‘tsh dishonour roll: brenton patrick geach s · tax court case 10 september 2012: tc vat 789. the...

* Not his real name. © 2012 C Divaris/The Electronic Publishing Corp CC

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

‘TSH Dishonour Roll: Brenton Patrick Geach SC’ The best proof possible that professional accreditation and oversight is no guide to ethics, morality or compliance.

Yet he would automatically qualify to register as a tax practitioner! (Yet, soon, I won’t—Ed.)

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue # 116

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 month-

ly, quarterly or even individually on DVD by post for R161 a month inclusive of VAT at 14%. This is perhaps the only newsletter in the world with its own stylebook (also free), by Costa Divaris & Duncan McAllister:

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

Customs agreement 02 July 2012: SA—Japan.* dti notice August (?) 2012 (undated): The dti warns the public of incentive scam. What it

means are the private incentive scams, as opposed to the official ones. Tax court case 10 September 2012: TC VAT 789. The vendor in this silly matter understands the VAT

law not at all, believing that s 20(7) of the Value-Added Tax Act gives the Commis-sioner the power to accept a complete lack of incoming tax invoices.

New bill 19 October 2012: Employment Equity Bill, 2012 [B 31—2012]. This includes a re-verse-onus provision operating against employers (s 6(1)); a power for the DG to apply to the Labour Court to impose a fine for failure to implement an employment equity plan (s 20(7)), submit an annual report (s 21(4B)) or obey a labour inspec-tor’s demands (s 36(2)); a requirement for the submission of annual reports by em-ployers with at least fifty employees (s 21(1)); contemplation of effective self-incrimination in an annual report (s 27(2)); measurement of compliance on a purely racial basis (s 42(2)); important effective legislative powers of the minister by way of codes of good practice (s 53(5)); references to fines in the strange amount of R30 0000,00 (s 59(3), s 61(3)); and massively increased fines for targeted contra-ventions, ranging from R1,5 m to R2,7 m (Schedule 1).

The AG’s column 29 October 2012: Presidency supports our long-standing belief that wholesale clean administration in government is an achievable goal. Yeah. (The ‘our’ seems to be not a royal plural but a recognition of ‘my office’.)

LSNP notice 05 November 2012: Contingency fee agreements. Following up on this item (116 TSH 2012), I visited the new website of The Law Society of the Northern Provinces. There, under ‘Contingency Fee Agreements’, it is still carrying the eponymous, un-dated article from Society News I noted in 113 TSH 2012 as having been written by ‘what appears to be a very prominent member of the legal fraternity’. A trophy like this, even if an image file, cannot cross my path twice without inclusion in the TSHD.

dti release 08 November 2012: Clarification on the revised B-BBEE codes: The Socio Economic Development (SED) element is addressing socio-economic develop-mental initiatives that can be tackled either through monetary or non-monetary contributions with the targeted beneficiaries as defined in the BEE legislation as stipulated above. BEE SED was never intended to displace Corporate Social Resp/Invest of companies, [it’s] meant to alleviate inherent social challenges confronted by a specific group of the society through no design of theirs as an add on to corporate social responsibility. Thus companies must con-tinue to do their CSI in spite of the BEE SED.

New bill 08 November 2012: Tax Administration Laws Amendment Bill, 2012 [B 35A—2012]. This reflects the draft standing committee amendments to the original bill, &, I now

Issue: 117 Tax Shock Horror Database 11 553 items: 2,85 GB Subscribers: 6 402 December 2012

117 Tax Shock, Horror 2012—December—2


see, is incorrectly designated as ‘[B 35—2012]’ (116 TSH 2012). High Court case 10 November 2012: Rees and Others v Harris and Others (A5070/10) [2011] ZAG-

PJHC 237. Part of the fallout from the Tannenbaum scandal, one of the issues being whether the Aljebami trust was the alter ego of Rees, a peregrinus. I like the way Salduker J rephrased that essentially silly formulation:

Put differently, the second issue is whether the assets of the Aljebami trust, can effectively be considered to be the assets of Rees.

Oh dear. She then goes on to deal with ‘the separate legal personality, if any, of the Aljebami trust’. It gets worse: what comes next is a discussion about piercing the corporate veil & another about trustees not treating a trust as a separate entity. I in-tervene here to restate the gravamen of the principal part of the judgement: there were insufficient facts to show that the trust property was in fact the property of Rees. There! Was that so difficult? But it wouldn’t win you a degree from UP. To put it another way, Harris, also misunderstanding trust law, botched his case.

New bill 13 November 2012: Tax Administration Laws Amendment Bill, 2012 [B 35B—2012]. This is the final version (always excepting surreptitious, illegal, extra-parliamentary changes, presumably made by the National Treasury). Includes a memorandum on the objects of the Tax Administration Laws Amendment Bill, 2012.

dti release 16 November 2012: The revised BEE codes of good practice are not intended to make things difficult:

The draft codes have elicited widespread support but the department has received feed-back expressing alarm that some charitable organizations and beneficiaries will lose bene-fits associated with the current version of the BEE Codes. This is not true. The proposed so-cio-economic development (SED) code encourages charitable organizations who receive CSI funding as a result of BEE policy, to ensure that their beneficiaries are representative of South African Society.

GN 969 GG 35900 23 November 2012: Determination of Remuneration of Members of Constitutional Institutions Bill, 2013 for comment.

The AG’s column 26 November 2012: Practising what we preach to our auditees [sic]—we lead by example by consistently receiving clean audits from our independent auditors. Yet AGSA debtors include many deadbeats, municipalities owing it R206 m & provincial government departments R124 m. The AG should read 116 TSH 2012 on how to cre-ate accessible public documents. His ‘columns’ constitute gigantic PDF image files.

GN 981 GG 35909 30 November 2012: Guidelines regarding applications for permits under rebate item 460.11/00.00.01.00 of Schedule 4 to the Customs & Excise Act. You will have immediately realized, of course, that I am speaking here about used coats of all kinds & even some caps, which may be imported under rebate (partially or fully duty free), not necessarily to be turned into wiping rags. In other words, here lies a com-mercial opportunity, especially for non-Gucci, small business. All you have to do is to avoid throwing up as you work your way through the incredible requirements, subject to financial ruin & possibly even imprisonment should you make a misstep. I can’t summarize them, they’re far too voluminous, so here’s a link to the Gazette:

http://www.bspseminars.co.za/idiotsatitac.pdf GN R 966 GG 35910 30 November 2012: Cancellation of an authorized dealer (Albaraka Bank Ltd) in

forex with limited authority under para 3(a) of the exchange control regulations. GN 1005 GG 35939 30 November 2012: Draft Treasury regulations under the Public Finance Manage-

ment Act. How odd; I can’t seem to find the rules insisting that our tax laws be draft-ed by callow amateurs knowing neither how to read nor write law & impervious to instruction, especially free, from moi. Perhaps the rules appear in the PFMA itself.

SCA case 30 November 2012: Glenrand MIB Financial Services (Pty) Ltd & Others v Theodor Wilhelm van den Heever NO & Others (199/2012) [2012] ZASCA 195. It’s hard to sort out who won & who lost in this case, which turned out to be more of a tag-wrestling than a boxing contest. It earns its inclusion here for this confirmation:

In Heathfield v Maqelepo 2004 (2) SA 636 (SCA) the court recognized that an agreement signed on behalf of a non-existent principal is invalid.

Customs EM 30 November 2012: Explanatory memorandum on the phase-down of duties under the EFTA Trade Agreement. This covers the 2013 instalment. It’s hard to remember that the Natural Treasury, taking advice, deploying brains (not bums) & working hard, electrified the new SA’s economy simply by reducing Apartheid-era tariffs, mak-ing even the most fanciful transformational dream possible.*

FIC notice 01 December 2012: Financial intelligence centre compliance contact centre. (The dta would love that one: FICCCC.) Well might those trying, for example, to register have a few queries. The registration form is a nightmare, & bears a tenuous rela-tionship with the FICA. Be sure to Google the string “validator” before attempting to



register. Clearly, SARS might profitably canvass for staff from the FIC. No one there gives a toss for the Constitution either.

Updated guide 01 December 2012: SARS payment rules GEN-PAYM-01-G01 rev 10. (DNS) Updated FAQs 01 December 2012: Frequently asked questions—SARS payment rules

GEN-PAYM-01-FAQ01 rev 12. (DNS) SARS release 03 December 2012: SARS enforcement & customs operations for November 2012.

It’s fine by me to name & shame, just as long as you’re careful ahead of sentencing. You be the judge: is, for example, this (alarming) announcement acceptable?

A former SARS employee, Mr AF Snyman, appeared in the Pretoria Commercial Crimes Court on 13 November 2012 on fraud charges. SARS detected that Mr Snyman had been defrauding SARS by manipulating a number of systems and abusing taxpayer information to which he had access as a SARS employee. He made 149 successful payments to his per-sonal account, from 54 taxpayers’ accounts to a total value of R227 380. The suspect was arrested, resigned from SARS and was charged criminally. The case was remanded and Mr Snyman remains in custody.

While it’s little better than the allegations SARS officials regularly make against tax-payers in writing, I feel uncomfortable even reproducing it.*

Companies & Markets 03 December 2012: Lack of prosecutorial ambition in SA may facilitate white-collar crime. By Stuart Theobald (Intellidex):

I also called up contacts at the South African Institute of Chartered Accountants and the In-dependent Regulatory Board for Auditors to see if they had disciplined any of their mem-bers who had been involved. I couldn’t get a straight answer from either. Mysteriously, nei-ther routinely publishes the names of those auditors and accountants who are debarred, making for a rather light form of discipline if indeed it is ever meted out.

Sake24 03 December 2012: Is groeibelied nog op koers? By Jac Laubscher (Sanlam): Die onvolhoubaarheid van groei deur herverdeling, waarvan die skerp toenames in onderskeidelik die staat se salarisrekening en die uitgawe aan maatskaplike toelaes voorbeelde is, is eweneens gedemonstreer. Per slot van rekening kom produktiwiteit voor herverdeling.

Treasury release 04 December 2012: Business Day gets it wrong on the jobs fund. Read the Econo-mist & you’ll see that ministers from civilized countries write to a newspaper directly to correct an alleged misperception or misrepresentation. A media release just doesn’t cut it. As always, the ANC confuses the map with the territory:

Of those 54 projects, 27 have signed agreements for funding of more than R1 billion. These initiatives will create over 65 000 new permanent jobs in South Africa by 2015 and place 42 000 unemployed people in existing vacancies.

Business day 04 December 2012: New statism: what replaces canned investment treaties? By Peter Leon (Webber Wentzel), on recent announcements by the cabinet (116 TSH 2012) & developments in this field:

Although it is legitimate for SA to demarcate its public policy space on such treaties, whether for transformational or other reasons, what is remarkable about the department’s move against the EU is the lack of bilateral consultation as much as the proposal, almost novel in international investment law, that all future investment arbitration with SA should be domes-ticated. A key feature of international investment law is the existence of a neutral dispute resolution forum through international arbitration before an independent tribunal.

Treasury release 05 December 2012: First quarter local government s 71 report for the period 1 July 2012–30 September 2012. To do with conditional grants:

First quarter performance constantly indicates low performance with both the 2011/12 and 2012/13 financial years indicating expenditure less than 25 %. In some cases the poor per-formance is attributed to technical delays and supply chain management processes.

dti release 07 December 2012: Minister Davies launches maize mill to boost food security, beneficiation & job creation:

As part of the dti’s commitment to food security and poverty alleviation, the maize-meal produced at the mills set up as part of the small-scale maize milling initiative will be market-ed at prices below prevailing market rates. In so doing the dti will be introducing competition into a highly concentrated sector which has an unfortunate history of uncompetitive practic-es which have directly impacted on poor consumers’ ability to feed themselves and their families.

GN 995 GG 35932 07 December 2012: Amendment under s 74(3)(a) of the Value-Added Tax Act of item 470.00 in para 8 of Schedule 1. On temporary imports of goods admitted for re-export purposes. This ought to have been a regulation notice; cf further on.*

GN 1006 GG 35931 07 December 2012: Monthly service fee imposed on abattoirs participating in the classification & marking of meat under the Agricultural Product Standards Act. Sounds like a neat idea—outsourcing but with reverse cash-flows!



GN 1009 GG 35931 07 December 2012: Section 12I tax allowance programme. Mabele Fuels (Pty) Ltd plans to spend R1,2 b on bio-ethanol & dried grains with solubles & is rewarded with a subsidy from the taxpayer. Thank the taxpayer!

GN 1010 GG 35931 07 December 2012: Section 12I tax allowance programme. Nestle SA (Pty) Ltd tries for what sounds like a coffee project…and CRACKS IT! Thank the taxpayer!

GN 1011 GG 35931 07 December 2012: Section 12I (also known in twee dti circles as ‘s 12i’) tax allow-ance programme. Nestle SA (Pty) Ltd…wait for it…FAILS to qualify! So you invest R108 m in the manufacture of non-dairy creamer—so what? You don’t cut it on the ‘manufacturing assets, skills development & employment’ requirements, which are MANDATORY, as opposed to the altogether voluntary, if not wholly capricious, idea of wanting to invest in the first place. Talk about trying to milk the system.

GN 1012 GG 35931 07 December 2012: Section 12I tax allowance programme. Ho hum. Now its Unile-ver SA (Pty) Ltd making it with a savoury-food-product project. Thanks, taxpayers!

GN 1032 GG 35962 07 December 2012: Determination of upper limits of salaries, allowances & benefits of different members of municipal councils under the Remuneration of Public Office Bearers Act. They get a basic salary, a housing allowance, the municipal contribu-tion to a pension fund, a municipal contribution to a medical aid scheme & a travel-ling allowance. A mayor can get as much as R1 m. There is a wide range of addi-tional perks available to councillors, both in cash & kind. Could I have been respon-sible (93 TSH 2010) for the lack of any mention of R120 000 constituency allowanc-es? Nah. They must have been discovered to be unconstitutional by other means.

SARS briefing note 07 December 2012: Briefing note on the draft export regulation. Now this I could go for: the rationalization of the often impractical rules governing VAT zero-ratings on exports, by way of the long-promised revision of the strangely named 1998 Export Incentive Scheme. It was supposed to have been updated in 2005 (85 TSH 2010), & a revision was in the air in 2008 (65 TSH 2008). Better late than never.*

Draft VAT rules 07 December 2012: Regulations issued under s 74(1) read with para (d) of the defi-nition of ‘exported’ in s 1 of the Value-Added Tax Act. On indirect exports by road & rail. I wonder which para (d) is intended; an amendment has been awaiting the Nkandla touch for some time.*

High Court case 07 December 2012: Motswai v RAF 2012 SA (GSJ). Every lawyer in the land should be made to read this judgment of Satchwell J (see the Monthly Notebook), which ought to destroy several reputations. It opens like this (footnotes suppressed):

I spent three and a half years of my life considering the principles and practice of road acci-dent compensation both in South Africa and throughout the world. During that time I learnt that any system of road accident compensation is intended to form an integral part of a sys-tem of social security and, as such, is intended to provide protection for members of society who have suffered misfortune. However, I also learnt that the current system of road acci-dent compensation is both perceived by and utilized as a means of providing a livelihood for administrators, attorneys, advocates and professional experts employed both by the Road Accident Fund (RAF) and road accident victims.

Sake24 07 December 2012: Oeps, dié verklaring is foutief. The cabinet incorrectly issues a statment imposing export duties, ‘where applicable’, on iron ore & steel.

dti release 10 December 2012: Statement on interdepartmental task team (IDTT) on iron ore & steel. Even after youthful, involuntary tertiary tuition by some two-bit local Commie economists, & a lifetime of recreational study of economics, I just can’t keep up with the priapic Comrade Minister. What is a ‘developmental steel price’, & who bears the difference if local prices are somehow depressed below international levels? Just how do export controls on scrap metal fail to ‘undermine scrap collection liveli-hoods’, if access to international prices is restricted or prohibited?

BPR 128 10 December 2012: Disposal of equity shares in a foreign company. I blame no one trying to flameproof a reorganization.*

BPR 129 10 December 2012: Beneficial owner of dividends. This is kak, pure & simple, & out of date, to boot. See the Monthly Notebook.*

New EM 10 December 2012: Explanatory Memorandum on the Taxation Laws Amendment Bill, 2012 [WP—’12].*

Business Report 10 December 2012: October revenue analysis casts alarmist image—SARS. By Dr Randall Carolissen, group executive for revenue planning & reporting, SARS. A ri-poste to comments about collections & further possible down-ratings by Azar Jam-mine (Econometrix). It’s been years, as far as I can remember, since a SARS staffer wrote to the press in his official capacity. It really doesn’t pay to be too thin-skinned.

Treasury release 11 December 2012: Tax treatment of RSA government bonds issued to nonresidents. For decades, desperate for foreign currency, we have subsidized the rich world by allowing it alone to tax SA interest earnings. With its usual sure touch, the govern-



ment has carefully picked its moment to terminate the subsidy…when we are des-perate for foreign currency.*

SARB release 11 December 2012: SARB executives to take a salary freeze: This is in support of President Zuma’s call to CEOs and executive directors in the private and public sectors, to agree to a freeze on increases in salaries and bonuses over the next 12 months.

You bloody fools; unless, that is, you’re also following his lead on taxpayer-sponsored personal housing, polygamy, mooching & etc. Are you also dogists?

SARS release notes 11 December 2012: Release notes: e@syFile™ employer version 6.2.0. (DNS) GCIS release 12 December 2012: Government dismisses fallacy about NDP.

Government has noted the reckless statements made by the chief economist at Pan African Investment and Research, Iraj Abedian, which were published by the Business Report re-garding the alleged ‘absence of buy-in’ of the National Development Plan (NDP) by Ministers Ebrahim Patel and Rob Davies.

In the credibility stakes, the government isn’t even on the same race course as the respected Mr Abedian. How invidious to single out a particular citizen expressing his opinion, & then in favour of our own Abbott & Costello, two of the funniest economic clowns the world has ever known.

EXCON manual update 12 December 2012: Section G (current payments by residents) & O (capital transac-tions) of the SARB’s Exchange Control Manual updated. The ‘full zipped manual’ is also listed as having been updated, yet, according to their file-dates, none of the other sections appears to have been changed. I don’t like such needless confusion.

GCIS release 13 December 2012: Government welcomes High Court judgment on the review application. By the North Gauteng High Court, on the implementation of the Gaut-eng open-road tolling system.

DHA release 13 December 2012: Extension of operational hours at ports of entry during upcom-ing festive season & AFCON event. Issued by the department of home affairs.*

Updated SARS tables 13 December 2012: Average exchange rates—Table A & Table B updated. These are purely image files. For a knowledge-based economy, promote accessibility!*

BPR 130 13 December 2012: Sale of mining rights & the respective base cost of each mining right. How do you sell what the government of the day has stolen (although, not ac-cording to Minister of Minerals and Energy v Agri SA (CALS amicus curiae) (458/11) [2012] ZASCA; 111 TSH 2012)? And was the taxpayer involved trying to pull a fast one on SARS? How can you possibly ignore the CGT connected-person rules, Dumbo?*

GN R 1072 GG 36002 14 December 2012: Amendment under s 74(3)(a) of the Value-Added Tax Act of para 8 of Schedule 1. On the importation of goods for an approved international sporting event (the upcoming soccer-thingee, no doubt).*

SARS release 14 December 2012: Launch of the 2012/13 festive season operation at the ports of entry.*

Draft C&E rules 14 December 2012: Draft amendment of rules under ss 59A & 120 of the Customs & Excise Act (registration & licensing matters).*

Draft C&E rules 14 December 2012: Draft amendment of rules under ss 19A, 54F, 64B, 64D, 64E, 64F, 64G, 101A & 120 of the Customs & Excise Act (pro forma agreements). A num-ber of new forms go with this item (§).*

Draft C&E rules 14 December 2012: Draft amendment of rules under ss 76 & 120 of the Customs & Excise Act (general refunds).*

Tax court case 16 November 2012: TC 12697. Good grief! A s103(1) case! Could the provision thwart access to STC exemptions? At stake was a cool quarter-billion, all because of a share buyback & cancellation within a group, under the old law. (Hell, I once my-self proposed a similar idea, a hairbreadth away from in jest but, er, clearly, for so-ber commercial reasons.) Desai J might be a bit hairy in court (104 TSH 2011) but he seems to write a good judgment. And I don’t say that simply because he showed yet again that s 103(1), just like its successor provisions, is designed to fail. If you want a good anti-avoidance provision, look no further than to the Value-Added Tax Act.*

New act 20 December 2012: Tax Administration Laws Amendment Act 21 of 2012. Its amendments to the principal act are generally retroactive to 1 October 2012.*

GN R 1096 GG 36011 21 December 2012: Amendment of rules (DAR/112) under ss 46, 46A, 49A, 49B & 120 of the Customs & Excise Act (EU Generalized System of Preferences). A number of new forms go with this item (§).*

GN R 1097 GG 36011 21 December 2012: Amendment of rules (DAR/112 [sic]) under ss 46, 46A & 120 of the Customs & Excise Act (Norway Generalized System of Preferences).*

dti release 27 December 2012: Government is committed to strengthening the manufacturing sector—Minister Davies:

‘Our support for the Automotive sectors has, notwithstanding considerable constraints led to



R15 billion investment commitments in the sector; the export of vehicles from SA will soon hit the 360 000 mark and the export of components is set to hit the R40 billion mark by 2013’, he said.

GN 1065 GG 36035 28 December 2012: Codes of good practice on broad-based black economic em-powerment issued under s 9(1) of the Broad-based Black Economic Empowerment Act, for the agricultural sector.

GN 1108 GG 36038 28 December 2012: Public notice listing reportable arrangements for purposes of s 35(2) of the Tax Administration Act. This has to do with the fiscal older-cousins of ‘hybrid equity instruments & ‘hybrid debt instruments’.*

GN R 1109 GG 36039 28 December 2012: Amendment of rules (DAR/113) under ss 76 & 120 of the Cus-toms & Excise Act (diesel rebate for diplomats). It comes with a huge DA 90 (§).*

SARS website note January 2013: Submission of EMP 201 through eFiling: Please note that we are aware of certain difficulties when completing a EMP 201 form in the Flash Player format on eFiling. Please use the Adobe version of the EMP 201 form for this submission.*

Budget day 27 February 2013: As announced by the National Treasury on its website. * Found or to be found on the SARS website. On the SARS What’s New page. (DNS) SARS daily notification service.

§ Not included in Tax Shock, Horror Database.

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

Agricultural Land Act Repeal Act 64 of 1998. C&E consultants Since 1 January 2002, the Commissioner has failed under the Customs & Excise

Act to gazette requirements for the registration of consultants to principals. Provisional tax tables Since 25 April 2003, SARS has failed to gazette the annual provisional tax tables. PAYE tax tables Since 1 March 2011, SARS has failed to gazette the annual PAYE deduction tables. Outstanding IN Since 29 February 2012, SARS has failed to finalize the draft interpretation note on

game farming. Exempt PBOs Since who knows when, SARS has ceased publishing the list of approved PBOs. SARS website I cheated this month, relying solely on the professionally done What’s New section,

the ‘new’ entries on the Legal & Policy page & the obvious links on the home page.

MONTHLY NOTEBOOK

Are our judges starting to do the right thing?

On 7 December 2012 Satchwell J’s registrar forwarded a copy of her judgment in Motswai v Road Accident Fund to the Johannesburg Bar:

You will observe that the judgment expresses concerns and makes many criticisms of the attorneys who repre-sented both the road accident victim and the RAF, the health professionals who produced reports and coun-sel who appeared for both parties.

Judge Satchwell is extremely concerned that this may be only the tip of the iceberg. She has received numerous hearsay reports—to which she has made no reference in this judgment—suggesting: that litigation without any justification is a frequent

occurrence and for the benefit of both attorneys for the claimant and the RAF, both of whom have finan-cial incentives for pursuit of such litigation.

that parties litigate to the determination of the mer-its incurring major costs but do not proceed on the quantum because there are no damages to be paid.

that attorneys (as a matter of course) utilize the services of ‘experts’ as a way of themselves con-ducting any investigation or, in fact, doing much more than opening a file.

that the same ‘experts’ are routinely used and there is a belief that there is some form of ‘accommoda-tion’ between ‘experts’ and attorneys for this career enhancement.

that counsel appear to bring no professional direc-tion or control to any part of the litigation and are perceived simply as persons who move orders in chambers.

that counsel who appear to move such settlement orders receive trial fees without having consulted with witnesses, prepared for trial, being available for trial.

Judge Satchwell has no idea if some or all or none of these tales have any truth in them. But such stories should not be doing the rounds of the courts and the legal profession and should either be investigated and disproved or investigated and terminated.

Judge Satchwell asks that you give your considera-tion to the issues raised in this judgment.

In my humble view, unless our judges do some-thing about our justice system and prisons, nothing good will ever be accomplished. They, too, will one day be judged—for participating in a largely dys-functional system.

It is to be hoped that judicial activism in the new SA, although not without risks, is a lot less scary than it must have been in the Apartheid era. I am not saying that judges should become politicians; merely that they avoid, as far as they are able, being used as tools furthering other people’s agen-das and accommodating their indifference.



The Geach VAT affair: lots of lawyers are honest, I’m sure

I received a tax invoice from a Johannesburg attor-ney not registered as a vendor. Her replies to my enquiries were in turn fawning and abusive yet failed to reveal why she was purporting to be a vendor and including VAT on invoices failing to comply even with the obvious requirements of a valid ‘tax invoice’ while not in fact being registered. She kept sending me what she purported to be a copy of her May 2012 eFiled VAT return, eventually citing her supposedly very eminent tax adviser, who has yet to contact me. Being repeatedly una-ble to find her listed on the SARS VAT Vendor Search, I reported her to SARS. Naturally, under the secrecy rules, I do not expect to enjoy any feed-back but my reports were at least acknowledged.

I then compiled an affidavit of complaint, signing it before a police officer acting as a Commissioner of Oaths. It was, in my eyes at least, a very profes-sional-looking affair, although, I was subsequently told, it’s not done to have a Commissioner’s signa-ture and stamp on a page lacking any text of the body of the affidavit itself. (You live and you learn.) In any event, I had the thing lodged by hand with the Law Society of the Northern Provinces, receiv-ing in return a stamped copy now lodged with an-other attorney (who has charged me a handsome fee for the privilege). From the LSNP, so far. nada, not even an acknowledgement. From the other attorney, I await a description of and accounting for the service he has supposedly rendered me.

There’s no need for cross-references, but I have been repeatedly commenting in these pages on my concerns about VAT compliance, which have sprung, in particular measure, from my observation of the publically visible fiscal transactions of the so-called professional classes.

But it was when I read the judgments in The General Council of the Bar of SA v Geach & Others (277/12; 273/12; 274/12; 275/12; 278/12; 280/12; 281/12) [2012] ZASCA 175 (29 November 2012) (116 TSH 2012) that I began to suspect that the true scope of the problem might be vaster than even I imagine.

I quote from the partially dissenting judgment of Wallis JA (Leach JA concurring—by coincidence, two judges I especially admire), who believed that three of the defendants, Messrs Geach, Gü-ldenpfennig & Van Onselen, all practising advo-cates, deserved to be struck off the roll (footnotes suppressed):

…. First, Mr Geach failed to register for, or to pay, VAT from its inception in 1992 until 2010. That was a sus-tained course of dishonesty for which he gave a dis-honest explanation.

…. That brings me to the matter of Mr Geach’s failure to

register for, and pay, VAT, where in my view the high court erred. When he was required to make his books of account available for inspection he disclosed what would have been apparent from them, namely that he

had never registered as a vendor in terms of the Value Added Tax Act, notwithstanding the fact that he had for many years earned considerably more than the statu-tory threshold at which such registration is mandatory. Nor had he accounted for VAT on his fees. His non-compliance with s 23(1) of the VAT Act was an offence in terms of s 58(c) of the VAT Act and rendered him lia-ble on conviction to a fine or a sentence of imprison-ment of up to two years. In addition for the reasons ex-plained in the following paragraphs his non-payment of VAT caused a loss to the fiscus and was potentially det-rimental to his clients.

…. The dishonesty was compounded by Mr Geach’s

response to this charge. The founding affidavit on behalf of the Pretoria Bar

recited his failure and said that his conduct must have been intentional and that he had no defence. His re-sponse to these serious allegations was to say that he disclosed his non-registration to the Bar and prior to that had made application for registration. He went on to say: I was lax and careless rather than intentional in this

regard. Earlier in his response to the Pretoria Bar on this issue

he said: My nalate om te registreer was eerder die gevolg

van agterlosigheid aan my kant as ŉ doelbewuste poging om belasting te ontduik.

That response displays breath-taking insouciance on his part in regard to a matter of this gravity. It cannot possibly be truthful. VAT was introduced in South Africa in September 1991. Mr Geach has been a successful advocate through most if not all of that period. He could not possibly claim to have been unaware of its existence or the fact that advocates are obliged, like other vendors, to register for VAT purposes and collect and pay over the tax collected. A tax system depend-ent upon self-assessment and regular payment of the tax by vendors is undermined if vendors do not fulfil their obligations and, hence, a failure by them to do so is a serious offence. For an advocate to be guilty of not registering and failing to pay VAT for many years in substantial sums and then to dismiss his failure to do so as an act of administrative carelessness demon-strates a complete lack of probity. Taken on its own, in my view, it would probably justify the conclusion that he was not a fit and proper person to practise as an advocate. When taken together with his other miscon-duct it demonstrates a complete lack of the integrity demanded of an advocate.

Mr Geach does not say that he was unaware of his obligations in regard to registration, collection and payment of VAT, and no senior counsel could be heard to claim ignorance of these matters. His conduct was deliberate. Whichever way one looks at the matter he was obliged to collect and pay VAT to SARS and did not do so. That involved a loss to the fiscus over nearly 20 years. On the fees that he was earning the amounts must have been considerable. This is misconduct of the most serious kind and was dishonest.



Outrageous behaviour at the GPW, & no credit to Adobe

In 116 TSH 2012 Duncan McAllister (SARS) and I both wrote about accessible files. In January 2013 Adobe appears to have pulled some sneaky little trick, perhaps designed to promote sales of a new product, forcing Adobe Reader to take precedence even over the hugely costly Adobe Acrobat Pro. Should you uninstall Reader, you won’t be able to open particular files in your browser—files with filenames ending in ‘(Secured)’. And when you reinstall it, you could disturb the ability of your sys-tem to search within PDF files (111 TSH 2012, 112 TSH 2012), as I did.

So you reinstall Reader. The next shock? Open a ‘(Secured)’ PDF file on your browser, and you can-not copy any of its text!

That was when I noticed that the files I have been including in the TSH Database from govern-ment sites over the 2012 year are ‘(Secured)’, a notification appearing only in the original filename.

Until now, my test for accessibility has been to right-click on a document. If the text may be high-lighted, the document is accessible, in the sense that it will be included in any search you make of

the directory in which it is stored. Only now do I realize that you cannot copy the highlighted text of a ‘(Secured)’ file! And all the files I have been downloading from the bloody Government Printing Works from January 2012 onwards appear to be frigging ‘(Secured)’. So here’s my workaround, relying in part on A-PDF Restrictions Remover or equivalent (116 TSH 2012):

Download a ‘(Secured)’ PDF file. Adobe forces it to be opened in Reader.

Save it. Right-click it and choose ‘Remove Re-

strictions’, declining the offer to open it thereaf-ter. Delete the resulting BAK file.

Right-click it again, choosing to open it with Adobe Acrobat.

Select ‘Document’ and reduce file size.

You will be left with a compact, fully accessible file. Now why would the GPW or some equally stupid

bastards elsewhere in government want to restrict copying from public documents? Are they planning to sell access on the side?

Buying stuff overseas—be careful!

I have thrown the bones and predict, even if only through a greater determination to interdict drugs and prohibited imports such as foodstuffs, SARS is going to be more successful at our points of entry. Especially to be feared are the dogs (canine varie-ty) working for SARS and other outfits.

Going GREEN Thus it could become an increasingly bad idea to try and avoid duty and VAT on your holiday pur-chases by sailing insouciantly through GREEN.

Going RED Yet is it safe to go through RED and divulge your address, your absence from home and your pos-session of desirable goods? Allegations have been made in the past about syndicates using such in-formation (60 TSH 2008), and then there was the Abigail Chiwara cause célèbre (60 TSH 2001, 61 TSH 2008. This led, I’ve always believed, to the temporary demise of the DA 331 travellers’ form.

My personal theory about life in SA attributes the success of both the road-accident-recovery indus-try and many types of crime to an informal, nation-wide network of incentivized informers.

You can be cycling, for example (based upon a true story), on a deserted road in the middle of nowhere, with not a soul in sight, dismount for a pee, and miraculously witness, while thus diso-bliged, the materialization, out of the ether, a gang of tsotsis intent on liberating your bike.

How it works, I surmise, is that a car passes, an occupant spots the opportunity, and relays it to the gang—or, for all I know, the gang’s call centre in the Union Buildings.

This phenomenon has yet to be accommodated by economists believing that cell phones are en-gines of economic growth.

FedEx it In any event, the alternative to bringing your good-ies back home with you and declaring them is to FedEx them home, as the Americans would put it.

And it is in this channel that I have stumbled across some very disturbing intelligence indeed.

It all started when someone complained to me about the inordinate duty demanded by a courier company to clear offshore holiday purchases of glassware and cutlery, having been informed by the EU retailers concerned that such items are duty free in SA.

Using the Legal & Policy division of SARS’s excel-lent web-based access to the schedules to the Customs and Excise Act, I was quickly able to con-firm that such items are indeed duty free.

Yet repeated interactions with the courier com-pany yielded nothing but insistence that SARS was demanding the duty. Finally, the importer spoke directly to a SARS official, ultimately mentioning, ahem, my name. Suddenly, the problem was re-solved, and the goods were entered duty free, sub-ject only to VAT.

Then I spoke to one of SA’s best businessmen, who regularly imports high-value duty-free items for his business. He told me, altogether nonchalantly, that SARS officials regularly insist on the payment of duty on such items, and his staff regularly have to argue the issue, to the point where the law is finally applied and the duty-free rate applied.

What I want to know is: cui bono?



Share‐incentive trusts & the dividends tax—memo to the Treasury

Accessing the law Attached is a partially completed consolidation of the dividends tax law [well, it was attached to the original memo, which has been received without comment, so far, by Keith Engel (National Treas-ury)].

To update the consolidation since Act 24 of 2011, took about a working day.

Without such a consolidation, it is impossible to judge the impact of the amendments—even though the great majority of amendments is already effec-tive.

Such a consolidation is not commercially availa-ble at this stage, for obvious reasons, including the fact that bills have yet to become acts, and the National Treasury has yet to effect its expected silent and illegal amendments during that process.

Yet it is obvious that the National Treasury pos-sesses such a consolidation. In fact, it must be in possession of more than one such consolidation, since it amends the law successively, with differing effective dates, both in the past and the future. The question arises why the National Treasury does not make such consolidations available. (Answer: it continues to amend right up past the very last legal moment.)

In order to compile this consolidation, I had to consult the following documents:

Act 13 of 2012. ‘Schedule 1’ (there is no Schedule 2) to Act 24

of 2011. Proclamation 51 of 14 September 2012. The Tax Administration Laws Amendment Bill,

2012. The Taxation Laws Amendment Bill, 2011.

There has never been a time in SA tax history, since 1910, when amendments had so many sources.

Amendments to amendments Part of consulting this last document involves an assessment whether any past amendments to the dividends tax have been amended in the amend-ments to amendments section commencing with s 156.

If anyone knows a quick way to do this, please let me know.

Legislative history of the dividends tax Here is the legislative history of the dividends tax:

2009 Revenue Laws Amendment Act 60 of 2008

and amended by 2009 Taxation Laws Amendment Act 17 of 2009

54 amendments 2010 Taxation Laws Amendment Act 7 of 2010

67 amendments 2012 Taxation Laws Amendment Act 24 of 2011

24 amendments 2012 Rates and Monetary Amounts and Amend-

ment of Revenue Laws Act 13 of 2012

1 amendment 2012 Tax Administration Act 28 of 2012

10 amendments 2012 Taxation Laws Amendment Act ?? of 2012

41 amendments

In other words, since it was first drafted, it has un-dergone 197 amendments.

Achieving accuracy Of course, until I can check my work with that of commercial publishers, I have no idea how accu-rate my consolidation is. First, I myself might have made a mistake, and, secondly, my OCR-conversion software might have made a mistake. Why does the National Treasury not make legislation availa-ble in Word form?

The drafting style Here are some typical examples of the drafting style employed:

[§64J(2)] (a) the amount by which the dividends accrued to that

company as contemplated in section 64B(3) dur-ing the dividend cycle ending on the day immedi-ately before the effective date, determined without regard to any dividend contemplated in sec-tion 64B(3A), exceed the dividends declared dur-ing that cycle by that company as contemplated in section 64B(2); and

[§64J(7)] (7) To the extent that any amount of dividends tax is

not withheld by any person from the payment of any dividend by that person as a result of an inaccurate no-tification provided as contemplated in [s 64J(1)(b)] by the company contemplated in that subsection [s 64J(1)(b)], the company contemplated in that sub-section [s 64J(1)(b)] is liable for that amount of divi-dends tax.

Does anyone understand the dividends tax? I would be astonished if anyone in the land has the faintest idea how the dividends tax is meant to work, partly because of the insane amendment programme and partly because of the undergradu-ate legalese and utter unfamiliarity with the princi-ples of legislative drafting.

Treasury’s ambition to rewrite the entire act On the basis of its experience with this new tax, where it had ample time and the whole world to consult, it is a complete mystery to me why the National Treasury might for a minute think that it is competent to rewrite the entire act or that any ad-vantage would possibly be gained by such an ex-ercise.

ON TRUSTS & THE DIVIDENDS TAX

Beneficial owner ‘[B]eneficial owner’ means the person entitled to the

benefit of the dividend attaching to a share;



‘Entitled to’ means to own, have a claim for, en-joy a right to claim transfer. ‘The benefit of’ means to own beneficially. A trustee, save in a bewind, owns, but no trustee ever owns beneficially.

In a bewind, the beneficial owner will be the beneficiary.

Who is the beneficial owner in an ordinary trust? In the unusual event that a beneficiary enjoys a vested right under the deed of an ordinary trust to the trust’s dividend income, that beneficiary will be the beneficial owner.

Role of s 25B of the Income Tax Act Section 25B has a limited role to play, since it con-stitutes a deemed-accrual provision, not a deemed-entitlement or deemed-ownership provision.

No one is liable! The only way a ‘dividend’, retaining its nature, can pass into the beneficial ownership of a discretion-ary beneficiary of an ordinary trust is if the trustees make a real-time distribution in that beneficiary’s favour, thus (incidentally) invoking s 25B(2). The beneficiary becomes the beneficial owner only from the date of a valid, qualifying distribution.

A cash dividend paid to a discretionary trust thus finds no one liable under s 64EA(a).

If a company is a discretionary beneficiary of its own share-incentive trust, it thus cannot be liable for the tax, and has no need of the s 64F(1)(a) ex-emption.

Yet the dividends tax is levied by s 64E(1). Under s 64E(1), the dividends tax is levied when it is paid. Section 64E(2) constitutes a disguised definition of the concept of paid.

And s 64G(1) requires the company to withhold the dividends tax. Since there is no beneficial own-er, there can be no s 64G(2) declaration.

If the definition were repaired But say that the definition of a ‘beneficial owner’ is amended so as to repair its deficiencies, by a ref-erence to accrual rather than entitlement. The trus-tees of a share-incentive trust could then make a distribution to the company ahead of the payment of a dividend by it.

Company’s own dividend taxed as income! But, by virtue of s 10(1)(k)(i)(ee), read with the s 64F(l), their exercise of their discretion will result in the company’s paying normal tax on its own divi-dends, paid out of profits that have borne the nor-mal tax!

Popular solution The solution apparently being adopted by many firms is to amend their share-incentive trust deeds to make the company the vested beneficiary of the dividends on any shares not allocated to employ-ees. This shields against both the dividends tax and the normal tax. Note that this operation does not amount to a cession (s 64EB).

Samsung, Windows 8, Office 2010—don’t try this at home

In preparing this issue, I was afflicted with full-time access to a brand-new Samsung, Series 7, ‘all-in-one’, touch-screen desktop computer (about R15 k) running Windows 8 Pro (I had to upgrade; about $70), with Office 2010 Professional (ditto; about $400), which is reportedly soon to be re-placed (free to very recent purchasers; alternative-ly, I got 2010 free, and will have to pay later—my memory of this vexed period is blurred) with the 2013 version.

The computer is great for the social-media gen-eration; the display is unbelievably good, it plays music beautifully, will probably astonish you with its picture-quality if you use it to play DVDs, & will do more than justice to your holiday snaps or, doubt-less, your pornography collection. As a piece of furniture, it is stunning. But it’s s-l-o-w…v-e-r-y s-l-o-w, thanks largely to a conventional Seagate (love the brand) hard drive, which drags down the overall performance of what might have been a fine ma-chine.

As it is, with the need to download and install the many, large programs I use, even with welcome assistance (Darren Kelly; no relation), I spent much more than two weeks struggling to get the machine ready for serious work.

And I also had to buy and attach two USB hubs, because the built-in connections are inaccessible. The wireless keyboard and mouse, on the other hand, are the best I’ve used, and the James-Bond-style, concealed DVD drive is terrifically cute.

As for Windows 8, it is impossible while Win-dows 8 Pro is merely a bitch to network. I simply could not replicate networking outcomes from one attempt to another, and am still, three weeks down the line, seeking solutions.

Both operating systems are much slower to start up than Windows 7. A huge problem, at least with Pro, is that it unreliably brings the latest window to the front, and inexorably leaves error-messages at the very back of open windows, so you end up with hidden dialogues while you sit and wonder why nothing is happening.

I immediately bought Start8 so as to get rid of the damn-awful, iPad-like, touchy-feely abomination comprising the (eventual…yawn!) principal inter-face-screen and revert to a traditional Windows start-screen lookalike.

My impression is that the OS is clunky, although the old-fashioned HD might be the real culprit. Us-ing a Cell© dongle (which takes up the room for two USB ports!), internet sessions are painful, and, to my gobsmacked befuddlement, you cannot buy airtime online.

As for Office 2010, I have to cast aside all mod-esty and reveal (neither for the first nor the last time) that I am a truly world-class MS Word nerd (and, ahem, on that account, a member of the Computer Society). I have spent hundreds of hours on customization and templates in MS Word 2003, so I was able, although by no means quickly, to adapt to the also-clunky MS Outlook and, I’ll go so



far as to say, very much improved MS Word. Alas, for ordinary users—fuhgeddaboudit. But, I sup-pose, they in any event aspire to access no more than about 1% of the program’s functionality.

Naturally, my Word styles did not transition suc-cessfully, so I had to check and modify all of them (this could be a big job with my full template), and my initial hopes that this new Word would be more stable in the matter of styles than Word 2003 proved futile. (As always, it’s the bullet styles that degenerate first, perhaps because I don’t use List styles.)

Annoyingly, on the ribbon, you cannot prevent

styles from listing in their fonts; screen real estate thus being wasted. On the other hand, the perma-nently available Styles Window achieves in a flash and far more conveniently what I used laboriously to create by way of customized toolbars. The worst mistake, I think, was not to stick more closely to the old tabs (File, Edit and so on). Nevertheless, you soon get used to the new arrangement. I’m grow-ing to like it…OK…very much.

For real work, a touch screen is not only stupid but essentially impractical. And there is no way I am generally migrating to Windows 8. In my next life, rather, I hope to return as an Apple user.

The SCA on the advocate‐attorney‐client relationship (& VAT)

The partially dissenting judgment of Wallis JA (Leach JA concurring in The General Council of the Bar of SA v Geach & Others (277/12; 273/12; 274/12; 275/12; 278/12; 280/12; 281/12) [2012] ZASCA 175 (29 November 2012) (116 TSH 2012) includes a passage on a subject of particular importance (footnotes suppressed):

The fact that advocates look to their instructing attor-ney for payment of their fees does not affect this. The payments the attorney makes for those services are disbursements and the attorney does not charge VAT on those disbursements. If the advocate does not charge VAT the attorney’s account to the client does not include VAT in respect of that service. The same is true in relation to other disbursements. The attorney is not concerned with whether the person to whom dis-bursements are made is charging VAT. They may after all, like many advocates, have earnings that are below the threshold for registration and charging of VAT. The attorney recovers whatever amount has been charged for the services in question whether or not the fee in-cludes VAT and does not himself add VAT if none has been charged. In the result there is a clear loss to the revenue if the advocate is obliged to charge VAT and does not do so. In addition, in terms of s 61(1) of the VAT Act, the client may be required by SARS to pay the unpaid VAT once the failure to collect and pay it over is discovered. In common parlance this is described as a fraud on the revenue. It is probably a fraud in law as well, but that is irrelevant. What is important for present purposes is that it is fundamentally dishonest.

Under s 2 of the Right of Appearance in Court Act 62 of 1995, an advocate acts on behalf of the client and so renders services to the client, and thus not to the client’s attorney. As I noted in 57 TSH 2007, I understand that there are numerous cases confirming this principle.

On the other hand, in Serrurier & Another v Kor-zia & Another 2010 (3) SA 166 (W), cited by Wal-lis JA in Geach, Jordaan AJ said that:

Counsel is not allowed in terms of his ethical rules to receive instructions or payment from a client. General Council of the Bar of South Africa v Van der Spuy [1999 (1) SA 577 (T) at 597H]; and De Freitas and An-other v Society of Advocates of Natal and Another

2001 (3) SA 750 (SCA) (2001 (6) BCLR 531). These two cases illustrate that an advocate will be suspended from practice even if he is not subject to the rules of the General Bar Council and even if the constitution of his own professional body allows receiving instructions and payment from members of the public.

In 57 TSH 2007, I cited Price Waterhouse Meyernel v The Thoroughbred Breeders Association of South Africa 2003 (3) SA 54 (SCA), in which attorneys had disbursed fees payable to advocates and claimed payment, plus VAT. The Taxing Master was found to be wrong in refusing to decide whether the inclu-sion of VAT was proper.

Serrurier involved two counsel on one side and an attorney and her client on the other. The issue: who was liable to pay counsel’s outstanding fees, when counsel has to be briefed by an attorney?

If the client pays the attorney who fails to pay counsel, apart from other consequences, said Jordaan AJ, the fidelity fund would probably pay counsel.

The usual situation is that the attorney pays counsel, while the client pays the attorney.

But in Serrurier there was an express agreement between counsel and the attorney that she, the attorney, would be liable for the fees. The facts thus settled the matter.

Yet Jordaan AJ chose not to leave well enough alone, expressing the view that, even in the ab-sence of an agreement, the attorney would be lia-ble:

The decision of Bertelsmann v Per [1996 (2) SA 375 (T)] has been misunderstood by some as being to the effect that an attorney is not liable to pay counsel’s fees. That is not what the decision says. All that it says is that it cannot be accepted as law that an advocate has to be paid by his attorney. Such a practice has to be proved by evidence.

…. …. However, in my view, in this case there was clearly

evidence of a trade usage amongst advocates and at-torneys.

Jordaan AJ’s reasoning went like this:

4. If there is not an express agreement between coun-sel and attorney the necessary implication is there-



fore that it can never be an implied term of the agreement that counsel look to the client to pay his fees.

5. Counsel will not be permitted to conclude an ex-press agreement that his fees be paid by anyone else than his attorney.

6. It therefore in my view follows logically that an attor-ney will always in our law be liable for counsel's fees, even in the event of the client not paying him. It seems to me however that I am bound by the deci-sion of Bertelsmann v Per (supra). As I have stated, I am satisfied that the requirement in that judgment, that evidence must be led to prove the existence of a professional practice or trade usage, was satisfied.

By this stage you could make some massive in-come tax and VAT mistakes, so, please, reread what Wallis JA said in Geach. Counsel earns a fee from and makes a supply to the client, who even-tually will have to stump up. The imposition of the fee is on the client. Its incidence, on the other hand, is on the attorney, who pays it by way of a disbursement—that is, as an agent of the client.

The attorney does not return payment by the cli-

ent either as income or as an output. Wallis JA’s next paragraph goes like this:

For the sake of completeness I deal also with the situa-tion where the advocate, who is a VAT vendor, charges on an inclusive basis. VAT is then included in the fee. The default position where no election is made or where the vendor does not register is that the amount charged is deemed to be inclusive of VAT. One does not avoid that by not registering to pay VAT. Mr Geach was liable to charge VAT. He did not claim VAT from his clients over and above his fees. His fees were accord-ingly VAT inclusive, a matter specifically drawn to the attention of his counsel. As a matter of law he collected VAT as part of his fees and should have accounted to SARS for that VAT. The effect of his nonregistration was to avoid the payment of VAT to SARS. Whichever way one looks at Mr Geach’s behaviour it was dishonest and involved a loss to the fiscus.

One last shock: none of this analysis is relevant to attorneys (and counsel) acting on a contingency basis, which is the reason I have demonstrated such a seeming obsession with contingency fees (104 TSH 2011, 113, 114, 115, 116 TSH 2012).

My nice letter to SARS on VAT ‘variances’

Particularly—or perhaps only—when you are due a refund, on average about two minutes after you have filed your VAT 201 return, you receive from SARS a form letter, now supposedly skillfully updat-ed so as to accommodate the advent of the Tax Administration Act (101 TSH 2011, 103 TSH 2011).

I have had the pleasure of drafting a few sug-gested responses on behalf of vendors but am not always sure that they have found the courage to use them. This is the reason why I have penned a milder response, which you might feel able to use:

A close analysis of your form letter reveals that the ‘variances’ referred to in its second paragraph refer-ence nothing more remarkable than the fact that the figures supplied for the preceding period differ from those of the reporting period. These are not ‘variances’ but a fact of life.

Its third paragraph is insanely insulting, since why would we be inclined to check the very return that we, ourselves have submitted, and on such an absurd ground? We would be checking identities, that is, whether ‘A’ is indeed ‘A’, and ‘B’ is ‘B’. We are happy to assure you that, at least in our world, these great truths endure, and that our VAT 201 declaration agrees to our records for the period under review!

It must follow that its fourth paragraph cannot possi-bly represent a proper application of administrative dis-cretion, since, following on what has preceded it, it ef-fectively requires every recipient (that is, every vendor in the land whose figures for one period do not exactly match those of the immediately preceding period—in other words, every vendor in the land) to submit the in-formation requested. It would be greatly instructive to see how a court would respond to such abusive non-sense, especially if there is any correlation between the issue by SARS of this form letter and the claiming by

its recipients of refunds. But even if it did, the fifth paragraph must surely fail

the standards of administrative discretion, for the fol-lowing reasons: It is altogether obscure. What, for example, is an

‘output tax schedule’? A list of every output? In our business we probably have [thousands/mil-lions/scores of millions] of individual outputs. What are ‘transactional documents’? What are ‘sales’ in relation to the VAT law?

It is impossible of performance. For example, all of our documents relating to capital expenditure might have to be delivered by [truck/railcar]. What would be our ‘transactional documents’ showing an in-crease or decrease in sales? How would we show, for example, on a documentary basis, why recipi-ents acquired more/fewer goods and services from us in one period as compared with another? Should our recipients be asked to explain, in writing, per-haps in duplicate, their habits of acquiring supplies? And, then, what about ‘inventory’, which is presum-ably a reference to ‘goods’ acquired but not sold? As far as we are aware, there is no requirement in the VAT law to keep a record of goods on hand. In any event, how would we present documentary evi-dence of why and how the level of goods on hand changed from one period to another?

But it is its second-last paragraph that is the most outrageous, in that it threatens criminal sanctions for noncompliance with a palpably unconstitutional, perhaps even criminal, request for information.

It is obvious that this form letter represents a meaning-less delaying tactic, probably designed to delay the payment of refunds due and payable in law.

We refuse to reply to it in its terms, and ask you to send a copy of this reply to your head office, with an additional copy to Mr Mark Kingon personally.

Feature Supplement to 117Tax Shock Horror 2012

Cases

December 2012

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

by Julian Ware © 2012 J Ware ([email protected])

Capital v Revenue— Compensation & VAT— Zero-rated supply Stellenbosch Farmers’ Winery Ltd v CSARS

Supreme Court of Appeal (2012)—74 SATC 235 (judgment delivered by Kroon AJA; Brand JA, Van Heerden JA, Tshiqi JA & Boruchowitz AJA concur-ring): The taxpayer, a liquor wholesaler, voluntarily entered into a termina-tion agreement with a nonresident party and so surrendered the remain-ing portion of a limited-period exclusive distribution right. The proceeds of R67 million, received during 1999 under the agreement, were rightfully held to be capital in nature, since the taxpayer was not a trader in distribu-tion rights. Furthermore, there was no change of intention by it to embark upon a scheme for profitmaking. An amount received from a nonresident for the termination of an exclusive distribution right is a zero-rated supply, since it is not immovable property under s 11(2)(l) of the Value-Added Tax Act. In an obiter remark, the court concurred with the tax court that the place where the debtor resides determines the situs of a right, which, on the facts, was outside the Republic. Luckily, judicial sanity prevails.

Tax incidence— damages computation / Barclay v / Road Accident Fund

Western Cape High Court (2011)—74 SATC 253 (judgment delivered by Blignault J): This is not a tax case. When it comes to computing the quan-tum of a damages claim, notional income tax should not be deducted from a gross notional earnings calculation but it must be considered when a net after-tax discount rate to be applied is determined. Since the court was not in a position to determine an appropriate rate, it made what it considered to be a fair and reasonable award to the claimant.

‘Exit’ tax— CGT CSARS v Tradehold Ltd

Supreme Court of Appeal (2012)—74 SATC 263 (judgment delivered by Boruchowitz AJA; Nugent JA, Cachalia JA, Malan JA & Tshiqi JA concurring): The case represents, at best, a monumental stuff-up by counsel for SARS. It seems that counsel failed to argue—or argue adequately—and the court did not consider para 13(1)(g)(i) of the Eighth Schedule to the In-come Tax Act, which, when read in conjunction with paragraphs 12(1) and 12(2), deems taxpayers who cease to be residents of the Republic to have disposed of their assets at market value and to have immediately reacquired them at the same value the day before they cease to be resi-dent. The taxpayer convinced the court that, under the provisions of a tax treaty, read together with domestic tax law as enacted before an amend-ment, that it was not liable for CGT under the deemed-disposal rules. Lucky taxpayer! As officers of the court, did a duty not rest upon counsel for the taxpayer to point out para 13(1)(g)(i) to the court? Perhaps they did and the court ignored it!

Tariff classification— customs & excise Distell Ltd v CSARS

Supreme Court of Appeal (2012)—74 SATC 272 (joint judgment by Navsa JA & Van Heerden JA; Heher JA concurring): As the court a quo had decided, distinct liquor-based beverages prepared from fermented wine stripped of its flavour and taste and fortified with other alcoholic spir-its, flavours, colourants and sweeteners are not wines under excise duty classifications. Decisions of the European Court of Justice are not binding upon South Africa courts but are of persuasive value, and it is up to the courts to determine their relevance.

t s h

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Feature Supplement to 117 Tax Shock Horror 2012

Briefing

December 2012 Medical expenses—a mess of complexity

by Michael Stein © 2012 M L Stein ([email protected])

Current position In the current (2013) tax year the Income Tax Act allows two forms of relief for medical expenses. First, there is a deduction from income under s 18 for qualifying expenses, subject to limit, which are more generous for taxpayers entitled to the over-65 rebate or with a family member suffering from a disability. Then there is the medical-scheme-fees tax credit under s 6A, which is a rebate that is de-ducted from the normal tax payable.

Under the current law, taxpayers aged 65 or over deduct their contributions to medical schemes and other medical expenses in full under s 18 and so do not qualify for the s 6A rebate.

Amount of rebate The rebate under s 6A is based on medical-aid contributions paid. In the 2013 tax year it is R230 a month for benefits to the taxpayer alone, R230 extra for the first dependant, and an additional amount of R154 for each additional dependant.

And the deduction under s 18 allows taxpayers who are at least 65 years old to deduct their medi-cal-aid contributions and other medical expenses in full. Younger taxpayers with a family member with a disability deduct their medical expenses in full but may deduct only so much of their medical-aid con-tributions as exceeds four times their s 6A rebate.

Taxpayers under 65 years with no family mem-bers with a disability calculate their potential de-duction in the same way as those with a family member with a disability but then limit their deduc-tion to the amount by which the calculated potential deduction exceeds 7,5% of their taxable income (as determined to the exclusion of privileged re-tirement fund lump-sum benefits and severance benefits and before the deduction under s 18).

The future All this law is set to change as from 1 March 2014, that is, in the 2015 year of assessment.

First, s 18 is expected to be scrapped, with the result that there will be no deduction for medical-aid contributions and other medical expenses in the determination of taxable income.

Secondly, taxpayers aged 65 years or more or with a family member with a disability will qualify for the s 6A rebate on the same basis as anyone else.

But a new rebate is to be introduced, which will be more generous to the aged and disabled.

The new rebate While the s 6A rebate will continue to apply, but may well be increased, a new rebate, the additional medical expenses tax credit, will be introduced as s 6B. The amount of the s 6B rebate is determined as follows when the person is over 65 or has a disabled family member. It is the aggregate of

33,3% of so much of the amount of the medical-aid contributions paid by the person during the year as exceeds three times the amount of the s 6A rebate to which he or she is entitled; and

33,3% of the amount of qualifying medical ex-penses paid by the person during the year of assessment.

When a person aged under 65 years with no family member with a disability is involved, the s 6B re-bate is so much of the aggregate of

25% of so much of the amount of the medical-aid contributions paid by the person during the year of assessment as exceeds four times the amount of the s 6A rebate to which he or she is entitled; and

33,3% of the amount of qualifying medical ex-penses paid by the person during the year of assessment,

as exceeds 7,5% of the person’s taxable income for the year of assessment (excluding retirement fund lump sum benefits and severance benefits and the s 18 deduction).

Qualifying medical expenses The term ‘qualifying medical expenses’ is de-fined for the purposes of s 6B as

any amounts (other than amounts recoverable by a person or his or her spouse) that were paid by the person during the year of assessment to a duly registered medical practitioner, dentist, optometrist,

homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopedist [sic] for professional services rendered or medicines supplied to the person or any of his or her dependants; or

nursing home or hospital or a duly registered or enrolled nurse, midwife or nursing assis-tant (or to a nursing agency for the services of such a nurse, midwife or nursing assistant) in respect of the illness or confinement of the

December 2012


person or any of his or her dependants; or pharmacist for medicines supplied on the

prescription of a person mentioned in the first bulleted item above for the person or his or her dependants;

any amounts (other than amounts recoverable by a person or his or her spouse) paid by the person during the year of assessment for ex-penditure incurred outside the Republic on ser-vices rendered or medicines supplied to the person or any of his or her dependants that are substantially similar to the services and medi-cines for which a deduction may be made under the bulleted items immediately above; and

any expenditure prescribed by the Commission-er (other than expenditure recoverable by a per-son or his or her spouse) that is necessarily in-curred and paid by the person during the year of assessment in consequence of any physical im-pairment or disability suffered by the person or any of his or her dependants.

‘Dependant’ A ‘dependant’ is defined for the purposes of s 6B as

a person’s spouse; a person’s child and the child of his or her

spouse; any other member of a person’s family for whom

he or she is liable for family care and support; and

any other person who is recognized as a de-pendant of the person under the rules of a quali-fying medical scheme or fund at the time the medical-scheme contributions were paid, the amounts contemplated in the first two main bul-leted items of the definition of ‘qualifying medi-cal expenses’ (see above) were paid or the ex-penditure contemplated in the third main bullet-ed item of that definition was incurred and paid.

‘Child’ For the purposes of s 6B a ‘child’ means the per-son’s child or the child of his or her spouse who was alive during any portion of the year of assess-ment, and who on the last day of the year of as-sessment was unmarried and was or would not, had he or she lived, have been

over the age of 18 years; over the age of 21 years and was wholly or par-

tially dependent for his or her maintenance upon the person and has not become liable for the payment of normal tax for the year; or

over the age of 26 years and was wholly or par-tially dependent for his or her maintenance upon the person and has not become liable for the payment of normal tax for the year and was a full-time student at an educational institution of a public character.

The definition of a ‘child’ also includes any other child who was incapacitated by a disability from maintaining himself or herself and was wholly or partially dependent for maintenance upon the per-son and has not become liable for the payment of normal tax for the year.

‘Disability’ The term ‘disability’ is defined for the purposes of s 6B as a moderate to severe limitation of a per-son’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment, if the limitation has lasted or has a prognosis of lasting more than a year and is diagnosed by a duly registered medi-cal practitioner in accordance with criteria pre-scribed by the Commissioner.

Examples of s 6B Over-65 or disabled family member Say a man with no dependants pays medical-aid contributions of R2 190 a month and other qualify-ing medical expenses of R36 000 during the year. His rebate under s 6B would be determined a fol-lows:

Medical-aid contributions for year R26 280 Less: Three times s 6A rebate (3 x 12 x 230) 8 280

Excess R18 000 33,3% R5 994

Plus: 33,3% of qualifying medical expenses 11 988

Section 6B rebate R17 982

Under-65 Say a man with no dependants pays medical-aid contributions of R2 000 a month and other qualify-ing medical expenses of R24 000 during the year. His taxable income is R150 000. His rebate under s 6B would be determined a follows:

Medical-aid contributions for year R24 000 Less: Four times s 6A rebate (4 x 12 x 230) 11 040

Excess R12 960 25% 3 240

Plus: 25% of qualifying medical expenses 6 000 R9 240

Less: 7,5% of taxable income 11 250 Section 6B rebate RNil

The rebate is set to become effective as from the 2015 year of assessment and the current s 18 de-duction for medical expenses is set to be repealed from that year. But when it comes to tax laws, our authorities have clearly demonstrated that there is many a slip twixt cup and lip!

t s h


---------------------------

Davey’s Locker

December 2012 QROPS Qualifying recognized overseas pension schemes

by Tony Davey © 2012 A H Davey ([email protected] www.tonydavey.com)

SARS recently published a bind-ing private ruling on the tax con-sequences arising from a trans-fer of a foreign pension fund interest to an RSA retirement annuity.

Qualifying criteria In essence, in terms of UK tax laws known as QROPS, you may transfer your UK pension, free from UK tax to an oversea re-tirement fund approved by the UK authority as a QROP, provided that:

Membership is of a personal pension fund and not an em-ployer fund, being, in other words, similar to an RSA re-tirement annuity.

The member will be a non-UK-resident for five years.

The member has not yet pur-chased a UK annuity.

Tax benefits No UK tax on the member’s

pension benefit. No RSA tax upon transfer to

the RSA retirement annuity, although only upon retire-ment, death before then or withdrawal.

The transfer amount will rank for the usual s 11(n) tax de-duction, to a maximum cap of 15% of taxable income. The balance may be carried for-ward and deducted on a year-by-year basis as above and any residue ultimately set off against the retirement lump-sum benefit or, in future, the annuity (112 TSH 2012).

Upon retirement the usual tax treatment of a retirement an-nuity will apply, namely, the commuted lump sum will rank for the R315 000 tax-free al-lowance and the balance will be taxed at the concessional retirement-tax table, with the annuity portion being fully taxable.

Conclusion Exchange rate issues aside, the relative tax treatment and rates of the respective countries vis-à-vis the fund member is the de-ciding factor for a returning resi-dent or immigrant on whether to avail yourself of a QROPS.

t s h


Shortcut Keys in Word by Duncan S McAllister ©2012

December 2012

Header & footers

There is quite a lot to headers and footers but here I deal with two issues only. The first is how to ac-cess the header and footer area using shortcut keys, while the second is how to insert different chapter headings in the header area.

Accessing the header or footer area Word 2003: alt, V, H will take you to the header area. To get to the footers just use the down arrow. This key sequence also acts as a toggle switch, which you can use to get you back to the main document window. It also works in Word 2007 and 2010 and is easy to remember (V for View and H for Header)

Word 2010: alt, N, H, E (Headers) or alt, N, O, E (footers).

Inserting different chapter headings In order to insert different chapter headings in your document you will need first to separate each chapter by inserting a section break (next page) at the end of each chapter. This type of section break will insert a section break and then start the next section on the next page. To insert the break press:

Word 2003: alt, I, B, N, enter.

Word 2007/2010: alt, P, B, N.

Next, press alt, V, H (or the Word 2010 alternative) and type the first chapter heading, say ‘Chap-ter 1—Introduction’ in the header area of that chap-

ter. Once you have done that, down-arrow to the

header area of Chapter 2. You will notice that it already contains a reference to Chapter 1. This is because Word automatically links the current sec-tion to the previous one and in the process repeats the contents of the header of the previous section.

Before changing ‘Chapter 1’ to read ‘Chapter 2’ you must break the link to Chapter 1. If you fail to first break the link, you will end up changing the header of the previous section—in other words the header of Chapter 1 would read ‘Chapter 2’ be-cause the linking works both ways.

To break the link to Chapter 1, while in the head-er area of Chapter 2 press alt, J, H, K (Word 2010).

Now you can change ‘Chapter 1’ to read ‘Chap-ter 2’, and it won’t affect the header in Chapter 1.

Repeat the process for subsequent chapter-headings. To avoid confusion, it might in fact be better to remove all the linking from the header area of each section before typing any headers. This will prevent you from inadvertently changing earlier chapter headings and repeating the infor-mation in subsequent chapters.

To copy the header or footer of the previous sec-tion into the current one, press alt + shift + R.

In Word 2010, to remove a header use alt, N, H, R and a footer alt, N, O, R.

t sh


December 2012

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

Improperly obtained evidence: seizure of documents under an in-valid search warrant (a tax-related case)

by Andrew Paizes © 2012 A Paizes ([email protected])

What if a case against you de-pends on the admissibility of documents seized by the police from your premises following the issue of a search warrant that is not valid? Is evidence of this kind admissible, or does it fall foul of the constitutional ban in s 35(5) of the Constitution, which re-quires the exclusion of evidence obtained in a manner that violates any right in the Bill of Rights ‘if the admission of that evidence would render the trial unfair or otherwise be detrimental to the administration of justice’?

In S v Van Deventer & another 2012 (2) SACR 263 (WCC) the ap-pellants had been convicted by the trial court of 767 counts of fraud and also of contravening the Value-Added Tax Act of 1991.

Much of the evidence against them consisted of documents, mainly invoices, seized at the home of the second appellant in terms of a warrant issued by the High Court under the Income Tax Act of 1962 (which, in this re-spect, was virtually identical to the corresponding provisions of the Value-Added Tax Act). In an appeal against the convictions, the appellants argued that the search and seizure warrant was invalid, in that it had been issued under the wrong statute (the In-come Tax Act, instead of the Val-ue-Added Tax Act), given that the convictions were based on con-

traventions of the Value-Added Tax Act and not the Income Tax Act. The evidence was, accord-ingly, inadmissible, it was argued, and the convictions had to be set aside.

The court of appeal rejected the argument that the warrants were invalid. It went on, however, to consider what the position would be if they were invalid and the seizure of the invoices was, therefore, unlawful. In its view, there were a number of factors in the case which supported the conclusion that the admission of the evidence would not be unfair to the appellants or otherwise detrimental to the administration of justice. In reaching this conclu-sion Blignault J (with whom Sal-danha J agreed) relied heavily on the analysis of improperly ob-tained evidence by the Supreme Court of Appeal in S v Tandwa & others 2008 (1) SACR 613 (SCA), where it was held that:

Evidence must be excluded in all cases where its admission is detrimental to the admin-istration of justice, including the subset of cases where it renders the trial unfair.

In determining whether the trial is rendered unfair, courts must take into account com-peting social interests: rele-vant factors ‘include the sever-ity of the rights violation and

the degree of prejudice, weighed against the public policy interest in bringing crim-inals to book’.

Rights violations are severe ‘when they stem from the de-liberate conduct of the police or are flagrant in nature’. There is a ‘high degree of prejudice when there is a close causal connection be-tween the rights violation and the subsequent self-incriminating acts of the ac-cused’. On the other hand, rights violations are not severe if the police conduct was ‘ob-jectively reasonable and nei-ther deliberate nor flagrant’.

In determining whether the admission of the evidence would be detrimental to the in-terests of justice, the central feature is the public interest. In this respect, there must be ‘a balance between, on the one hand, respect (particularly by law enforcement agencies) for the Bill of Rights and, on the other, respect (particularly by the man in the street) for the judicial process’. Overempha-sis of the former would lead to acquittals on what the public would see as ‘technicalities’; while overemphasis of the lat-ter would lead to a dilution, or, even, negation of the Bill of Rights.

December 2012


In Van Deventer’s case, there were four factors that impelled the court to incline towards the reception of the evidence: The first was that the evidence was obtained without any compelled participation by or conscription of the appellants. In Tandwa the court had pointed out that the distinction between testimonial evidence (such as an admission or a confession) and real evi-dence (such as a murder weap-on, a set of fingerprints or a pho-tograph), which had been relied on by courts in the past in such cases, was not as helpful or as significant as the question whether the accused had been compelled to provide the evi-dence. In this case there was clearly no such compulsion.

The second factor was that the violation of the appellants’ rights was of a technical nature and not flagrant at all. The warrant itself

was lawful; the relevant provi-sions of the Value-Added Tax Act were identical to those of the Income Tax Act; the appellants were not prejudiced in any way by the omission of the reference to the Value-Added Tax Act in the warrant; and the South African Revenue Service derived no benefit from what was, in effect, a mere mistake.

The third factor was that the tax officers acted bona fide. There was nothing in the evidence to indicate bad faith on their part.

The fourth factor was the so-called ‘no difference principle’: if the evidence would in any event have been discovered by lawful means, its exclusion would gen-erally be detrimental to the ad-ministration of justice. In this case, the relevant invoices would have been discovered if a lawful warrant had been issued and the appellants could not have done

anything lawful to prevent it. The court concluded, as a re-

sult, that the evidence would have remained admissible even if the warrants were unlawful as alleged by the appellants.

It is difficult to find fault with this conclusion. Cases like this are often difficult to decide, since judicial precedent is often of little assistance, and the standards set out in s 35 are difficult to define and apply.

Fairness is a notoriously slip-pery concept, and detriment to the administration of justice is very difficult to articulate or quan-tify.

But, however one defines these terms, it is not easy to ap-preciate how the reception of the evidence in this case could be perceived as being either unfair to the appellants or detrimental to the interests of justice.

t s h

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The Practice Manager

December 2012 by Eric Milner

© 2012 E Milner ([email protected])

SARS: sometimes what you have is not so bad The grass always appears greener on the other side. This perception is never more true than when the topic is our local branch of the Mafia, otherwise known as SARS. As has become a South African custom, no braai is complete without somebody regaling all with the virtues of foreign governments and how efficient they can be.

Nevertheless, the tendency is to acknowledge the efficiency of SARS (a mistake, but understanda-ble among those easily influenced by good adver-tising), while complaining about the use to which the tax is put.

To experience a singular divergence from this tradition, attend a gathering of tax professionals, who uniformly complain about SARS, with, I must add, good reason—try getting a tax clearance when the SARS computer is having a bad day!

Nonetheless, there are definite advantages to liv-ing in a country with a solid majority in the National Assembly and the will to collect taxes. This truth was recently brought home to me in two stories making international headlines.

Procedure to enact tax legislation The enactment of tax legislation in South Africa often seems to be chaotic and arbitrary, being sub-ject to the whims of the officials in charge at SARS and the Treasury, as well as political expediency. How else can you explain the fact that capital gains tax (CGT) is still a work in progress twelve years after its inception? I am convinced in my own mind that the only reason we have CGT today is that a certain space-traveling internet billionaire sold his software business for billions at a very tender age. To the best of my recollection, it was shortly after the announcement of this deal that the government discovered the urgent need for a CGT. Envy can be a terrible thing.

The opportunistic and reactive nature of tax leg-islation is also evident in the demutualization levy, which was hastily implemented so as to grab some money from the policyholders of Sanlam and Old Mutual. [As to the mysterious ultimate fate of the funds so raised, see ‘Hypothecation—whatever happened to the demutualization levy?’ 83 TSH 2010—Ed] Similarly, the tax on plastic bags ap-pears to be sitting in an account waiting for a pur-pose.

A prime example is set by the numerous flip-flops

we have had in the taxation of dividends over the last twenty or so years. There was the one-third exemption from tax, then a full exemption, then an STC imposed upon companies, and now a withhold-ings tax. These are just the policy decisions, never mind the endless tinkering with definitions, exemp-tions, inclusions, rates and tax treaties.

But the thought that we had it bad was forever banished from my mind last week. Having watched the democratic machinery of the United States of America in action, and having lived through the non-Armageddon of the end of the Mayan calendar and the near-miss Armageddon of the US fiscal cliff, I decided to have a look at the legislation which saved the whole world from financial meltdown by allowing Americans to continue to purchase goods they do not need. The legislation is known as the American Taxpayer Relief Act of 2012.

From the discussions in the newspapers and on television, I was under the impression that the only issue to be dealt with was the rates at which tax was to be levied on the rich, the middle class and the poor Americans.

My first shock was to learn that the document is 157 pages long, with 97 sections.

The second was that many of the sections seem to deal with topics other than the rate of tax, for example:

Sec 201: Extension of deduction for qualifying expenses of elementary and secondary school teachers.

Sec 203: Extension of parity for exclusion from income for employer-provided mass transit and parking benefits.

Sec 209: Improve and make permanent the provision authorizing the Internal Revenue Ser-vice to disclose targeted returns and return-information to qualifying prison officials.

Sec 301: Extension and modification of re-search credit.

Sec 302: Extension of temporary minimum low-income tax credit rate for non-federally subsi-dized new buildings.

Sec 304: Extension of Indian employment tax credit.

Sec 401: Extension of credit for energy-efficient existing homes.

The list goes on and on. I cannot believe that the

December 2012


entire world was held to ransom so that US teach-ers enjoy a tax break, employees get parking bene-fits, the US IRS discloses information to prison offi-cials, and US taxpayers claim a tax break for ener-gy-efficient homes. Surely to goodness the US Congress could have dealt with these seemingly no-brainers in a separate bill?

In the light of the grand theatrics accompanying the passing of US tax legislation, perhaps the pro-cedure adopted in SA is not so bad after all. This is not to say that the procedure is perfect, not by a long shot, but it is still preferable to worldwide Ar-mageddon.

Tax collection An efficient revenue service is a necessity for any country relying on taxes to pay its way. Efficiency must be balanced by equity and fairness. That, however, is a topic for another day. The bottom line is that, except for out-and-out crooks, we all need an efficient SARS to collect taxes.

Greece is a prime example of what happens to a country not having an efficient revenue service. The Task Force for Greece Quarterly Report De-cember 2012 reported that:

The strong willingness of the new Government to ad-vance overall reform in this area is still hampered by lack of administrative capacity and inertia.

A recent article in the New York Times (Greek tax scandal distracts from a collection shortfall, 5 January 2013) reported that:

One study by researchers from the University of Chi-

cago and Virginia Tech estimated that tax evasion costs Greece about $37 billion a year, equivalent to nearly 15 per cent of economic output. The study found that doctors, engineers, accountants and lawyers were ‘the primary tax-evading occupations’.

It is one thing for the truly wealthy to evade tax (they always seem to be able to); it is quite another when doctors, engineers, accountants and law-yers—the pillars of middle class society—are able to do so with impunity and the implicit support of the authorities.

The same article provides the following insight:

While Greece received a badly needed $45 billion in aid last month to help it avoid defaulting on its debts, critics say that unless Athens can more forcefully tap the billions it is owed in taxes, it will never pay off its debts, even if its moribund economy eventually starts to recover.

The basic problem associated with tax is that of the free rider. It is in the individual’s interest to avoid tax while everybody else pays tax. No one should pay tax if he or she can legally avoid doing so. The real problem arises when the state is unable or unwilling to enforce tax collection of tax legally payable. The solution to this problem, or at least part of the solution, is an efficient revenue service.

So here is hoping for a 2013 without any surpris-es and drama in the enactment of tax legislation, and an efficient (but fair and equitable) collection of tax revenue by SARS.

T S H

A second chance to attend this half-day tax seminar!

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present a

Tax Update Seminar 2012–2013 East London—Port Elizabeth—Durban—Cape Town—Pretoria—Johannesburg

Fee per delegate (including 14% VAT) before discounts is R1 690.

CONTACT [email protected]

‘tsh dishonour roll: brenton patrick geach s · tax court case 10 september 2012: tc vat 789. the...

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