process? High Court case 21 October 2016: BMW South Africa (Pty) Ltd v CSARS (35006/2016) [2016] ZAGPPHC 913.

Well done BMW! The only thing to do when SARS screws you over is to take the bastards to court. The familiar SARS lie that, years ago, VAT was not paid, despite proof of payment being tendered. SARS did not even oppose the taxpayer’s motion proceedings, save for the issue of mora interest on the penalties & interest by which the taxpayer was mulcted, dismissed in two short sentences by the court. Shameless shakedown artists, litigating at taxpayers’ expense, like the rest of the gangsters in government, with nary a legal argument to cover their bare arses.

GN R 1288 GG 40356 21 October 2016: Amendment of rules (DAR/160) under ss 49 & 120 of the Customs & Excise Act (MERCOSUR & SACU).*

GN R 1282 GG 40356 21 October 2016: Amendment of rules (DAR/161) under ss 64D & 120 of the Customs & Excise Act (own transport of road vehicles).

SARS website 21 October 2016: Tariff amendments 2016: Publication details for the Tariff Amendment Notices R 1283, R 1284, R 1285, R 1286, R 1287, R 1289 and R 1290 as published in Government Gazette 40356, and R 1306 as published in Government Gazette 40363 are now available.*§

SARS website 21 October 2016: Legislative framework: Legislative Framework page updated to incorporate changes as a result of the Tariff Amendment Notices R 1286 and R 1290 as published in Government Gazette 40356.*§

SARS website 21 October 2016: Schedule to the Customs & Excise Act: Schedules to the Customs and Excise Act, 1964 (Tariff Books) page updated to incorporate changes as a result of the Tariff Amendment Notices R 1286 and R 1290 as published in Government Gazette 40356.*§

SARS IN 21 October 2016: Interpretation Note 91—Reduction of debt. Eighty-eight pages on just two short provisions of the Income Tax Act.*

SARS release 21 October 2016: Heroin [dog] bust of R7,9 million at Lebombo border post.* Business Day 21 October 2016: Loss of support will force ANC to change tack over leadership. By

Anthony Butler.§ SARS release 23 October 2016: Detector dog sniffs 7,5 kg of cocaine in hair treatment bottles.* City Press 23 October 2016: ‘ANC’s NEC must quit’:

ANC chief whip Jackson Mthembu has made a shocking proposal: the party’s top leaders should step down for having failed members as it moves from one crisis to the next.§

SARS IN 24 October 2016: Interpretation Note 92— Documentary proof prescribed by the Commissioner. This IN has the force of law:

This Note prescribes the documentary proof required under section 16(2)(f) [of the Value-Added Tax Act] that must be obtained and retained by a vendor (or the vendor’s agent) to substantiate the vendor’s entitlement to a deduction as contemplated in section 16(3)(c) to (n).*

SARS summary 24 October 2016: Summary of all interpretation notes.* SARS release 24 October 2016: SARS detector dog bust 8 kg cocaine at OR Tambo.* BGR 36 (VAT) 24 October 2016: Binding general ruling 36—Circumstances prescribed by the

Commissioner for the application of s 16(2)(g) [of the Value-Added Tax Act]: This BGR prescribes the circumstances under which the Commissioner will allow a vendor to use alternative documentary proof to substantiate the vendor’s entitlement to a deduction under section 16(3).*

LSSA release 25 October 2016: Law Society urges SA government to reconsider withdrawal from the International Criminal Court:

The LSSA also adds that the African Court on Human and Peoples’ Rights (AfCHPR) has the potential to enforce human rights through proper judicial processes and has relative independence from political leaders. However, although South Africa ratified the Protocol to the African Charter on Human and Peoples’ Rights on the Establishment of the African Court on Human and Peoples’ Rights on 3 July 2002, it has yet to submit a declaration accepting the competence of the AfCHPR to receive cases under Article 5(3) of the protocol. At least two cases from South Africa have been brought before the AfCHPR, but the court had to dismiss these cases due to lack of jurisdiction in the absence of the declaration by our Government, as the AfCHPR may not receive any petition under Article 5(3) involving a state party which has not made such a declaration.

High Court case 25 October 2016: Dale v Aeronastic Properties Ltd and Others (9297/2016) [2016] ZAWCHC. Yet another attempt to hide behind business rescue, in which Davis J sees cause to say some adverse things about a couple of professionals, one very well known. I am going to wait for SAFLII to report the case before commenting, since there is some confusion about the identity of the enumerated defendants. The CSARS was an intervening party.*

CIPC practice note 25 October 2016: Notice 54 of 2016: Requirements for certification of documents. Treasury release 26 October 2016: National treasury launches open local government financial data



portal—‘Municipal Money’: National Treasury is proud to launch ‘Municipal Money’, an open local government budget data portal which provides citizens and other stakeholders with access to comparable, verified information on the financial performance of each municipality. Municipal Money aims to promote transparency and citizen engagement through the visualization and ‘demystification’ of information about municipal spending.

Go ahead, Google it. It’s simply terrific. What a wonderful use of the Internet. I hope that some money will be spent to publicize it.

MTBPS 26 October 2016: Budget speech, initially MIA. Then posted on 31 October 2016: In respect of the Road Accident Fund, NEDLAC has completed its work on the proposed Road Accident Benefit Scheme, which will provide a more equitable and affordable benefit arrangement. Legislation now needs to be taken through Parliament.

That legislation should return to citizens their right to buy insurance cover now denied to them by s 21 of the Road Accident Fund Act.

MTBPS 26 October 2016: As usual, I keep only selected chapters. Read on. MTBPS 26 October 2016: Chapter 1—Act together for a better future [kotch, hurl]. The 2015/16

budget deficit, previously reported (151 TSH 2015) at a revised 3,8%, now given as 3,7%. 2016/17: was 3,3%, now 3,4%. 2017/18: was 3,2%, now 3,1%. 2018/19: was 3,0%, now 2,7%. Three years out, the promise is a deficit of 2,5%, on revenue of 30,4% of GDP & expenditure of 33%. It’s a new era! I’ll miss the old, reliable 3% promise, three years out. At that point net loan debt is expected to be 47,9% of GDP (45,4%). Perhaps the Treasury is factoring in a DA national government by that stage.

MTBPS 26 October 2016: Chapter 2—Economic outlook. In the alternative universe in which I must live, none of the stuff lauded here is actually happening: NDP, improving the policy environment, immigration reforms, investing in network infrastructure, renewable energy & the IPPP, encouraging private sector investment, building a platform for collective action, fostering better labour relations, the Easter Bunny, the Tooth Fairy, Santa Claus. It’s a constant stream of bullshit from a bunch of brazen crooks who have thrown away most of a millennial opportunity.§

MTBPS 26 October 2016: Chapter 3—Fiscal policy: Reductions to the expenditure ceiling of R10 billion in 2017/18 and R16 billion in 2018/19. Tax measures to raise an additional R13 billion in 2017/18. Combined with the proposals

announced in the 2016 Budget, this brings the total increase next year to R28 billion. Government will also propose measures to raise additional revenue of R15 billion in 2018/19.

MTBPS 26 October 2016: Technical annexure. MTBPS 26 October 2016: Fiscal risk assessment. What a sad litany of failure. PRASA R53 b,

SANRAL R35 b, SAA R19,1 b (‘technically insolvent’), SAPO R4,4 b, Land Bank R6,6 b, RAF R155 b (‘insolvent for over 30 years’). What sticks most in my craw is PRASA—surely everyone saw that one coming? (Rail has had almost no capex experience for about fifty years. And then billions are made available, without supervision.) But perhaps it was just a practice run in preparation for the coming more-nuclear-for-ESKOM fiasco-to-be. And how does a Treasury burdened by its duties under the PFMA blithely countenance continued trading by insolvent SOEs?

MTBPS presentation 26 October 2016: Medium term budget policy statement. Tax bill 26 October 2016: Taxation Laws Amendment Bill, 2016 [B 17—2016].* Tax bill 26 October 2016: Tax Administration Laws Amendment Bill, 2016 [B 18—2016].* Tax bill 26 October 2016: Rates & Monetary Amounts & Amendment of Revenue Laws Bill,

2016 [B 17—2016].* Tax bill 26 October 2016: Rates & Monetary Amounts & Amendment of Revenue Laws

(Administration) Bill, 2016 [B 17—2016].* On these items 26 October 2016: The last two bills contain the long-awaited (supposedly) final details of

the special voluntary disclosure programme (SVDP). Eyewitness News 26 October 2016: Corruption Watch to lay criminal charges against SARS’s Moyane.§ Times LIVE 26 October 2016: NPA subpoena ‘desperate attempt’ to prop up prosecution against

Gordhan‚ organizations say.§ Mail & Guardian 26 October 2016: Emails involving Hawks and NPA lead to ‘hostage’ drama at SARS

office.§ dti release 27 October 2016: Entry into force of the Preferential Trade Agreement (PTA) between the

Common Market of the South (MERCOSUR) & the Southern African Customs Union (SACU): The Agreement is being administered by SARS following the approval of the legislation and its publication in the Government Gazette.

news24 27 October 2016: SARS ‘hostage drama’: Leading Gordhan investigator being probed.§ SARS release 27 October 2016: Hawks incident:

SARS has noted the media reports and circulated video material. To the extent that the matter relates to members of the HAWKS the enquiries must be directed to the relevant law enforcement agency. Where SARS employees are concerned a full investigation will be conducted and a public



statement issued.* FIC advisory 28 October 2016: Financial Action Task Force statements on jurisdictions with strategic

anti-money laundering & counter-terror financing deficiencies. On North Korea & Iran. Treasury release 28 October 2016: Draft demarcation regulations tabled in parliament. Like the

Nationalists of yore, the ANC is determined to destroy all hope for rational health options: The draft Regulations allow insurers to continue to provide Medical Expense Shortfall policies (Gap cover plans) and Non-medical expense cover as a result of hospitalisation policies (Hospital cash plans) in a manner that complements medical schemes, subject to strict underwriting and marketing conditions. The draft Regulations do not allow insurers to continue to provide Primary healthcare insurance policies. These types of benefits will, going forward, have to be provided in accordance with the MSA. In this regard, the Minister of Health has requested that the CMS grant a two year exemption, subject to certain conditions, for primary healthcare insurance policies, while further research is being led by the Department of Health into the development of a Low Cost Benefit Option (LCBO) guideline. It is envisaged that the existing primary healthcare insurance policies will be required to transition into a LCBO framework once finalized.

Treasury response doc 28 October 2016: Response to key issues raised in public submissions on regulations which give effect to the demarcation between health insurance policies & medical schemes:

The Regulations acknowledge that while health insurance products have a role in the market place, these products must operate within a framework whereby they complement medical schemes and support the social solidarity principle embodied in medical schemes. It is in this context that the final Regulations seek to strike a better balance between health insurance and medical schemes.

GN 708 GG 40375 28 October 2016: Empowering supplier status. You’re all empowered, says Dr Red Rob, so go in peace, until further notice.§

GN 709 GG 40375 28 October 2016: Section 12I tax allowance programme. Vopak Durban Terminal (Pty) Ltd fails to make the grade, despite R1,5 b to spend. You can’t buy our dti, no siree.

GN 710 GG 40375 28 October 2016: Section 12I tax allowance programme. Safripol (Pty) Ltd, on the other hand, cracks it, with less than R1 b.

GN 711 GG 40375 28 October 2016: Section 12I tax allowance programme. As does KAP Diversified Industrial (Pty) Ltd.

GN 712 GG 40375 28 October 2016: Section 12I tax allowance programme. And Tongaat Hulett Ltd. GN 713 GG 40375 28 October 2016: Section 12I tax allowance programme. And Fruitways Packing

Services (Pty) Ltd. GN 714 GG 40375 28 October 2016: Section 12I tax allowance programme. And Mpact Versapak (Pty) Ltd. GN 715 GG 40375 28 October 2016: Section 12I tax allowance programme. And KAP Bedding (Pty) Ltd. GN 716 GG 40375 28 October 2016: Section 12I tax allowance programme. And Kansai Plascon (Pty) Ltd. GN 1334 GG 40375 28 October 2016: Duty to keep the records, books of account or documents in terms of

s 29 of the Tax Administration Act. The third such notice. This one applies to ‘potentially affected transactions’, which are a doddle to identify:

‘potentially affected transaction’ means an ‘affected transaction’, as defined in section 31 of the Income Tax Act, without regard to paragraph (b) of the definition, but excludes any transaction, operation, scheme, agreement or understanding contemplated in section 31(5), (6) or (7) of the Income Tax Act;*

GN 1339 GG 40375 28 October 2016: Codes of good practice on BBBEE. Draft amended construction sector code.§

GN 1353 GG 40379 28 October 2016: Procedures for the application, administration & allocation of export quotas under the trade, development & co- operation agreement/economic partnership agreement between the European Union & the RSA for the year 2017. Over 12 MB of hoops to jump through, including, especially, the usual BBBEE stuff.§

GN 721 GG 40381 28 October 2016: Codes of good practice on broad based black economic empowerment. Defence sector code.§

BN 167 GG 40375 28 October 2016: Adjustment of statutory limit on claims for loss of income & loss of support. Under s 17(4)(c) of the Road Accident Fund Act, to R251 990 (R248 710) as from 31 October 2016. (TSHD ‘Thresholds’ schedule updated.)

GN 1341 GG 40375 28 October 2016: Water research fund—rates & charges: increase of 5,8%. Yoicks! Yet another tax, under s 11 of the Water Research Act.

GN R 1343 GG 40376 28 October 2016: Establishment of statutory measure & determination of levies on dried fruit. Under the Marketing of Agricultural Products Act (MAPA).§

GN R 1346 GG 40376 28 October 2016: Ditto on table grapes.§ SARS release 28 October 2016: Corruption Watch letter:

The South African Revenue Service confirms receipt of the letter from Corruption Watch to Commissioner Tom Moyane with a due date of November 2016. We have noticed that the letter has been made public by Corruption Watch. To read a detailed response by Commissioner Moyane sent to Mr David Lewis , the Executive Director for Corruption Watch, click here.*

SARS release annexure 28 October 2016: Letter by CSARS to Corruption Watch dated 27 October 2016: I am aware of my legal obligation to refer this matter to the South African Police Service (‘SAPS’) for



criminal investigation, as required by Section 34 of the Prevention and Combating of Corrupt Activities Act 12 of 2004 (‘PRECCA’). However, upon an enquiry and before I could report this matter to the SAPS, I was advised by the Directorate for Priority Crimes Investigation (‘the Hawks’) that the matter had already been referred to the SAPS for investigation during early June 2016.

As I have already made clear (162 TSH 2016), I do not believe that the CSARS handled this matter in an appropriate manner. He has, entirely by his own (in)actions, brought his judgment & even his personal integrity into question.*

SARS release 28 October 2016: SARS Commissioner opens new George branch: SARS’s George office is the prototype of future SARS branches….*

SARS website 28 October 2016: Rule amendments 2016: Publication of Rule Amendment Notice R 1282 in Government Gazette 40356 relating to the amendment of rules published in Government Notice R 1874 of 8 December 1995.*

Daily Maverick 28 October 2016: Minister Davis tear up the draft Liquor Bill now. By Michael Fridjohn.§ Daily Maverick 28 October 2016: MTBPS 2016: decoding some of Minister Gordhan’s pronouncements.

By Iraj Abedian.§ Mail & Guardian 28 October 2016: Moyane’s own goal rebounds on NPA.§ Mail & Guardian 28 October 2016: Violent showdown in SARS office exposes plot against Gordhan.§ Eyewitness News 29 October 2016: Corruption Watch not satisfied with Tom Moyane’s explanation.§ City Press 30 October 2016: Hawks blame McBride—four officers implicated in holding a SARS

lawyer hostage claim that they were set up by the IPID boss.§ City Press 30 October 2016: Zuma’s critics waited too long—many will greet the chorus of voices

with cynicism for speaking out when Number One is weakened. Quite.§ City Press 30 October 2016: SARB raids Ponzi schemes.§ Sunday Times 30 October 2016: Van Roooyen visited the Guptas…seven days in a row!…& then he was

appointed finance minister.§ Business Day 31 October 2016: NPA withdraws summons against Gordhan.§

* 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 an incredible 135 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. The Draft Preservation & Development of Agricultural Land Bill goes entirely the other way.

C&E consultants Since 1 January 2002, the CSARS has failed under s 99A of the Customs & Excise Act to gazette requirements for the registration of consultants to principals.

PCC 05A 30 March 2016: PCC 05A not only remains unavailable (156 TSH 2016) but is no longer even listed on the FIC’s website. I have now logged a specific query (QRY/161029/90) with the FIC, by way of a media enquiry.

Proc 50 GG 40182 02 August 2016: Remuneration of Public Office Bearers Act: Employer contribution to pension fund for members of executive councils & provincial legislatures. Still MIA (162 TSH 2016).

MONTHLY NOTEBOOK

Administration of estates: moneys from the Guardian’s Fund I continue to be astonished how seemingly threadbare is Chapter V of the Administration of Estates Act, on the Guardian’s Fund. Imagine what it would look like if it were administered under the PFMA, the Treasury, the NCA, the FSB or—the heavens forfend—the USA! The clue, perhaps (I don’t want to be gratuitously judgmental here), is that the whole caboodle is nothing more than an account at the PIC (S 87), an outfit that might as well be a separate, secretive (slightly less so, these days), sovereign country. I continue to imagine—but am never able to find—reams of regulations that might bring the Fund to life in the real world.

Search the act for the monies to go into the Fund, and you will not be much enlightened (ss 28(6), 34(12), and 35(13)). As for Chapter V itself, after dealing with the ‘old’ Fund, it is so enervated that it cannot find the strength to elaborate upon its sources of funding.

But, if you scratch around for long enough, you will see that the act requires moneys to be paid to the Master, presumably, not for the purpose of being trousered by him (ss 43(6), 82). In fact, s 86(2) obliges him to pay such moneys into an account in the Guardian’s Fund.

Are things much better with payments? Under s 89, if you want to be paid moneys to which

you are entitled, you have to apply for them. Fair enough.

Section 90(1) is the provision you want to worry about, although only if you are capable of worrying about such things, and a minor or someone under tutorship or curatorship. If the relevant will or other instrument governs your pay-outs, it prevails, and the Master be damned. If not, you, or, better, your natural guardian, tutor or curator, will require some skills in the interpretation of statutes.

The underlying presumption, I would guess, is that



once you are no longer a minor or under tutorship or curatorship, your bundle is your own—there for the asking, under s 89.

Until that halcyon day, however, you may ask, out of the moneys due to you, for a qualifying amount approved by the Master. First step.

It must be ‘immediately required’. Second step, but, I think, a significant one. Immediate requirements do not arise once in a lifetime but episodically, all over the place. That is the main reason I believe s 90(1) to be a per-application clog. In each application under s 89, if you are constrained by s 90(1), you must abide, for the purposes of that application alone, by its constraints.

Qualifying immediate requirements:

The maintenance, education or other benefit of a minor or person under curatorship or tutorship or any of his dependants.

A s 82(c)(i) (debts), (ii) (protecting property) or (iv) (current business expenses) purpose.

Investment in immovable SA property or in a mortgage over such property.

A cap applies, set by the ‘capital amount’ in the account. Since ‘capital’ is unspecified, it must mean ‘capital’ (the tree), as distinct from ‘income’ (the fruits of the tree). But, under the (English) history of this old-fashioned, silly distinction, ‘income’ not consumed in the financial year in which it is earned becomes ‘capital’. Does the convention apply to this extent? I cannot see why not, provided that you can prove the existence of the convention.

The quantum of the cap (as a lawyer would say, albeit for a higher fee) is set, currently, by GN R 920 GG 38238 of 24 November 2014, at R250 000.

In my view, it applies not for all time and not for each year but to each application.

Adiation under a will It is fashionable to make a big song and dance about adiation (acceptance) under a will by the beneficiaries. Inexperienced executors will, perhaps as their very first official action, rush around securing adiation by the beneficiaries. Sometimes even the Master, with no possible legal right to butt in, has been known to insist upon their adiation. Yet there is no legal requirement for adiation, the critical issue being not adiation but the opportunity for repudiation.

This is what Van der Heever JA, delivering a separate judgement of the majority in the famous case of Crookes, NO and Another v Watson and Others 1956 (1) SA 277 (A), said:

The oft-repeated saying that a legatee does not acquire a legacy unless he accepts it, misplaces the stress; it would be more correct to say that he acquires a right to the subject-matter of the bequest unless he repudiates it.

The will of a deceased is not a stipulatio alteri, a contract (such as a life policy with a beneficiary-nomination clause) between two parties, allowing for one party to drop out (the deceased insured) and another person (the nominated beneficiary, if he or she accepts) to accede to the contract with the surviving party (the insurer) as a fully fledged party to the contract.

The s 35(12) moment The executor in a solvent estate, once the accounts have lain for inspection and been confirmed by the Master, is obliged, under s 35(12) of the Administration of Estates Act (not s 34(11), as erroneously stated in 162 TSH 2016), ‘forthwith’ to distribute the estate property in accordance with the terms of the will. No action is reciprocally required on the part of a beneficiary, and, at that stage, it is too late to repudiate. Should the executor fail to distribute a required distribution, apart from other consequences, the mulcted beneficiary will be able to sue the executor, for performance in accordance with

the will. The trouble with adiation, whether explicit or

implicit, is that, generally, it extinguishes the opportunity to repudiate.

For example, the beneficiaries can hardly enter into a valid redistribution agreement (123 TSH 2013) without impliedly having adiated under the will. Before the ‘s 35(12) moment’, they accept the monetary terms of the will but agree to receive their designated benefits (and neither a penny more nor less) in a form other than as envisaged in the will.

It is worse under a so-called family arrangement (123 TSH 2013), no matter when it is concluded, in which the beneficiaries carve up the estate property as best suits them, regardless of the terms of the will. What they are effectively doing is adiating under the will and then transferring among themselves property they either hope to acquire or already have acquired under the will.

Do the reported cases offer any further illustrations? Here are the fruits of a search of the flynotes of SALR for the string “adiation”:

Weiner NO v The Master and Others NNO (1) 1976 (2) SA 830 (T): … Heirs giving consent to sale of property in testator's estate—Such amounting to an adiation—Adiation thereafter irrevocable—Heirs, after adiating, waiving their rights in or against estate—Such waiver invalid and devoid of effect…

Ex Parte Lindemann and Others 1963 (3) SA 735 (E): … Renunciation by survivor as fiduciary in favour of children after adiation—Agreement effective to vest whole estate in children…

Small as the list is, it ought to serve as a warning against a premature, ill-considered and entirely unnecessary adiation.

Just how binding is adiation? In Ex Parte Nel 1965 (3) SA 197 (T), adiation by the surviving spouse under a joint will was set aside. Per Vieyra J:



In view of the curator’s attitude in being satisfied of the bona fides of the applicant and that the story told by him was true, I accepted as a fact that at the time of his adiation the applicant was unaware that he had a choice in the matter.

Two questions then fall to be decided, viz: (a) whether the applicant can be permitted to

withdraw his adiation, (b) and, if so, what the rights of the children and

further descendants are. Adiation is a species of election. The contention is that in fact the applicant has made no such election owing to his ignorance that he had a choice in the matter: see van Wyk v van Wyk's Estate, 1943 OPD 117 at p 121. There can be no intention to surrender the rights involved in making an election unless there is knowledge both of the facts and of the legal consequence of such surrender: van Wyk's case at p 124.

In Oxenham v Oxenham's Executor 1945 WLD 57 at pp 62–3, MURRAY J says:

The general rule laid down by Voet [and as I think interpreted by FISCHER JP, in van Wyk v van Wyk's Estate, supra at p 125, and by VAN DEN HEEVER J, in Schwarzer v Roderick's Motors, Ltd, supra at p 185], appears to be that, where a dispositive act has been performed and quite apart from contract, a party is ordinarily bound by his conduct: if that conduct constitutes a clear choice of one of two courses, he would normally be bound to accept all the consequences of the course he has chosen, even if he elected in ignorance of these consequences. Relief may in exceptional cases be accorded him if the ignorance which led him to elect is in the circumstances excusable—when it is justus et probabilis—not otherwise.

I am satisfied that the applicant was ignorant of his rights and that such ignorance was in the circumstances justus et probabilis [equitable and plausible]. Accordingly he is entitled to repudiate the adiation made.…

CGT: ‘old’ exit tax on death The Income Tax Act makes an important distinction between taxpayers dying on or before 29 February 2016 and those dying on or after 1 March 2016.

Since the amendments necessary to achieve this distinction are not only complex but were clearly rushed, it is a challenge to follow what is going on.

Here are the relevant provisions applying to taxpayers dying on or before 29 February 2016:

The ‘old’ s 25—‘Income of beneficiaries and estates of deceased persons’. Use the version as it stood BEFORE amendment by s 48(1) of the Taxation Laws Amendment Act 25 of 2015.

Paragraph 40 of the Eighth Schedule to the Income Tax Act—‘Disposal to and from deceased estate’. Use the version AFTER amendment by s 112(1) of Act 25 of 2015.

Paragraph 41 of the Eighth Schedule—‘Tax payable by heir of a deceased estate’. Use the version AFTER amendment by s 113(1) of Act 25 of 2015.

The ‘old’ para 67(2)(a) of the Eighth Schedule—‘Transfer of assets between spouses’. Use the version BEFORE amendment by s 121(1)(b) of Act 25 of 2015.

Remainder of ‘old’ para 67. Use the version BEFORE amendment by s 121(1)(b) of Act 25 of 2015.

If it hasn’t dawned on you yet, the drafters of fiscal legislation (in this instance, the National Treasury) do not give a rotten fig for your convenience. But, rather than try to make simultaneous sense of two versions of the act, you may simply use a rendition of the Income Tax Act before its amendment by the Taxation Laws Amendment Act 25 of 2015.

Repudiation under a will A good will, I always say, provides for the possibility that a beneficiary might repudiate.

Requirements for valid repudiation In order to be effective, a repudiation has to take place before the ‘s 35(12) moment’, meaning s 35(12) of the Administration of Estates Act, which, in a solvent estate, provides that, when the estate accounts have lain for inspection and been confirmed by the Master,

the executor shall forthwith pay the creditors and distribute the estate among the heirs in accordance with the account….

Once s 35(12) applies, the beneficiaries enjoy a personal right against the executor for the delivery of the property due to them, which, upon delivery, becomes a real right in the property itself.

Moreover, a repudiation will be meaningless if a

beneficiary has already adiated under the will. The general rule (to which there are exceptions) is that adiation is final and irreversible.

There is one further possible snag, under s 2C of the Wills Act, dealing specifically with repudiation, which it carefully refers to as a renunciation of a right to receive under a will.

Here is the text of s 2C(1):

2C. (1) If any descendant of a testator, excluding a minor or a mentally ill descendant, who, together with the surviving spouse of the testator, is entitled to a benefit in terms of a will renounces his right to receive such a benefit, such benefit shall vest in the surviving spouse.

The first task is to understand what ‘entitled’ means in a context in which the s 35(12) moment has clearly not arrived (otherwise it would be too late to repudiate). As I read it, s 2C(1) envisages that the



deceased’s surviving spouse and a descendant must jointly be beneficiaries under the will of the same property. Their ‘entitlement’ consists in vested property, although in the form of contingent interests in the same property identified by the will. And what s 2C(1) governs is only repudiation by the descendant (and not by the spouse). Finally, it is clearly intended to override the Intestate Succession Act, the Wills Act being the detailed and the Intestate Succession Act being the more general and therefore subordinate act in this context (see my ongoing series on the conflict of statutes).

Consequences of repudiation Under these circumstances, should the descendant repudiate, his or her share of the contingent interest will vest in the spouse, with the result that his or her share of the underlying property will not fall into intestacy but will accrue, upon the s 35(12) moment, to the spouse.

As a participant at a seminar I recently presented pointed out, the will cannot override this statutory imperative by providing for a possible repudiation by the descendant. But, as I read s 2C(1), it would not apply if the will treated the descendant entirely separately from the spouse. Then, the will might validly allow for the possibility of repudiation, whether by the spouse or the descendant, and so fend off the application of the Intestate Succession Act.

Section 2C(2) By contrast, s 2C(2) specifically allows for its provisions to be overridden by the will:

(2) If a descendant of the testator, whether as a member of a class or otherwise, would have been entitled to a benefit in terms of the provisions of a will if he had been alive at the time of death of the testator, or had not been disqualified from inheriting, or had not after the testator's death renounced his right to receive such a benefit, the descendants of that descendant shall, subject to the provisions of subsection (1), per stirpes be entitled to the benefit, unless the context of the will otherwise indicates.

If not so overridden, s 2C(2) also takes precedence over the Intestate Succession Act. Again, a descendant must enjoy a contingent interest as a result of the deceased’s death, but not jointly with a surviving spouse (when s 2C(1) will apply). Should he or she fall out of the picture in one of envisaged ways, his or her descendants acquire the contingent interest, per stirpes. ‘Falling out of the picture’ in this context means:

Predeceasing the deceased. Being disqualified from inheriting (for example, by

having murdered the deceased). Repudiation.

CGT: ‘old’ exit tax on death—how it works The ‘old’ s 25 of the Income Tax Act supposedly tells you when a deceased estate (for which read ‘the executor’) pays so-called income tax and when the beneficiaries do. Alas, there are three possible ways to interpret it.

In addition, the deceased estate itself is exposed to liability for the so-called capital gains tax (CGT), under the Eighth Schedule to the act, should the executor make an actual (as opposed to a deemed) disposal of a capital asset.

The deceased’s trading stock, livestock and produce on hand at the end of his or her last year of assessment are valued in the conventional fashion, and no income tax is payable on any unrealized profit.

The Eighth Schedule adopts a different attitude, by deeming the deceased to have disposed of all trading stock, all livestock and produce and all capital assets at market value and subjecting the unrealized profit to the CGT. How it works:

Paragraph 40(1): Deemed disposal of all assets by deceased at ‘CGT market value’ at date of death.

Paragraph 40(1)(a): Exclusion of assets acquired by surviving spouse under the ‘old’ para 67(2)(a). No need to read it. Just exclude all estate property passing into the ownership of the surviving spouse. (And ignore property belonging to the survivor under the accrual system. Tell SARS I said so.)

Paragraph 40(1)(c) and (d): Exclusion of favoured insurance and retirement fund products.

Paragraph 40(1A)(a): Deemed acquisition by

deceased estate of assets under control and in the custody of the executor, at CGT market value at date of death. This is the estate’s base cost.

Paragraph 40(1A)(b): Deemed acquisition by beneficiary of any other property passing upon deceased’s death, at CGT market value at date of death. This is the beneficiary’s base cost. Essentially, this is property excluded from the executor’s authority by s 26(1) of the Administration of Estates Act, such as an insurance policy subject to a valid beneficiary-nomination clause. Referred to as a ‘direct’ transfer to the beneficiary.

Paragraph 40(2)(a): Deemed disposal by deceased estate to beneficiary (other than surviving spouse) at the estate’s base cost.

Paragraph 40(2)(b): Deemed acquisition by beneficiary (other than surviving spouse) at the estate’s base cost.

Paragraph 40(3): Both deemed and actual disposals by the deceased estate are treated as if the deceased made them.

In summary, the deceased is charged with CGT on an unrealized capital gain as at the date of death. His or her deemed selling price comprises the base cost for the estate, which may add to but otherwise passes on that base cost to the beneficiaries.

Should trading stock, livestock, produce or capital assets be sold by the executor, the deceased estate has to deal with the normal tax consequences (income tax and the CGT).



Under the ‘old’ para 67, a resident surviving spouse escapes any immediate CGT charge but takes over the CGT fiscal history of all inherited trading stock, livestock, produce or capital assets, and thus the

contingent CGT charge. For a nonresident surviving spouse, this supposed concession is restricted to qualifying domestic fixed property and fixed-property interests.

Property law and tax—III The insights of Centlivres CJ (162 TSH 2016) in dealing with the administration of estates are not much regarded when the beneficiary is an insolvent, leading me to wonder whether the Insolvency Act has regard to the same property law as other statutes.

Kellerman NO v Van Vuren and Others 1994 (4) SA 336 (T) is a much-cited case, on the deliberate repudiation of his legacy by a beneficiary under a will shortly before his estate was placed under sequestration. The point was whether, on the death of his father, dies cedit took place, with the result that what vested in him was the right to the inheritance; a right forming part of his estate, which he would lose only if he repudiated; a repudiation that would amount to a disposition without value under the Insolvency Act.

In other words, it consisted in an (unwitting) examination of the very point made, just over two short months earlier, in the obiter dictum of Joubert ACJ in De Leef Family Trust and Others v CIR 1993 (3) SA 345 (A) (160 TSH 2016)!

Goldblatt J’s judgment:

Whilst there is much to be said for this argument, the law appears to me to have been settled more than 100 years ago in this country and not deviated from since that date.

This very issue was raised in the Cape in the case of Van Schoor's Trustees v Executors of Muller (1858) 3 Searle 131. In this case Watermeyer J, giving judgment, in delivering the judgment of the Full Court, said the following at 137:

3. A child may decline to adiate an inheritance, or may repudiate it, with the very object that the amount which would otherwise go into his estate should be lost to his creditors. This is not considered in law an alienation in fraud of creditors; as there can be no alienation of what is omitted to be acquired (Voet 42.8.16). If the child on the brink of insolvency may decline to adiate absolutely, he may decline, where he has an election between the acceptance of the ‘legitimate’ free, and of the whole inheritance burdened, to accept the latter instead of the former, although the acceptance of the ‘legitimate’ might be more in accordance with the interests of his creditors.

Goldblatt J then resorted to a translation of Voet, which led him quite a long distance from his precedent, to this conclusion:

As stated earlier in my judgment, it seems to me that adiation or repudiation are the two options that are available to a legatee. If he adiates, then, with retrospective effect, the right to the legacy becomes an asset in his estate. If, prior to adiating, he repudiates, or

waives his right to the legacy, then, as was stated by Voet, the legacy is retrospectively rejected and never belonged to him and accordingly the right did not form part of his insolvent estate.

The retrospective recognition or denial of property does not easily jibe with s 35(12) of the Administration of Estates Act:

(12) When an account has lain open for inspection as hereinbefore provided and…the executor shall forthwith pay the creditors and distribute the estate among the heirs in accordance with the account…:

Goldblatt J’s judgment was nevertheless fully supported by Melunsky J, in Klerck and Schärges NNO v Lee and Others 1995 (3) SA 340 (SE):

I am therefore of the opinion that Kellerman’s case, supported as it is by the authorities mentioned above, was correctly decided. In my view it is untenable to hold that a person who refuses to accept a benefit—whether it be a donation or an inheritance—thereby disposes of his property. And the definition of 'disposition' in the Insolvency Act, wide as it is, does not cover the instant case. Counsel for the plaintiffs submitted that a renunciation of an inheritance was an abandonment of rights to property in terms of the aforementioned definition. It appears to me, however, that a repudiation of an inheritance is merely a refusal to accept a right to property.

And his judgment was dealt with in much greater detail and supported by Comrie J in Durandt NO v Pienaar NO and Others 2000 (4) SA 869 (C), although without reference to any retrospective effect in relation to adiation. His conclusion:

In a straightforward case the law of succession is sufficiently clear. An inheritance or legacy vests in the heir of legatee on the death of testator. It is not the dominium which vests, but a personal right to claim the testamentary benefit from the executor in due course. But the benefit comes with a choice: an election…by the beneficiary either to adiate (to accept) or to repudiate. The latter is not presumed. If the beneficiary dies or is declared insolvent before making a choice, the right (and with it, the choice) passes to his deceased estate or trustee in insolvency. If the beneficiary chooses to repudiate, the underlying right is taken in law never to have vested.…

Later in the same year Kellerman was approved of in Wessels NO v De Jager en 'n Ander NNO 2000 (4) SA 924 (SCA), although in entirely different terms.

This is all that Van Heerden WnHR had to say on the subject:



Ek kom dan by die erfenis. Weereens is daar in die geval van 'n testate of intestate bevoordeling by die dood van die testateur slegs 'n bevoegdheid en geen reg nie, wat die insolvent toeval. 'n Reg verkry hy eers as hy die bevoordeling aanvaar.

Thus a competency, rather than a right of any sort, and the right arising upon adiation, without any regard for the process of administration and

distribution of the estate or of the critical confirmation of the L&D account.

Under insolvency law, then, you appear to be free to wish away the beneficiary’s property, at the moment of the deceased’s death, in the form of a contingent interest, by calling it a competency, or you may treat it like Schrödinger’s cat, as simultaneously being and not being property, depending upon observation by way of adiation or repudiation.

Normal tax: new exit tax on death And here are the provisions applying to persons dying on or after 1 March 2016:

The new s 9HA—‘Disposal by deceased person’ Section 9HA(1): The deceased’s trading stock,

livestock and produce on hand at the end of his or her last year of assessment and all capital assets are deemed to be disposed of at their CGT market value. Excluded are favoured insurance and retirement fund products and assets passing to a resident surviving spouse. The deceased is liable for the resulting income tax and CGT.

Section 9HA(2)(a): Deemed disposal to a resident surviving spouse. This contradicts s 25(2)(b). Await amendments.

Section 9HA(2)(b): With capital assets, the resident surviving spouse takes over the deceased’s base cost. With any other stuff, there is a cock-up. Await amendments. This is a valuation routine relevant only to s 25. Await amendments.

On nonresident surviving spouses, there is a cock-up relating to RSA fixed-property interests. Await amendments.

Section 9HA(3): Deemed acquisition by beneficiary of property passing upon deceased’s death not under the executor’s custody or control, at CGT market value at date of death. This is the beneficiary’s cost of acquisition or base cost. Essentially, this is property excluded from the executor’s authority by s 26(1) of the Administration of Estates Act, such as an insurance policy subject to a valid beneficiary-nomination clause. Referred to as a ‘direct’ transfer to the beneficiary.

The new s 25—‘Taxation of deceased estates’ Section 25(1): The deceased estate is the taxpayer

for all post mortem income subject to income tax. Section 25(2)(b): Section 9HA(2)(a) assets

deemed to have been disposed of to resident surviving spouse now simultaneously (!) deemed to be acquired by the deceased estate at the cocked-up s 9HA(2)(b) cost.

Section 25(2)(a): Other assets deemed to have been acquired by the deceased estate at their CGT market value at the date of death.

Section 25(3)(a): Deemed disposal of assets to beneficiaries at deemed plus actual cost.

Section 25(3)(b): Deemed acquisition by beneficiaries of assets at the deceased’s estate’s deemed and actual cost.

Section 25(4): Fiscal history of assets acquired by a resident surviving spouse passed on to that spouse.

Section 25(5): Deceased estate deemed to be a natural person, other than for ss 6, 6A and 6B rebates.

The new para 67—‘Transfer of assets between spouses’ Paragraph 67(1)(a): Ignore interspousal transfers

of assets for CGT purposes. Paragraph 67(1)(b): Receiving spouse takes over

CGT fiscal history of assets transferred. Paragraph 67(3): If the receiving spouse is a

nonresident, these rules apply only to qualifying domestic fixed property and fixed-property interests.

Paragraph 67(2)(a): On death, property belonging to the survivor under the accrual system of the Matrimonial Property Act deemed to be disposed of to that spouse.

Paragraph 67(2)(b): On divorce and qualifying equivalents, property passing to a spouse deemed to be disposed of to that spouse.

Overview—the deceased In summary, the deceased is charged with income tax and CGT on unrealized profits and an unrealized capital gain as at the date of death on trading stock, livestock and produce on hand at the end of his or her last year of assessment and all capital assets, as if these were sold at their CGT market value.

The estate (executor) His or her deemed selling price comprises the cost price for the estate, which may add to but otherwise passes on that cost price to the beneficiaries.

Should trading stock, livestock, produce or capital assets be sold by the executor, the deceased estate has to deal with the normal tax consequences (income tax and the CGT).

The surviving spouse Under the ‘new’ para 67, a resident surviving spouse escapes any immediate income tax or CGT charge but takes over the fiscal history of all inherited trading stock, livestock, produce or capital assets, and thus the contingent normal tax charge. For a nonresident surviving spouse, this supposed concession is restricted to qualifying domestic fixed property and fixed-property interests. The ‘new para 67 is thus just as potentially unfair as the ‘old’.

Feature Supplement to 163 Tax Shock Horror 2016

Cases

October 2016

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

by Julian Ware © 2016 J Ware ([email protected])

Capital v revenue—disposal of shares CSARS v Capstone 556 (Pty) Ltd

Supreme Court of Appeal (2016)—78 SATC 231 (judgment delivered by Van der Merwe AJA; Ponnan JA, Bosielo JA, Wallis JA & Mbha JA concurring): An unsuccessful appeal against an order granted in the High Court (145 TSH 2015) that the proceeds from the disposal of shares acquired by the taxpayer under a convoluted business rescue and salvage restructuring arrangement were capital in nature. The dominant and objective purpose of the acquisition was to facilitate the rescue of a business. Since profit-making is an element of capital accumulation, the real test is whether the asset was acquired as part of a scheme of profit-making and assumed the character of trading stock. It was inappropriate to adopt a narrow legalistic approach. The substance and reality of the transaction was the decisive factor. The court confirmed that an ‘equity-kicker’ is simply a cost of borrowing. Under a cross-appeal, the share-acquisition-linked indemnity settlement-obligation incurred by the taxpayer was held to form part of the acquisition cost of the shares.

Tax administration—lifestyle questionnaire CSARS v Brown

Eastern Cape Division, Port Elizabeth (2016)—78 SATC 255 (judgment delivered by Smith): Since the taxpayer, the notorious Julian Brown, had failed to register as a taxpayer and had never submitted tax returns, the Commissioner served a lifestyle questionnaire, comprising twenty-six pages, upon him. Upon his repeated refusal to respond to it, a senior SARS official launched motion proceedings for an order directing him to do so. The provisions of s 46 of the Tax Administration Act (dealing with requests by SARS for relevant material) are peremptory. The information sought in the questionnaire constituted ‘relevant material’, and it satisfied the specificity requirements under the act. The issuing of the questionnaire could not be regarded as a fishing expedition, especially since the Commissioner had established all the jurisdictional facts outlined in s 46. Since the request for information (the lifestyle questionnaire) was a preliminary investigation, it did not constitute an administrative action. (Hmm.) The Commissioner was entitled to use a common-law remedy (civil action) to enforce compliance for the request for relevant material. And then, just for good measure, the court ruled that, should Brown fail to respond to the questionnaire within two weeks of the order that it granted, an application for a further order for him to be held in contempt of court, coupled with imprisonment until he duly complied, was available to SARS.

Remission of interest—VAT Taxpayer v CSARS

ITC 1884 (Durban Tax Court—Case VAT 1237 (2016))—78 SATC 272 (judgment delivered by Lopes J): It was common cause that the taxpayer had incorrectly treated a transaction for the disposal of assets as a zero-rated supply, and that it had failed to pay VAT to the SARS timeously, on 25 March 2010. Consequently, the Commissioner imposed a penalty and interest (with effect as from 1 April 2010) upon the late payment. Following upon representations made by taxpayer, the Commissioner waived the penalty but not the interest. The court upheld the Commissioner’s view. On the basis of the facts, an amendment to s 39(7) of the Value-Added Tax Act, as it then read, which took effect on 1 April 2010, precluded him from waiving the interest.

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Davey’s Locker

October 2016 Special voluntary disclosure programme Fourth (and final?) version

by Tony Davey © 2016 A H Davey ([email protected] www.tonydavey.com)

SARB relief The South African Reserve Bank’s relief for exchange control breaches, contained in Circular 6 of 2016, was canvassed in 160 TSH 2016, and remains unchanged.

In essence administrative breaches (moneys always abroad but not previously reported to SARB, such as pre-immigration funds, qualifying foreign inheritances from a foreign source, and foreign earnings) will incur no levy, but must be placed on record, unless exempted.

Broadly speaking, if an inheritance originated from an RSA source (‘sins of the father’ scenario) there is no levy, if the funds are repatriated, but the levy is 10% if the inheritance is retained abroad.

For other unauthorized foreign assets, the levy, based on the market value of the property concerned as at 29 February 2016, is 5% if repatriated, 10% if retained offshore, plus 2% if the levy is settled from local moneys.

SARS relief: Special VDP (SVDP) The fourth and (it is to be hoped) final legislative version enacted, contained within the two Rates and Monetary Amounts and Amendment of Revenue Laws Bills, 2016 (see the Monthly Listing), is effectively a tax on the

net offshore asset-value of an applicant taxpayer, this being the highest net asset value for the period between 1 March 2010 and 28 February 2015, in any one tax year, translated to rand at the spot rate at the tax year-end, being the last day of February 2011, 2012, 2013, 2014 and 2015.

Forty per cent of this highest value will be included in taxable income in the 2015 tax year, aggregated with other taxable income for that year, and taxed at the applicant’s marginal rate.

In most instances the taxpayer’s marginal rate will be the maximum of 41%; thus the effective rate is 16,4%, being 41% (marginal rate) of the 40% inclusion.

Normal VDP The SVDP treats all taxpayers in the same way, no matter whether the applicant taxpayer’s offshore assets comprise pre- or post-tax moneys.

The normal VDP currently offered in the Tax Administration Act does not require applicants to pay tax on post-tax (taxed) capital (as distinct from pre-tax, untaxed capital).

It follows that post-tax applicants should consider applying for the normal VDP instead of the SVDP, albeit with its arduous administrative burden,

requiring an applicant to establish taxable income (if any) for each of the past tax years since 1 March 2001 (2002 tax year), as opposed to the simpler remedy available under the SVDP.

Such taxable income will be included in normal income, re-assessed, and taxed for each year of assessment.

There is no penalty, but a simple-interest late-payment levy is payable.

In summary, a post-tax applicant would need to compare this result with the simpler SVDP option of an effective 16,4% of capital.

Conclusion Given global common reporting standards (CRS), being the automatic exchange of financial information between countries, commencing as from September 2017, this is taxpayers last opportunity to regularize their exchange control and tax affairs on or before 30 June 2017, the closing date for the SVDP.

As I read the act, both VDPs incur the late-submission penalty, although the method of its

computation remains a mystery to me.—Ed

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Shortcut Keys in Word by Duncan S McAllister ©2016

October 2016

ALT sequence keys (Word 2010)—the Review tab

Review (ALT + R)

ALT, R, S Spelling and grammar ALT, R, R Research ALT, R, E Thesaurus ALT, R, W Word count (statistics of number of pages, words, characters,

paragraphs and lines) ALT, R, L Translate ALT, R, L, T Translate document ALT, R, L, S Translate selected text ALT, R, L, M Mini translator ALT, R, L, L Choose translation language ALT, R, U Language ALT, R, U, L Set proofing language ALT, R, U, P Language preferences ALT, R, C New comment ALT, R, D Delete comment ALT, R, D, D Delete selected comment ALT, R, D, A Delete all comments shown ALT, R, D, O Delete all comments in document ALT, R, V Previous comment ALT, R, N Next comment ALT, R, G Track changes [ctrl + shift + E] ALT, R, G, G Track changes ALT, R, G, O Change tracking options ALT, R, G, U Change user name ALT, R, T, D Display changes to document for review (Original = before

changes; Final = Display all changes) ALT, R, T, M Show mark up ALT, R, T, M, C Comments ALT, R, T, M, K Ink ALT, R, T, M, I Insertions and deletions ALT, R, T, M, F Formatting ALT, R, T, M, H Markup Area Highlight ALT, R, T, M, B Balloons ALT, R, T, M, R Reviewers

October 2016


ALT, R, T, M, U Highlight Updates ALT, R, T, M, O Other authors ALT, R, T, P Reviewing pane ALT, R, T, P, V Reviewing pan vertical ALT, R, T, P, H Reviewing pan horizontal ALT, R, A Changes ALT, R, A, M Accept and move to next ALT, R, A, C Accept change ALT, R, A, A Accept all changes shown ALT, R, A, D Accept all changes in document ALT, R, J Reject changes ALT, R, J, M Reject and move to next ALT, R, J, R Reject change ALT, R, J, A Reject all changes shown ALT, R, J, D Reject all changes in document ALT, R, F Previous revision ALT, R, H Next revision ALT, R, M Compare ALT, R, M, C Compare two versions of a document: Legal blackline ALT, R, M, M Combine revisions from multiple authors into a single document ALT, R, M, S Show source documents (original, revised or both) ALT, R, P, B Block authors ALT, R, P, E Restrict editing

T S H

Resolving Disputes

With SARS Addressing the private sector's

dangerous unfamiliarity with due process in tax matters

Presenter

COSTA DIVARIS

The seminar: R2 500 —includes the handouts

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JOHANNESBURG 1 December 2016 Wanderers Golf Club (Sandton)

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October 2016 Evidence Corner—evidence could make a welcome change to tax cases

The perils of hearsay evidence: a reminder

by Andrew Paizes © 2016 A Paizes ([email protected])

The Supreme Court of Appeal, in S v Seemela 2016 (2) SACR 125 (SCA), has reminded us of the dangers presented by hearsay evidence adduced against an accused in a criminal case.

The trial court had convicted the appellant of, amongst other things, two counts of murder. His appeal to the High Court was unsuccessful, but his further appeal to the Supreme Court of Appeal met with greater success: the two murder convictions were set aside, with the second being replaced with a conviction for attempted murder.

The Supreme Court of Appeal was scathing in its assessment of the trial, Ponnan JA (at [2]) describing it as ‘an object lesson in how litigation, in particular in criminal trials, should not be conducted’. The convictions turned largely on the admissibility of evidence that was clearly hearsay, being statements made by both of the victims after they had been assaulted, in which they implicated the appellant. Both statements had been admitted by the trial court in terms of s 3(1)(c) of the Law of Evidence Amendment Act 45 of 1988, which gives a court the power to admit hearsay evidence if, having regard to a list of specified factors, it is ‘of the opinion that such evidence should be admitted in the interests of justice’.

There were several problems surrounding this decision to admit the evidence under s 3(1)(c). First, that provision makes it plain that a court must have regard to each of

the specified factors before deciding that it is in the interests of justice to receive the evidence. This approach the trial court did not adopt. An essential aspect of the inquiry is to evaluate the extent to which the evidence raises the well-known dangers associated with hearsay: the fact that the out-of-court declarant may be insincere, may have a faulty memory, may have misperceived what is being conveyed, or may have narrative inadequacies in transmitting the information to the witness who received it. The court will, then, examine the facts in order to assess whether there are, in each case, sufficient indicia of trustworthiness to overcome those dangers. A failure to subject the evidence to this treatment leaves the potential dangers of hearsay unexplored and cannot conduce to a proper determination of where the interests of justice lie.

Secondly, reliance was, on the first count, placed solely on the hearsay evidence in order to sustain the conviction. Ponnan JA (at [14]) was of the view that the trial judge ‘seriously underestimated this factor and was too easily persuaded to place weight on this evidence for the purpose of convicting the appellant’, and ‘did not manifest a sufficient awareness of the perils of relying solely on that evidence to found a conviction’. Ponnan JA, on the other hand, ‘instinctively baulk[ed] at founding a conviction solely on that statement’.

Thirdly, the investigating officer to whom the statement was made by the victim in respect of the second count did not testify. The evidence was thus, in effect, double hearsay, or hearsay upon hearsay. The traditional dangers in such circumstances tend to be compounded. In such circumstances, said Ponnan JA, the statement should not have been admitted into evidence.

Finally, it was important to take into account the central role played by the evidence in convicting the appellant. Ponnan JA considered (at [13]) that ‘a judge should hesitate long in admitting or relying on hearsay evidence which plays a decisive or even significant part in convicting an accused, unless there are compelling justifications for doing so’. He spoke, too, of a ‘court’s intuitive reluctance to permit untested evidence to be used against an accused in a criminal case’, pointing to what had been said by Schutz JA in this regard in S v Ramavhale 1996 (1) SACR 639 (A), as well as by the court in Metedad v National Employers’ General Insurance Co Ltd 1992 (1) SA 494 (W).

The last point should not, however, be pressed too far. It is important to note that the Supreme Court of Appeal has, despite warnings of the kind issued by Ponnan JA, expressly maintained that this reluctance to admit hearsay against an accused should not be allowed to entrench itself as a rule. In S v Shaik & others 2007

October 2016


(1) SA 240 (SCA) at [171] and, more recently, in S v Van Willing & another [2015] ZASCA 52 (unreported, SCA case

no 109/2014, 27 March 2015) at [34], there are strong pronouncements to the effect that each case must be treated on its

own merits and that the test remains the flexible one set out in s 3(1)(c).

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