‘Forget BRICS; Let’s Join B · PDF fileand Uganda have powered ahead. ... Guide for employers in respect of tax deduction tables—2014 tax ... Guide for employers in respect of

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

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

75

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

‘Forget BRICS; Let’s Join BFEMRTU’ Internationally, BRICS is regarded as the plural of BRIC. Meanwhile Burkina Faso, Ethiopia, Mozambique, Rwanda, Tanzania

and Uganda have powered ahead. For how long will (foreign brands of) hair shampoo and washing powder sustain our economy?

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue # 127

This is a free publication devoted to unearthing what is going on in the SA tax field. If it isn’t here, it never happened. Unless otherwise indicated, every document listed is cumulatively included in the Tax Shock, Horror Database, which is available

monthly, quarterly or even individually on DVD by post for R250 a month inclusive of VAT at 14%. This is perhaps the only newsletter in the world with its own stylebook (also free), by Costa Divaris & Duncan McAllister (9 ed):

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

GN R 558 GG 21246 01 June 2000: Amendment of rules (DAR/23) under s 120 of the C&EA (form DA 4).* GN R 892 GG 21540 07 September 2000: Amendment of rules (DAR/25) under ss 49 & 120 of the Cus-

toms & Excise Act (SADC).* GN R 892 GG 21540 07 September 2000: Amendment of rules (DAR/25) under ss 49 & 120 of the Cus-

toms & Excise Act (SADC).* GN R 959 GG 21592 22 September 2000: Amendment of rules (APT/1) under the proviso to s 47B(2)(b)(i)

of the Customs & Excise Act (air passenger tax).* GN R 951 GG 21594 22 September 2000: Amendment of rules (DAR/26) under the C&EA (corrections).* GN R 1293 GG 21811 29 November 2000: Amendment of rules (DAR/28) under ss 47B & 120 of the Cus-

toms & Excise Act (chargeable passengers).* GN R 86 GG 21994 26 January 2001: Amendment of rules (DAR/24) under s 120 of the Customs & Ex-

cise Act (form DA 199.20).* GN R 210 GG 22105 02 March 2001: Amendment of rules (DAR/29) under ss 13, 46A & 120 of the Cus-

toms & Excise Act (textiles & apparel).* GN R 574 GG 22407 22 June 2001: Amendment of rules (DAR/30) under s 120 of the C&EA (forms).* GN R 595 GG 22405 29 June 2001: Amendment of rules (DAR/27) under s 6(1)(g) of the Customs & Ex-

cise Act (transit sheds).* GN R 1121 GG 22817 09 November 2001: Amendment of rules (DAR/32) under s 46(A) of the Customs &

Excise Act (list of countries).* GN R 1290 GG 22881 07 December 2001: Amendment of rules (DAR/33) under s 120 of the Customs &

Excise Act (reference to Value-Added Tax Act).* GN R 1429 GG 22990 28 December 2001: Amendment of rules (DAR/34) under ss 49 & 120 of the Cus-

toms & Excise Act (SACU & SADC).* On this stuff 28 December 2001: I still have to catch up with SARS in some later years. It took a

variety of methods & software to make these old documents accessible. GN R 456 GG 27580 20 May 2005: Amendment of money laundering control regulations under FICA. SARS form 2013: Special power of attorney to tax practitioner, version 2013.01.00.* SARS form 2013: Special power of attorney, version 2013.01.00.* SARS form 2013: Authority on special power of attorney by tax practitioner, ver 2013.01.00.* SARS guide 2013: How to complete your individual income tax return ITR 12 IT–AE-G04.* SARS guide 2013: Comprehensive guide to the ITR 12 return for individuals IT–AE–36–G05.* SARS guide 2013: Guide to help you eFile GEN–ELEC-06–G01.* SARS tsatske 2013: How to complete the return of income: trust (IT 12TR) IT–AE–G02.* Act 28 March 2013: South African Reserve Bank Act 2 of 1996. I am not the only one

collecting old reference materials. An entry on the SA Government Online website.

Issue: 128 Tax Shock Horror Database items: 12 757 3,17 GB Subscribers: 6 234 November 2013

128 Tax Shock, Horror 2010—November—2


SARS tsatske June 2013: How to eFile your provisional tax return.* SARS guide 07 June 2013: Guide for employers in respect of tax deduction tables—2014 tax

year PAYE–GEN–01–G01 revision 5.* SARS guide 07 June 2013: Guide for employers in respect of allowances—2014 tax year PAYE–

GEN–01–G03 revision 5.* SARS annexure 07 June 2013: Motor vehicle rate per kilometre PAYE–GEN–01–G03–A01 revision 4.* SARS annexure 07 June 2013: Subsistence allowance—foreign travel PAYE–GEN–01–G03–A02 revi-

sion 6.* SARS guide 28 June 2013: Registration of employees for income tax purposes PAYE–REG–03–

G01 revision 5.* SARS guide 26 July 2013: Guide for employers in respect of skills development levy SDL–GEN–

01–G01 revision 7.* SARS guide 26 July 2013: Guide for employers in respect of the Unemployment Insurance Fund

UIF–GEN–01–G01 revision 9.* SARS annexure 26 July 2013: SETA codes & contact details SDL–GEN–-01–A01 revision 5.* SARS specifications 30 July 2013: Income tax system—IBIR–006 tax directives interface specifications.* SARS guide 02 August 2013: Guide for employers in respect of employees’ tax PAYE–GEN–01–

G04 rev 10.* SARS guide 08 August 2013: Guide for employers in respect of fringe benefits (2014 tax year)

PAYE–GEN–01–G02 rev 5.* SARS release 22 August 2013: Implementation of the new customs systems modernization pro-

gramme. Tying CSMP to the NDP. Perhaps the only NDP action in the land.* Draft C&E rules 03 September 2013: Draft amendment of the rules under ss 35 & 120 of the Cus-

toms & Excise Act (wine in bulk in C&E warehouse).* AGSA report 06 September 2013: General report of the AG on audit outcomes for the financial

year ended 31 March 2002.§ AGSA report 09 September 2013: Ditto for the financial year 2003–04.§ AGSA report 09 September 2013: National general report of the AG on the audit outcomes of de-

partments, constitutional entities, public entities & other entities for the financial year 2004–05.§

AGSA report 09 September 2013: Ditto for the financial year 2005–06.§ AGSA report 09 September 2013: Ditto for the financial year 2006–07.§ AGSA report 09 September 2013: Ditto for the financial year 2007–08.§ AGSA report 09 September 2013: General report on national audit outcomes 2008–09.§ AGSA report 09 September 2013: General report on national audit outcomes 2009–10.§ AGSA report 09 September 2013: General report on national audit outcomes 2010–11.§ On this stuff 09 September 2013: Several other reports are also issued (reissued?) by the Attor-

ney General SA on this date, including those on local government. AGSA report 09 September 2013: PFMA 2011–12—Consolidated general report on the national &

provincial audit outcomes.§ On this stuff 09 September 2013: Was none of it previously available? SARS website 13 September 2013: C&E rule amendments have been taken back to 2001.* SARS website 13 September 2013: I now see how I must have missed the VAT News newsletter

archived on the Legal & Policy page (126 TSH 2013).* Updated guide 13 September 2013: Change of banking details for a registered VAT vendor VAT–

MTD–05–G01 revision 0.* SARS website 19 September 2013: Archive of INs included on the Legal & Policy page.* SARS website 19 September 2013: Change My Banking Details page updated. Which reminds me:

since February I have not had time to visit the Randburg office for this purpose.* Updated guide 19 September 2013 (?): Change of banking details for employer PAYE–MTD–28–G01

revision 0.* Act 26 September 2013: Transport Laws & Related Matters Amendment Act 3 of 2013.

Amongst other things this amends the South African National Roads Agency Limited & National Roads Act so as to accommodate the purple-light-emitting gantries over Gauteng Freeway Improvement Project roads. This is a taxing statute, & ought to be read as such. The imposition of the tax appears to be mediated by s 27(1)(b), & is triggered by ‘the driving or use of any vehicle on a toll road’. An amendment creating a new s 27(3)(b)(v) refines this down to the point at which ‘the passage of a vehicle beneath or through a toll plaza is identified’. That, as far as I am concerned, fixes dies cedit, with dies venit presumably set by regula-tion (read on). A new s 27(3)(b)(vi) appears to equate payment with ‘pre-payment of toll liability’, an undefined term. Yet there can be no toll liability before passage be-neath a gantry, the moment of performance by both SANRAL (permitting access to the particular stretch of the GFIP) & a particular motorist (knowingly triggering a



statutory liability). What, then, is the nature of the prepayment? Section 59A, a pre-sumption of who was driving at the moment of dies cedit, is bound to be problem-atic. So who is the taxpayer? Section 27(1)(b) says it is the person driving the vehi-cle, who, clearly, might be acting as the agent or servant of another. Tricky stuff.

SAIT Opinion 25 September 2013: A long-winded, self-regarding, self-aggrandizing, patronizing poke at the head of SAICA’s East Rand member district (126 TSH 2013) for daring to challenge SAICA’s CEO’s exorbitant salary. Listen to this kak:

Civil society groups always start from very modest beginnings, and SAIT is no different. It has equally grown to become the largest professional body representing tax professionals in South Africa.§

dti guidelines 30 September 2013: Automotive investment scheme—programme guidelines. Some fifty years or more of subsidies from the taxpayer & not even a tricycle in-vented here & saleable abroad. Illegally claimed to be ©. What is fed at the troughs:

3.2 The AIS provides for a taxable cash grant of 20% of the value of qualifying investment in productive assets by light motor vehicle manufactures and 25% of the value of qualifying investment in productive assets by component manufactures and tooling companies as ap-proved by the dti. 3.3 An additional taxable cash grant of between 5% or 10% may be available to projects that are found to be strategic by the dti as follows. 3.4 An additional taxable cash grant of 5% of the value of qualifying investment in produc-tive assets may be available to projects that meet the requirements of paragraph 7.3. 3.5 An additional taxable cash grant of 10% of the value of qualifying investment in produc-tive assets may be available to projects that meet the requirements of paragraph 7.3 and 7.4.1.§

Draft C&E rules 30 September 2013: Draft amendments to rule 15 under the Customs & Excise Act (traveller declaration).*§

Updated guide 21 October 2013: Change of banking details for companies income tax (CIT) IT–ACM–08–G01 revision 2.*

FIC directive 29 October 2013: Directive 01/2013—Updating of registration information of ac-countable & reporting institutions. You should notify the FIC of a change of address.

GN 1079 GG 36981 30 October 2013: Explanatory summary of Public Administration Management Bill. BN 214 GG 36982 30 October 2013: Mostly annual fees payable to the SA Pharmacy Council under the

Pharmacy Act. These are not inconsiderable, & include VAT. SCA case 01 November 2013: Quartermark Investments (Pty) Ltd v Mkhwanazi & another

(768/2012) [2013] ZASCA 150 (footnotes suppressed): This court, in Legator McKenna Inc & another v Shea & others [69 TSH 2008, 78 TSH 2009, 86 TSH 2010, 126 TSH 2013], confirmed that the abstract theory of transfer applies to mov-able as well as immovable property. According to that theory the validity of the transfer of ownership is not dependent upon the validity of the underlying transaction. However, the passing of ownership only takes place when there has been delivery effected by registration of transfer coupled with what Brand JA, writing for the court in Legator McKenna, referred to as a ‘real agreement’. The learned judge explained that ‘the essential elements of the real agreement are an intention on the part of the transferor to transfer ownership and the inten-tion of the transferee to become the owner of the property’.§

GN 1087 GG 36995 01 November 2013: Draft Promotion & Protection of Investment Bill, 2013 [B 48—2013] for comment. The ANC is now naming its legislation in the Orwellian style of the Nationalists. Foreigners have to be nuts to invest here in the first place, so clause 10, on ‘Sovereign rights to regulate in the public interest’, will not phase them. Nor will the prospect of being treated in the same way as nationals. Imagine placing your treasure at the capricious disposal of Dr Rob-Peter-to-pay-Paul, possi-bly the most economically illiterate man ever to walk the earth, who clownishly keeps himself busy with innumerable interventions & initiatives, whose success he measures largely by their mere existence & what they cost us, as taxpayers. As a minister in the President’s cabinet, he is a perfect fit. Neither of them would recog-nize an opportunity cost if it sat on their heads & farted.

SARB release 01 November 2013: The deadline for the application for the art scholarship (126 TSH 2013) has been extended to 27 November 2013.

Bill 01 November 2013: Public Administration Management Bill, 2013 [B 48—2013]. Bill 02 November 2013: Property Valuation Bill, 2013 [B 54—2013]. Anything to do with

what the government chooses to call ‘land reform’ makes me nervous.§ The Economist 02 November 2013: No need to dig. Burkina Faso, Ethiopia, Mozambique, Rwanda,

Tanzania & Uganda have achieved 5% average GDP growth from 1995 to 2010 & 3% growth in per capita GDP according to an IMF study. And this without reliance on natural resources. (The heavens forefend that we should find oil or gas.)



Goldman Sachs 04 November 2013: Two decades of freedom—what SA is doing with it, & what now report needs to be done. I don’t know what the fuss was about. This is no whitewash.§ Business Day 04 November 2013: Respecting taxpayers. Sunita Manik (SARS) takes exception to

the article of 25 October 2013 ‘Tax compliance burden ‘irks big firms’ in SA’ (which was repudiated on the Letters Page on 5 November):

But one has to draw the line at the complete misrepresentation of how SARS interacts with corporate taxpayers. SARS places a high value on maintaining professional relations with all taxpayers. SARS is bound by legislation that requires organs of state to act in a manner that is fair, just and reasonable in the performance of its duties.

In the hugely unlikely event that this official is a reader of TSH, I extend an invitation to join my The Secret Meeting Initiative & gain a glimpse into what is really going on.

DTC release 05 November 2013: The Davis Tax Committee calls for contributions. The emphasis falls first on small business. (Can the DTC perhaps tell us what is a ‘small business corporation’—40 TSH 2006?) Find it at www.taxcom.org.za.

SARB speech 05 November 2013: Daniel Mminele (SARB), at the Standard Bank 5th African central bank reserves management conference. I wonder why so many foolish people hold SARS in such high regard when the true professionals are mostly located at SARB.

SARS release 05 November 2013: SARS enforcement & customs operations for October 2013. People ask me if there are prosecutions for tax fraud. As far as TSH is concerned, I publish the names of those found guilty of tax crimes but only if I have seen a copy of the judgment myself, & judgments of magistrates’ & regional courts do not ever come my way. These monthly SARS releases, which, for a couple of reasons, I do not support, represent the only source of information on such alleged convictions.*

SARS release 05 November 2013: The Davis Tax Committee calls for contributions.* GN 1093 GG 37008 06 November 2013: Publication of draft amendment to treasury regulations for pub-

lic comment. On governmental credit & debit cards, on which, read on.§ SARB release 06 November 2013: SARB launches refresher campaign on Mandela banknote se-

ries. A dotty (truly) security feature has been added. Bill 06 November 2013: Portfolio committee amendments to Employment Services Bill,

2012 [B 38A—2012]. Bill 06 November 2013: Employment Services Bill, 2012 [B 38B—2012]. Draft C&E rules 06 November 2013: Draft amendment of Schedule 6 to the Customs & Excise Act

under s 75. At the discretion of the CSARS, users of distillate fuel subject to rebate without the necessary logbooks will suffer a deemed reduction of usage of 30% from 1 November 2009 to 1 April 2013. Thereafter a logbook is a sine qua non.*

SARS website 06 November 2013: C&E rule amendments now go back to 2000.* Business Day 06 November 2013: Parliament decides to postpone customs bills.§ SARS guide 08 November 2013: Treatment of PAYE for VDP purposes VDP–EMP–01-G1 rev 1.* GN 855 GG 37019 08 November 2013: MOF’s notice of the date upon which s 12L of the Income Tax

Act comes into operation: 1 November 2013. Energy-efficiency savings deduction. On its website, SARS suggests that you also look at GN R 729 GG 34596 of 16 September 2011, the applicable regulations (102, 103, 104 TSH 2011).*

dti release 11 November 2013: Free State artists urged to turn their ideas into formal busi-nesses:

Ngwenya [Busisiwe Ngwenya; dti] urged artists to take forth the information given to them and stop referring to their craft as ‘hobbies’ and start taking their work serious [sic]. Ngwenya said formalization of businesses by artist will help them in growing their brands and will also assist in access incentives from the dti and other government departments.

The dti knows as much about art as about business & economics (zip-minus). Treasury speech 11 November 2013: By the MOF at the SAIIA–University of Pretoria Conference on the

G 20 & Africa’s economic growth & transformation. Has the man no sense of irony? Sub-Saharan Africa (SSA) is the second fastest growing region in the world. The continent’s average growth of gross domestic product (GDP) is projected at 4,8% in 2013 and 5,3% in 2014. In many respects this growth is a reflection of Africa’s peace-dividend, the results of the hard-won struggles of its peoples, supported by the international community. The IMF World Economic Outlook (October 2013) projects continued dynamism in SSA.

Bill 11 November 2013: Legal Practice Bill, 2013 [B 20B—2012]. Since this repeals the Attorneys Act, I suppose that the law societies will go. RIP.

Bill 11 November 2013: Ad hoc committee amendments to Protection of State Informa-tion Bill, 2010 [B 6G—2010].§

Bill 11 November 2013: Protection of State Information Bill, 2010 [B 6H—2010]. A classi-fied record is still not defined (127 TSH 2013).§

Treasury invitation 12 November 2013: Inviting tax proposals for Annexure C of the Budget Review. Clearly addressed to the coterie of the Big 3½ audit firms & the large attorneys’



firms accustomed to lobbying the soft touches at the Treasury on a daily basis. Who else could meet the response date of 29 November 2013? What a racket! Gain in-side information to sell to your clients. Lobby so as to create loopholes. Then re-spond gracefully to the Treasury’s request for help in closing them. Repeat for as long as there are overheads to pay. Meanwhile the law grows ever more grotesque.

Business Day 12 November 2013: EU steps up fight to have treaties with SA retained. Yet Dr Rob-Peter-to-pay-Paul denies talks on 11 November had anything to do with BITs.

AGSA release 13 November 2013: Auditor-General is optimistic as national, provincial departments & public entities improve their audit outcomes. The now ex-AG seriously damaged his credibility with the patina of optimism with which he coated his dismal findings:

The 2012-13 AG’s report indicates that of the 450 auditees whose audits were finalized (26 not finalized) by 31 August, 96 have improved while 61 regressed. The number of clean audit opinions for 2012–13 is 105 (22%). This total is made up of 24 departments and 81 public entities and constitutes a slight improvement from the 17% in the 2011–12 finan-cial year (including audits finalized after the last general report).

AGSA report 13 November 2013: PFMA 2012–13—Consolidated general report on the national & provincial audit outcomes.§

On all this AGSA stuff 13 November 2013: What an incredible waste of time. There is no appetite whatso-ever, anywhere in government, to improve anything. Less than a kilometre from where I live a mixed-race gang of tsotsis has for at least three years been conduct-ing, at precisely the same spot, a lucrative, terrifyingly violent trade of passing-car break-ins. For all I know, they are also responsible for the serial malfunctioning of the traffic lights at ‘their’ intersection, possibly with the connivance, if not active in-volvement, of those profiting from the resulting, never-ending ‘repairs’. Respectively a kilometre and four kilometres away are two hopelessly low bridges, which flood during bad thunderstorms, one of which, situated on a truly major (provincial) thor-oughfare, has been responsible, to my knowledge, of one ghastly fatality & one, really bad close call. This thoroughfare (but not its bridges) was, no doubt at great cost, paid to pals, ‘upgraded’ about four years ago, but without any discernible input from an engineer or a traffic-flow specialist. The result is comically deadly &, traffic-wise, catastrophic. The local on-&-off-ramp to SANRAL’s GFIP (the one with the pur-ple-light-emitting gantries) is an engineering disaster, causing incredible traffic jams at rush hours, although nothing as bad as the next, westward ramp. In recent times, a gang rumoured to be hiring accommodation in the neighbourhood has visited a reign of occupied-house-break-ins upon the hapless inhabitants, sometimes up to three times a week. It fearlessly hits the same road repeatedly in the same week.

CC case 14 November 2013: Gaertner and Others v Minister of Finance and Others (CCT 56/13) [2013] ZACC 38. The constitutional invalidity of parts of s 4 of the Customs & Excise Act (searches without warrants) has now been confirmed by the Constitu-tional Court (Gaertner and Others v Minister of Finance and Others (12632/12) [2013] ZAWCHC 54 (8 April 2013); 121 TSH 2013), but not retroactively. The legisla-ture has six months in which to cure the invalidity. Meanwhile, s 4(4) is deemed to include ‘read-ins’ inserted by the court. Madlanga J commences his judgment with an account of warrantless searches in the Apartheid days. If only he knew the true extent of the abuse of power, disregard for the law & contempt for the Constitution residing in the bosoms of high-rankers at SARS & at least one other at the Treasury! I guess that this decision pretty much impregnates much of the TAA.*

SARS release 14 November 2013: Inclusion of new data in SA’s trade statistics. We have until now excluded trade with the BLNS countries:

South Africa’s total trade deficit for 2012 was R116,9 b. Had the BLNS trade data been in-cluded, the deficit would have been R34,6 b.

Given the correlation between the trade deficit & the international value of the rand, substantial harm, you might think, has been done to some economic actors. Yet SARS is naively ignoring the plain fact that the cognoscenti have always adjusted the figures to allow for this previously unrecorded trade. Read on.*

Treasury release 14 November 2013: Obligations of primary dealers in fixed-rate government bonds to improve liquidity in secondary market:

The outstanding amount on the R2037 (8,50%: 2037) bond has reached the R10 b mark and consequently, Primary Dealers are obliged to quote a two-way price on this bond as stipulated in the rules of the Primary Dealers in fixed rate government bonds of the Repub-lic of South Africa.

NPC speech 14 November 2013: Minister in the presidency, to the Gauteng Senior Management Service. Much as I admire the man for his past contributions to the nation, by the standards of this speech, he comes across as being more than a little flaky. Thus:§



SARB release 14 November 2013: SARB statement on the inclusion of new data in SA’s trade statis-tics. It’s nowhere near the big deal SARS has made it out to be:

However, the Bank has always included its own estimates, which were derived from various sources, of the trade between South Africa and the other SACU countries in its compilation of South Africa’s overall imports and exports. Therefore the impact on the balance of pay-ments will be less than the amounts of BLNS exports and imports now disseminated by SARS.*

GN 1105 GG 37029 14 November 2013: Publication of the Public Administration Management Bill, 2013 under rule 18 of the NCOP.

dti release 15 November 2013: Government committed to find solutions to global warming—minister Davies:

‘We are faced with prospects of catastrophic human-induced climate change. We are see-ing extreme weather conditions across the world. The effects of global warming will be catastrophic. And these will be felt particularly in the developing world, including South Af-rica. So as Government we are committed to be good global citizens and to contribute in finding solutions to the problem of global warming. We are undoubtedly in support of sus-tainable development’, said Davies.

That’s OK, then. The SA government will save the world, no doubt after it has finished Medupi & Kusile, unions willing.

GN R 874 GG 37042 15 November 2013: Amendment to treasury regulations under the PFMA. As from this day no department or constitutional institution may obtain a debit or credit card. All such cards must be cancelled by 1 December 2013. Allowance is made, upon a restrictive basis, for travel & related accommodation expenses, online transactions & fleet management & petrol & garage cards. Don’t worry, chaps! The elections will soon be over, so don’t change your wallowing habits too drastically.§

BN 226 GG 37014 15 November 2013: Draft for public comment. cidb Best practice project assess-ment system: best practice: minimum requirements for engaging subcontractors on construction contracts. While half-completed shopping malls are collapsing upon the heads of their hapless builders, the government coolly orders its priorities. Under s 5(2) of the Construction Industry Development Board Act, the board proposes that

the employer specifies and verifies that prime contractors appoint sub-contractors that comply with the following a written contract exists between the prime contractor and sub-contractor; and sub-contractors are in possession of a valid tax clearance certificate (TCC) and comply

with the relevant requirements of Skills Development Levy (SDL), the Unemployment In-surance Fund Act (UIF), and the Compensations for Occupational Injuries and Disease. Act (COIDA).

Since even the most notorious, colourfully dressed crooks obtain TCCs with effort-less ease, officials must love them (TCCs) for reasons other than compliance (called ‘rent-seeking’ by polite economists or ‘bribery’ & ‘extortion’ by others. I challenge any official to ‘verify’ someone else’s future compliance, even for only a week.

BN 227 GG 37014 15 November 2013: Amendment to rules governing NHBRC fees. How is it that our very silliest & most useless tax has never yet been mentioned in this newsletter? GN R 1407 GG 20658 of 1 December 1999, a public-access copy of which I am un-able to find, lays down an ‘enrolment fee’ of varying percentages, depending upon the selling price of homes to be built by homebuilders, under s 14(1)(a) of the Hous-ing Consumers Protection Measures Act. Other fees are also charged. While R 1407 states that all such fees include VAT, the current BN 227 removes all references to VAT but doesn’t say why. These fees are payable to the National Home Builders Regis-tration Council. This is a national public entity under Part A of Schedule 3 to the PFMA & thus a ‘public authority’ as defined in s 1 of the Value-Added Tax Act. Para-graph (b)(i) of the definition of an ‘enterprise’ in s 1 requires the MOF to decide & the CSARS to notify a public authority that its supplies of goods & services amount to so-called enterprise services. Clearly, no such decision or notification was ever made. Let me know if you ever have had a tax invoice from the NHBRC.

BN 228 GG 37014 15 November 2013: Credit rating agency rules under the Credit Rating Services Act. I hope these bozos will get the message—give the ANC favourable ratings, always.

GN 1107 GG 37014 15 November 2013: Notice & order of forfeiture under the EXCON rules. A Nigerian, Lasbrey Uchechukwu Ogide, & two Johannesburgers, Kholeka Mavies Botha & Zamanguni Pearl Umeh, lose a blocked account worth R814 710.

GN R 871 GG 37034 15 November 2013: Amendment notice—export control. An amendment to GN R 543

GG 36708 of 2 August 2013, the export control guidelines effectively nationalizing ferrous & nonferrous waste & scrap (125 TSH 2013). For previous amendments, see 126, 127 TSH 2013. The dti is clearly having to cope with reality for a change.



ZAeconomist 18 November 2013: Adcorp estimates that 370 000 skilled migrants have returned to SA since 2009. I now see how we have survived our current government.§

Bill 19 November 2013: Public Administration Management Bill, 2013 [B 55—2013]. Better late than never? Business with the state is altogether forbidden, & disclosure of financial interests compulsory. Training of employees is required, & a National School of Government is to be established (can I teach legal drafting…please?). Ethics, integrity & discipline are to be enforced & minimum norms & standards es-tablished. By my reckoning, the bill does not encompass SARS.

GN R 887 GG 37038 19 November 2013: Gauteng freeway improvement project, toll roads: publication of tolls. Tariffs include VAT. The launch date is 3 December 2013 (inserted by hand).

GN R 888 GG 37038 19 November 2013: GFIP, toll roads: conditions for payment of e-tolls—Doc number- 382-QAS-04-TEM-900422 Revision-02.00. Under s 27(1)(b) of the South African Na-tional Roads Agency Limited and National Roads Act. All about dies venit for this new tax. There is a seven-day grace period, although only for an unregistered, al-ternate user, who has to identify himself or herself, & provide the VLN, make, model & colour of motor vehicle used when the e-toll transaction occurred. If a tax invoice is required, the necessary information must be supplied. Alternate users who do not pay will be invoiced. Registered e-tag & VLN users are bound by terms & conditions otherwise available. SANRAL persists, mysteriously, in calling itself the South African National Roads Agency SOC Limited, without explaining what the ‘SOC’ signifies (127 TSH 2013). Perhaps it is used in the sense of ‘We plan to SOC it to you!’

GN R 888 GG 37038 19 November 2013: So I went to the website, which turned out to be that of SANRAL, with a click-through to E-toll. There I found ‘Terms & conditions for people & organi-zations who register with SANRAL’. Presumably, it is the document referred to in the regulation. ‘VLN’ signifies the motor vehicle licence number, while ‘website’ is indeed the SANRAL website. You may maintain something called an ‘e-toll account’ but insuf-ficient information is provided to support my theory that it represents a deposit made with SANRAL, both in the banking & VAT sense. Is SANRAL violating the banking laws by running such accounts? I hope to check. It is remarkably coy about the unused portion of such an account, for example, when a user dies. The ‘E-road regulations’ (GN R 739 GG 36911 of 9 October 2013; 127 TSH 2013) also deal with payment.

GN R 889 GG 37038 19 November 2013: GFIP, toll roads: exemption from the payment of toll: certain pub-lic transport services & emergency vehicles. Once you exempt minibus taxis, you no longer can lay claim to the pursuit of safety or mitigation-of-congestion goals.

GN 1126 GG 37050 19 November 2013: Explanatory summary of the Rental Housing Amendment Bill, 2013. Read on.

CC case 20 November 2013: Minister of Local Government, Environmental Affairs and De-velopment Planning of the Western Cape v Lagoonbay Lifestyle Estate (Pty) Ltd and Others (CCT 41/13) [2013] ZACC 39. Beware! It is not necessarily true, as I have previously asserted (for example, in 93 TSH 2010), that the correct party to bribe on a town-planning matter is your municipality, not your province. That was the implica-tion of the Constitutional court’s decision in City of Johannesburg Metropolitan Mu-nicipality v Gauteng Development Tribunal and Others CCT 89/09 [2010] ZACC 11 (87 TSH 2010). Now the same court has, in the circumstances before it, found that deci-sion to be of no avail. Municipalities may decide on subdivisions but only once re-zoning has been sorted. That might be a provincial competence.§

Bill 20 November 2013: Rental Housing Amendment Bill, 2013 [B 56—2013]. Apart from representing an entirely unnecessary intervention, this poses yet another problem for the misconceived SARS 3rd party reporting cock-up-in-waiting (127 TSH 2013). For ordinary landlords, the interest on rental deposits appears to accrue for the benefit of tenants, subject to a resolutive forfeit. While landlords will report it as being earned by tenants, banks will report it as being earned by landlords, while no tenant in the land will include it in his or her tax return.

MPC statement 21 November 2013: Statement of the monetary policy committee (unchanged: 5%). The Guv, on the inclusion in our trade figures of SACU business:

However, in compiling the balance of payments accounts in the past, the Bank made esti-mates of South Africa’s trade with Botswana, Lesotho, Namibia and Swaziland, based on various sources. The historical trade data in the balance of payments accounts will be re-vised to account for the differences between the new data and our own previous estimates. These revisions will be published in the December Quarterly Bulletin on 3rd December, and may also result in minor revisions to the GDP data. Nevertheless, the underlying trend of the current account is not expected to change significantly.

What a pleasure to have at least some clever people in government. Even so, loy-ally, she persists in equating governmental profligacy, especially in its wage bill, as



‘countercyclical’ fiscal policy: A deficit of 4,2 per cent is projected for the current fiscal year, and is expected to narrow to 3,0 per cent by 2015/16. Non-interest real expenditure growth is capped at an average of 2,2 per cent over the next three years, and the three-year agreement with civil service un-ions, due to expire in 2015, is expected to limit the growth in the public sector wage bill. This pace of consolidation should stabilize the net national debt at 44 per cent in 2017/18.

Yes, perhaps with the help of divine intervention. GN 1133 GG 37056 22 November 2013: Proposed levies on medical schemes under s 3(a) of the Coun-

cil for Medical Schemes Levies Act. I now see that those responsible regularly cite their governing legislation incorrectly. The correct reference is to s 2(1)(a).

GN 1135 GG 37058 22 November 2013: Codes of good practice on broad based black economic em-powerment. With immediate effect, Dr Rob-Peter-to-pay-Paul declares:

[I n]ow approve and inform the members of the public that entities in the financial services sector shall in the interim utilize the Qualifying Small Enterprise scorecard of the Generic Codes of Good Practice for the purpose of measurement of their B-BBEE status…Despite this provision, QSEs in the financial services sector are encouraged to implement the sector transformation priorities as espoused in the Financial Services Sector Code.

Draft C&E rules 22 November 2013: Draft amendment of Schedule 6 to the Customs & Excise Act. I don’t ordinarily carry tariff amendments but you had better take note of this one:

An amendment to Note 6(f)(iii)(c) in Part 3 of Schedule no 6 is proposed to specifically ex-clude the processing of minerals from the scope of diesel refunds. Qualifying own primary production in mining is limited to activities required for the recovery of minerals. The pro-posed amendment clarifies that the subsequent processing of minerals and related activi-ties cannot qualify for the diesel refund.*

dti release 23 November 2013: dti has disbursed more than 65% of its budget on Incentives—Davies. According to Dr Rob-Peter-to-pay-Paul,

about 65 percent of the department’s R9-billion annual budget was delegated to the provi-sion of incentives. The total incentive grant value approved by the dti during the period 2012/13, amount to more than R7 billion.

dti report 23 November 2013: No doubt this is the date on which ‘The industrial development administration division (IDIAD)—2012–13 incentive performance report’ was pub-lished. One thing I’ll say for the dti, or, as it seems to prefer, the dti, it produces an inexhaustible supply of acronyms. Could we profitably export them, I wonder?§

SARS website 23 November 2013: Tax season now closed for all non-provisional taxpayers.* NPC speech 25 November 2013: The minister in the presidency, to the Third Conference on the

business of social & environmental innovation. Also a bit flaky. In future, I am going to give the National Planning Commission website a complete miss.§

SARS release 25 November 2013: Preliminary outcome of the 2013 tax season. More than 6 m returns submitted, mostly electronically & ‘assessed’ within three seconds.*

SARB presentation 26 November 2013: November 2013—policy review PowerPoint show. SARB pub notice 26 November 2013: Monetary policy review—November 2013. Act 26 November 2013: Protection of Personal Information Act 4 of 2013. This has been

a long time coming (84 TSH 2010, 77, 78, 79 TSH 2009), although it is possible I missed some of its developmental stages. I have seen some silly legislation in my time but this takes the cake. Thanks to abusive drafting, it is extremely difficult to understand, & is highly unlikely to be complied with by the vast majority of its tar-gets, whether in government or the rational sector. Small business just does not have a chance—and perhaps that is the main thrust of this act. Even as a small business with formidable computational resources, I cannot afford to bear the bur-den of proof of a data subject’s consent. And how would I comply with s 114?

114. (1) All processing of personal information must within one year after the commence-ment of this section be made to conform to this Act.

What, for example, would it take to contact and enjoy a response from the 6 200-plus subscribers to this (free) newsletter? It took me ten years to reach them in the first place. I’ll risk the R10 m fine. As for unsolicited e-mails, the wide boys have long ago identified the glaring loophole in this legislation—the definition of a ‘re-sponsible party’ in s 1. These pricks sell access to their mailing lists—obtained by who-knows what nefarious means—to each of a client’s products. You can unsub-scribe for the rest of your life & still never get off their master list. And then there are unsolicited SMSs. Who sells these lists, how do they get them, & why should I spend R1,50 each time in order to unsubscribe? And will the government protect me from the con artists who, by way of SMSs, declare, sometimes three times a day, that I have won some fabulous prize? The ANC passes fewer acts but more regulations than did the Nationalists. Noncompliance has probably increased—off a high base.



SARS website 26 November 2013: The SCOF invites your comments on the customs bills.* Treasury release 27 November 2013: SA one of eighteen countries that comply with global standards

for exchange of tax information. So says the Global Forum on transparency & ex-change of information for tax purposes:

‘South Africa’s ranking as one of the 18 countries that comply with the implementation of in-ternationally agreed standards of transparency and exchange of information on individual and corporate taxpayers is further testimony to the excellence of some of the institutions of our democracy’, the Minister of Finance Pravin Gordhan said.

SARB speech 27 November 2013: SA & the normalization of world monetary policies, by Lesetja Kganyago (SARB). He doesn’t even bother mentioning the recalculation of our cur-rent account deficit. A good, instructive speech. I hope he’s right on this one:

As rates rise, interest costs will consume a greater portion of GDP. Our attempts to estimate this effect point to an extra R11 to R30 b in interest payments annually, averaged over the next four years and depending on the interest rate path. It is therefore important that fiscal policy adjust appropriately to more normal interest rates. National Treasury’s most-recent MTBPS shows that this exigency has been well-understood by the fiscal authorities, and we are confident that it charts a sustainable course for South Africa.

SARS website 27 November 2013: C&E tariff amendments have been taken back to 2004.* SCA case 28 November 2013: Solidarity obo Barnard v SAPS (165/2013) [2013] ZASCA 177.

Bravo Navsa ADP! (Although I wish he would read Thomas Sowell.) In striving to achieve an egalitarian society and in addressing employment equity whilst maintaining fairness as a standard and meeting the country’s needs there can be no victors nor should there be persons considered to be vanquished. Dealing with race classifications, as is necessary under the EEA, feels almost like a throw back to the grand apartheid design. If we are to achieve success as a nation, each of us has to bear in mind that wherever we are located, particularly those of us who have crossed over from the previous oppressive era into our present democratic order, it will take a continuous and earnest commitment to forging a future that is colour blind. This necessarily includes serious and sustained efforts to overcome the prejudices that inevitably attach to us because of our programming, rela-tive to the segregated societies from which we emerged, in order to build a cohesive and potentially glorious rainbow nation. For now, ironically, in order to redress past imbalances with affirmative action measures, race has to be taken into account. We should do so fairly and without losing focus and reminding ourselves that the ultimate objective is to ensure a fully inclusive society—one compliant with all facets of our constitutional project.§

SCA case 29 November 2013: Jakins v Baxter (178/13) [2013] ZASCA 190. The respondents in this case were executors who went to an awful lot of trouble to stop the applicant, the deceased’s widow, from benefiting under a life policy on her late husband’s life, & ended up paying the costs of her application. The couple’s ANC included the un-dertaking that she would benefit from the assignment to her of:

All benefits which will accrue as at the date of his death arising from his membership of his Tongaat-Hulett Pension Fund.

When the deceased retired he invested his one-third commutation of his pension benefits in an Old Mutual policy. The ‘life policy’, said the court, ‘clearly originated from the pension fund because it was funded from the fund’s proceeds’. What deep well of bitterness required three courts to decide such an obvious issue?

SCA case 29 November 2013: Dr JS Moroka Municipality v The Chairperson of the Tender Evaluation Committee of the Dr JS Moroka Municipality (937/2012) [2013] ZASCA 186. Tenderers were required to submit original tax clearance certificates. Would a copy suffice? Nope, said the court, per Leach JA:

Accordingly, in my respectful view, insofar as the judgment in Millennium Waste Manage-ment may be construed as accepting that a failure to comply with the peremptory require-ment of a tender may be condoned by a municipal functionary who is of the view that it would be in the public interest for such tender to be accepted, it should be regarded as in-correct.

GCIS release 29 November 2013: Leaking of purported Public Protector’s provisional report: The security cluster wishes to reiterate the integrity of government’s own investigation into the Nkandla security upgrades. This investigation established, among other things, that no state funds had been spent on improving President Jacob Zuma’s private houses at Nkandla. Government maintains its view that while the security upgrades were justified, the manner in which the Department of Public Works handled the matter was inappropriate. The government investigation found there had been a number of irregularities in the ap-pointment of service providers and the procurement of goods and services.

GN 1147 GG 37062 29 November 2013: Request for the continuation of the statutory levy on lucerne seed & lucerne hay under the Marketing of Agricultural Products Act.



NCR compliance 30 November 2013: Here’s a curious thing. The National Credit Regulator has, by notices its own account, not issued a compliance notice since 8 July 2011. I feel better

about not yet having had the time to see how the NCA affects my own business. Budget day 13 February 2014: So says the National Treasury on its website.§

* Found or to be found on the SARS website. Concurrently on the SARS ‘What’s new’ page. § Not included in Tax Shock, Horror Database.

LOST & FOUND TSH Database This month 111 items were added to the Tax Shock, Horror Database. Land subdivision Since 16 September 1998, the President has failed to proclaim the Subdivision of

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

zette requirements for the registration of consultants to principals. Missing High Court 12 June 2013: Meadowglen Homeowners Association and Others v City of Tshwane case report Metropolitan Municipality and Another (31565/2012) [2013] ZAGPPHC 157. Help! SARS website 31 July 2013: The What’s New page goes back to this date. I painstakingly checked

through it & found some items I missed. There is much stuff on the website never listed on this page. With the increasing complexity of the tax field, I no longer have the time to search for it systematically, & now follow an opportunistic approach.

GPW saboteurs Just to let you know that I continue to have to name & save every (SECURE) GG, re-open it with A–PDF Restrictions Remover, & reduce its size with Adobe Acrobat, while saving it again. Should I attempt in addition to remove metafiles & other invisi-ble appurtenances of PDF files, the file reverts to being inaccessible, meaning that its text cannot be searched or copied (115,117 TSH 2012, 118, 126 TSH 2013).

Warning to a traitor Let it also be known that I shall be comparing the tax bills passed by the National Assembly with the corresponding acts when these appear. I no longer suspect any-one at the Treasury or SARS. Could it be SCOPA that harbours the perp who treacher-ously alters bills before they reach the GPW? Unless it’s a GPW janitor on night-shift.

MONTHLY NOTEBOOK

VAT: the latest SARS scam

SARS is busy, feverishly, working on its Xmas bo-nuses, and, as usual, is willing to do anything and break any law in order to achieve its goals, di-rected, I am now convinced, by secret SOPs ema-nating from its head office.

The latest scam is to deny input tax deductions on the basis that a vendor’s incoming tax invoices do not carry the supplier’s VAT registration number on every page of each invoice longer than a page!

A ‘tax invoice’ is defined in s 1(1) of the Value-Added Tax Act as follows:

‘[T]ax invoice’ means a document provided as re-quired by section 20;

And this is how s 20(1) commences:

20. (1) Except as otherwise provided in this section, a supplier, being a registered vendor, making a taxable supply (other than a supply contemplated in sec-tion 8(10)) to a recipient, must within 21 days of the date of that supply issue a tax invoice containing such particulars as are specified in this section….

Thus a tax invoice is a document, a term not de-fined in the act. But s 1(2) provides as follows:

(2) Unless the context indicates otherwise, a word or expression to which a meaning has been assigned in the Tax Administration Act bears that meaning for pur-poses of this Act.

And, as it so happens, the term ‘document’ is de-

fined in s 1 of the Tax Administration Act:

‘[D]ocument’ means anything that contains a written, sound or pictorial record, or other record of information, whether in physical or electronic form;

Thus a physical tax invoice is a document, in its entirety. There is no reference to the pages of a document, which would in any event be nonsensi-cal in the context of an electronic invoice. A page of an electronic document is largely an artefact of the software and hardware used to access it.

Then, when you look at s 20(4), you see that the document must contain specified things, and it is clear that each such thing is required only once. If SARS were correct, then all these things would have to be repeated on each page, which is such a silly argument that you can see, very clearly, that SARS is here acting beyond the law, if not, possibly, criminally:

(4) Except as the Commissioner may otherwise allow, and subject to this section, a tax invoice (full tax in-voice) shall be in the currency of the Republic and shall contain the following particulars:

(a) The words ‘tax invoice’ in a prominent place; (b) the name, address and vat registration number of

the supplier; (c) the name, address and, where the recipient is a

registered vendor, the vat registration number of the recipient;

(d) an individual serialized number and the date upon which the tax invoice is issued;



(e) full and proper description of the goods (indicat-ing, where applicable, that the goods are second-hand goods) or services supplied;

(f) the quantity or volume of the goods or services supplied;

(g) either [pricing]….

For example, you include the words ‘tax invoice’ in

only one prominent place, otherwise you would have to decide which points on the document are prominent, and then stick it in everywhere.

Because our Constitution in effect says, via the Electronic Transactions and Communications Act, that you can provide a tax invoice in electronic form, a page has no significance whatsoever in the prominence stakes.

Taxing foreign dividends: say what?

I was so taken up with tracking down the law sup-porting correspondent Andy van Heerden’s take on the current taxation of foreign dividends in 127 TSH 2013, that I failed to appreciate its economic and fiscal significance until well after publication.

What astonished him—and, now, at last, me—is that someone with R1 m in foreign dividend income would enjoy a drop in taxable income from this source from R996 300 (R1 000 000 – R3 700) in the 2012 tax year to R375 000 (R1 000 000 – R625 000) in the 2013 year! The saving is enough to buy a decent small car.

How do you make such capricious laws, and in

whose particular benefit was the change made? Did any particular party lobby for the change?

Was any corruption involved? Was the change fair to taxpayers so viciously mulcted in the past? Might the law be changed back again, just as abruptly, after its current form has served its purpose?

And then I happened to mention Andy’s letter to a colleague. Without hesitating, he exclaimed ‘Arbi-trage!’

Of course. What could be easier, offshore, to convert other forms of income to (apparent) divi-dend income and send it here, instead of those other forms? And so save a bomb.

Readers have their say: paying SARS is hard to do

Regular correspondent Carl Nielsen (Dulverton Financial Services) writes:

Please, can SARS stop its obvious policy of making it as hard as possible for taxpayers trying to pay their taxes to do so. You are stooping so low in your efforts to maximize potential for penalties, it is way beyond a joke. Here’s the latest: Log in to eFiling, set up banking details and—Huzzah!—there’s a new option (MyBills) for Standard Bank customers. Whew, that was in the nick of time. But wait. Next we hear (in the usual cack-handed, unlikely-to-reach-90%-of-the-people-whom-this-is-going-to-affect, manner) that, although the sys-tem is switched on, it don’t work. Here it is from the horse’s mouth: Standard Bank South Africa (SBSA) is currently en-

hancing the Credit Push payment option for internet banking clients.

While the system is being developed, taxpayers

are required to process their payment on eFiling and select ‘Manual Payments’ (on the Payment—General Unpaid option) meaning the payment will not be processed through eFiling but a different channel may be used, eg EFT (Electronic Funds Transfer), over the counter payment at a Standard Bank branch or at a SARS branch.

In other words, the way to process the payment on eFiling is to not process it. Criminy, let’s do things in order guys:

1. Set up a new system that works. 2. Turn it on and tell people about it. Provide easy to

access information on ‘How to use it’. 3. Turn off the old system. \

Here’s how SARS does it:

1. Switch off the old system. 2. Turn on the new system. 3. Make the new system work.

My recent trust seminar—the math, according to a reader

Feedback in SA publishing is a rare thing, so I was thrilled when no fewer than two subscribers (a huge percentage of readers, especially if I exclude myself) mentioned Peter Hamp-Adams’s (Archen-field Financial Planning) letter in 127 TSH 2013.

First, the cost per hour. If attendance cost R4 500 and the notes alone R3 900, the cost per hour (say, four hours) of attendance alone, inclu-sive of VAT, was a mere R150 an hour, not R1 000 as alleged.

Next, how many cases can I cover in four hours? Well, the seminar, as advertised, was about speci-men trust deeds, not the cases in the chronological database provided on a CD, all of which (with the help of colleagues) I covered in a day last year,

although in alphabetical order. As for the specimen deeds, attendees will con-

firm that these were comprehensively covered, precisely within the advertised time.

Then I might be able to steer business in the way of any ‘senior partner/member of a good law firm’ capable of answering a ‘list of ten pressing ques-tions’ at about R2 500–R3 500’ an hour, prepared to throw in ‘a quality precedent for about R3 500’. Such expertise matched by economy is in my ex-perience nonexistent. Two hours of advice and a deed (I don’t sell deeds) ought to cost you at least R14 000 in the real world.

Finally, if the opportunity cost of attendance is the reported R2 000, I make the total cost



R6 500—far from ‘the better part of R10 k’. As for ‘electronic-age attendance’, when it ar-

rives, and people are willing to sit, alone and inac-tive, in front of a screen for four hours, I’ll try it.

VAT: are nuts zero‐rated?

Phillip West (Finvision) on my attempt to address this issue in 125 TSH 2013:

Just some feedback on the ‘nuts’ issue: SARS con-firmed to us that they still rely on the contents of VAT News 3, issued in September 1995, where they regard ALL nuts as subject to the standard rate (this obviously excludes ‘peanuts’ which fall under item 19 of the Schedule).

I am only too happy to revisit this issue, partly be-cause I don’t fully understand my last stab at it and partly because I did not read VAT News 3 carefully enough.

Status of VAT News But first, what is the status of the long-defunct VAT News?

It is not an ‘official publication’ as defined in s 1 of the Tax Administration Act. Consequently, noth-ing it contains can amount to a ‘practice generally prevailing’ (s 1 read with s 5(1)).

But in BGR (VAT) no 2 of 1 January 2007, issued under ss 41 and 72 of the Value-Added Tax Act, SARS declared that ‘the various issues of [VAT News] will continue to be binding’ despite the wholesale disestablishment of rulings that took place at the time (thanks to the nutty actions over many years of the then CSARS).

Yet I can see nothing in s 89 of the Tax Admini-stration Act, on ‘binding general rulings’, that might possibly cover VAT News. And an electronic search of the interpretation notes and Gazette notices yields a blank. Nor is s 41B of the Value-Added Tax Act at all helpful.

Until contrary evidence arises, then, I say that VAT News is not binding on SARS. Even so, there is nothing stopping SARS from agreeing with what it says.

VAT News on nuts So what did issue no 3 actually say on nuts?

Vegetables and fruit A number of enquiries have been received asking in

what circumstances can fruit and vegetables be sup-plied at the zero rate. Where they are sold in their natu-ral or frozen state the zero rate applies. If dehydrated, bottled, canned, cooked or treated in any way other then to preserve them in their natural state the stan-dard rate applies. The standard rate also applies where they are sold as part of a meal.

Herbs (eg parsley), spices (eg ginger), green pep-pers, green mealies, garlic, chillies and mushrooms are all regarded as vegetables and may be supplied at the zero rate unless dried, canned, bottled or cooked. Slices of pumpkin or vegetables cut up as a soup mix (either fresh or frozen) can also be sold at the zero rate, but not when mixed with standard-rated items (eg dried spices). The standard rate applies to nuts.

White peanuts (if not roasted, salted or mixed with other nuts or raisins) may be sold at the zero rate, the sale of all other nuts is standard-rated. The reason for this is that a peanut is a leguminous plant.

The text of Item 13 I missed the emboldened bit, which does represent one of the ways to interpret Item 12 of the zero-ratings listed in Part B of Schedule 2 of the Value-Added Tax Act (which is to be read with s 11(1)(j)):

Item 13 Fruit, not cooked or treated in any manner except for the purposes of preserving such fruit in its natural state, but excluding dehydrated, dried, canned or bottled fruit and nuts.

How is your maths? The set fruit includes nuts and excludes peanuts (a leguminous plant and thus qualifying for a zero-rating under Item 19). Mathematically, then, Item 13 may be reduced to the following proposi-tion:

Zero-rated = [(Fruit – Nuts) + (Nuts)]

– [Dehydrated, dried, canned or bottled (Fruit – Nuts)] – Nuts

That represents the SARS view (nuts are standard-rated, full stop), and is supported by (shallow) sumptuary considerations. After all, the (misguided) objective was to cheapen everyday food (actually, retailers, not consumers, benefit from zero-ratings; costs do not determine prices), and nuts in this part of the world are an expensive luxury item.

Equally valid mathematically is this proposition:

Zero-rated = [(Fruit – Nuts) + (Nuts)] – [Dehydrated, dried, canned or bottled (Fruit – Nuts)] – [Dehydrated, dried, canned or bottled

(Nuts)]

That represents the view I expressed in 125 TSH 2013 (nuts are zero-rated unless dehydrated, dried, canned or bottled).

There is no easy way to choose between the two views, especially since you have to consider the entire supply-chain, and not just the retail environ-ment. Within that space, nuts may be supplied in shells, shelled and raw, soaked and dried, sprouted and dried, fermented and dried, and slow-cooked (I got most of that off the internet).

I am sticking to my guns Unless there is widespread knowledge and accep-tance of the SARS view, a redraft seems necessary, when a couple of issues might profitably be con-sidered:

Item 13 is a bad thing—a mixed-sign list. It starts as an inclusion in the zero-ratings list



(+ Fruit), reduces the inclusion (– Cooked or Treated Fruit), reduces the reduction (+ Preserved Fruit), and then excludes a con-junctive list consisting of two items joined by an ‘and’ (– Processed Fruit – Processed (?) Nuts).

Thus, confusingly, it represents two positive values and three negative values, in just three lines! Inclu-sions and exclusions ought to be dealt with entirely separately, not jumbled like this.

Even worse, it deals poorly with sets.

Even though it clearly recognizes that the set Fruit includes Nuts (otherwise, how could you exclude

nuts?), it does so at opposite ends of the inclusion. All controversy would vanish if only the set Fruit

had immediately been diminished, as in:

Item 13 Fruit (other than nuts)….

I am inclined to argue that, had the legislature in-tended the SARS meaning, it would have written Item 13 in this unambiguous fashion. And I would support the argument by a more carefully consid-ered sumptuary consideration: nuts that are not cooked or treated (save for sorting, washing, trim-ming, refrigeration, freezing, shelling, husking and the like) and are in addition not dehydrated, dried, canned or bottled are unlikely to be a luxury item.

Words & phrases: universitas

I hate it when people refer me to textbooks, like the colleague who recently alleged that a universitas is not incorporated, since you can only be incorpo-rated in terms of legislation. That was in response to what I had written in 104, 105 TSH 2011, based entirely upon case reports.

To repeat, this is what Van Zyl J said in Ex-TRTC United Workers Front and Others v Premier, East-ern Cape Province 2010 (2) SA 114 (ECB) (footnotes suppressed):

…. A distinction must be drawn between, on the one hand, corporate associations which are by virtue of leg-islation (statutory associations) or under the common law (universitas personarum) legal entities distinct from their members, and what are referred to as unincorpo-rated associations, on the other. For present purposes it is only necessary to deal with a universitas and an unincorporated association. The distinction between these two entities has been explained as follows in Webb & Co Ltd v Northern Rifles; Hobson & Sons v Northern Rifles: An universitas personarum in Roman-Dutch law is a

legal fiction, an aggregation of individuals forming a persona or entity, having the capacity of acquiring rights and incurring obligations to a great extent as a human being. An universitas is distinguished from a mere association of individuals by the fact that it is an entity distinct from the individuals forming it, that its capacity to acquire rights or incur obligations is distinct from that of its members, which are acquired or incurred for the body as a whole, and not for the individual members. One of the most important rights of a universitas is the capacity to own prop-erty. Being a legal persona, a universitas may sue or be sued in its own name. It derives these character-istics from the common law and it is not necessary for it to be created by or registered in terms of a statute.

A universitas is therefore a separate legal entity that has perpetual succession with rights and duties inde-pendent from the rights and duties of its members.…

In Ahmadiyya Anjuman Ishaati-Islam Lahore (South Africa) and Another v Muslim Judicial Coun-cil (Cape) and Others 1983 (4) SA 855 (C) the fol-

lowing was said:

First plaintiff is a voluntary association. A voluntary association can either be an incorporated voluntary as-sociation or an unincorporated voluntary association, ie it can either be a corporate body (universitas) or a non-corporate body. The characteristics of a corporation or universitas are that it should have perpetual succes-sion and be capable of owning property apart from its members….

And in CIR v Witwatersrand Association of Racing Clubs 1960 (3) SA 291 (A) Ogilvie Thompson JA, as he then was said:

…. The first question for decision, therefore, is whether respondent is a ‘person’ within the meaning of this sec-tion. Sec 3 of the Interpretation Act, 5 of 1910, provides that, unless the context otherwise requires or unless the statute provides otherwise, the word ‘person’, when used in a statute, includes, inter alia

‘(b) any company incorporated or registered under any law; or

(c) any body of persons corporate or unincorporate.’ In the Dutch version (c) above is rendered as ‘een

lichaam van personen, hetzij ingelijfd of niet’. In an en-quiry as to what is comprehended by the expression ‘any body of persons unincorporate’ it is, I think, note-worthy that the Interpretation Act, 33 of 1957, which repealed Act 5 of 1910, while retaining the identical English words of (c) above, renders them in the Afri-kaans text as follows: ‘Enige liggaam van persone, hetsy met regsper-

soonlikheid beklee al dan nie.’ Although the English text of Act 33 of 1957 is the

signed version, it is, in my view, permissible to refer to the Afrikaans text in order to elucidate the somewhat ambiguous English words ‘body of persons unincorpo-rate’…. Thus elucidated, it becomes clear, I think, that the expression ‘body of persons unincorporate’ as used in the Interpretation Act 33 of 1957 means a body of persons which does not have a legal persona sepa-rate from its constituent members.

Thus a universitas is referred to as a corporate body—the opposite of an unincorporated body—or, if you like, an incorporated body. QED.



Logical legal drafting # 1—purpose

If the rules of interpretation apply equally to con-tracts and legislation (Bothma Batho Transport v S Bothma & Seun Transport (802/2012) [2013] ZASCA 176 (28 November 2013)), both types of document ought to be governed by the same principles of legal drafting.

What would happen if you swept away all pre-conceptions, conventions, hubris and bad habits currently afflicting legal drafting and started afresh, step by step, to determine what constitutes good and what constitutes bad drafting?

Perhaps the first issue you would address would be the purpose of legal drafting.

The big answer is that it is all about communica-tion, whether between parties, a government and its subjects, or a bureaucracy and those under its sway.

The communicative demands of good drafting On that basis, the demands of good drafting are for the most part easily determinable:

The draftsperson has to be proficient in the drafting language.

If that is, say, English, it is insufficient that the draftsperson be merely an English-speaker: he or she must be a good and idiomatic writer. Good writers tend to be good readers, and often resort—in fact, on a daily basis—to dictionaries. They also understand the essential principles of grammar, even if nowhere near the level of professional lin-guists. (English grammar, for example, is, in its full glory, a highly complex subject, way beyond the understanding of most of us.)

Logic has to be celebrated in every drafting element, not merely for its own sake but in pur-suit of the overriding imperative—communica-tion.

Communicative logic is something you perhaps learnt a little about at school; it demands a title, an introduction, a main body of content, and a conclu-sion. But it extends also to word-order and topic-order, as well as the sense of individual elements, and their relationship to one another.

It includes as well a mathematical dimension, as demonstrated by the piece on the VAT treatment of nuts in this issue.

Drafting propositions tend to be coloured by both extensions and restrictions. These carry the logical equivalents of a positive or negative sign, in the sense that an extension might add either to a per-missive (+) or a restrictive (–) proposition or take away from either a permissive (–) or a restrictive (+) proposition. A good draftsperson will be con-scious of and strive to organize equally signed val-ues, while a bad draftsperson will treat them in a jumble, as if they all were expressed in absolute values (look it up!).

Sets, at least at an elementary level, also de-serve some attention. A bad draftsperson will ex-plicitly include within a set a pre-existing member (such as the recent inclusion of electricity in the definition of the term ‘goods’ in s 1(1) of the Value-Added Tax Act) or specifically exclude from a set a member it does not include.

Mozart and Churchill wrote and finished. The rest of us have to write and rewrite and rewrite until the finished product reflects what it is we want to say as perfectly as we are able.

A bad draftsperson ascribes personal inadequacies to a lack of time. A good draftsperson undertakes delivery within a period accommodative of the pur-suit of excellence. After all, other peoples’ lives and wellbeing are at stake.

Searchability has to be honoured.

To an ever-increasing extent, a document’s users will be accessing it electronically. They require it not only to be accessible, in the sense that it may be searched and copied electronically, but to be sufficiently consistent in its style and word-usage and number-usage so as to be reliably searched electronically.

Computability ought to be aspired to.

In an age of burgeoning complexity, what cannot be computerized is likely to become increasingly arcane. Lawyers and legislatures both exploit this fundamental truth; lawyers in order to develop an-nuity incomes, and legislators in order to be able to select their victims. Both understand only too well that their complex, obscure and inaccessible writ-ings are impossible of integration, whether by the parties or society, whether segmented or at large.

What cannot be reduced to a computer program or to input to a computer program will increasingly be neither complied with nor enforceable.

For example, there is no method on earth by which a firms’ income tax return may objectively be checked, whether by the firm itself or an outsider, yet I can tell you (and already have; 59 TSH 2008) how reliably to automate the completion of a firms’ VAT returns, and several people are in a position to tell you (but, for proprietary reasons, will probably not) how to conduct a programmatic VAT audit. The difference is that the substantive provisions of the Value-Added Tax Act are reducible to fairly straight-forward algorithms, while the Income Tax Act is an ever-growing algorithmic morass, increasingly im-possible to traverse.

Computable drafting ties back into logic, since all serious drafting ought to start out in the form of a series of algorithms, with each iteration being more detailed than the last, until the whole is ready to be expressed in the drafting language.

Feature Supplement to 128 Tax Shock Horror 2013

Cases

November 2013

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

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

Income tax— validity of additional assessment MTN International (Mauritius) Ltd v CSARS

North Gauteng High Court (2013)—75 SATC 171 (judgment delivered by Tlhapi J): A peculiar case, for a number of reasons, involving an applica-tion by the taxpayer (a Mauritian-registered company) brought under the Promotion of Administrative Justice Act for the review of procedural de-fects and the actions of SARS upon the issue by it of an additional as-sessment for the company’s 2006 year of assessment. The trouble began after the company was originally assessed to tax and a substantial refund was due to it, owing to a substantial overpayment by it of provisional tax. It contended, amongst other things, that the additional assessment issued by SARS was maliciously manipulated to prevent it from being time-barred. The application was opposed by SARS but, by the time the application came before the court, it had refunded the provisional tax—sans some interest—to the company. It was common cause that the original assess-ment was issued (whatever that means) on 1 April 2008. The taxpayer argued that, since the additional assessment was issued by SARS on 31 March 2011 and the ‘due date’ was back-dated to 30 March, the pre-scription period was manipulated and the assessment defective. Can you see the issue (pun intended)? Counsel for the taxpayer should have ar-gued that the ‘due date’ was the ‘date of the assessment’ as defined in the Income Tax Act, and, since SARS, by its own admission, had back-dated this date, the assessment was invalid. Simple. No fuss. No bother. The other peculiarities are that in one breath reference is made to an ad-ditional assessment and in another a revised assessment; SARS had the gall to ask the taxpayer to agree to an extension of the prescription pe-riod. Had SARS not manipulated the ‘due date’, a valid assessment might have existed.

Customs & excise— constitutional invalidity of sections Gaertner & Others v Minister of Finance & Others

Western Cape High Court (2013)—75 SATC 184 (judgment delivered by Rogers J): A lengthy judgment attempting to summarize aspects of the Customs & Excise Act but, I dare say, it failed to hold my attention. The taxpayer’s business premises and the homes of its directors, the appli-cants, were searched by a large contingent of SARS officials under s 4(4), which requires no search warrant. The applicants launched proceedings to have the relevant parts of s 4 permitting targeted non-routine searches to be conducted without a warrant declared unconstitutional. Sec-tions 4(4)(a)(i), 4(4)(a)(ii), 4(4)(b), 4(5) and 4(6) were declared to be in-consistent with the Constitution and invalid. The declaration was not ret-roactive, and its effect was suspended for eighteen months to allow the legislature an opportunity to amend and constitutionally validate the of-fending provisions (a bill, containing these amendments, was recently passed by the National Assembly). Furthermore, during the period of sus-pension, the law was altered by the court by way of a read-in (a convo-luted read-in, to say the least). The matter was heard, just the other day, by the Constitutional Court, which confirmed the outcome with a six-month suspension period and a watered-down read-in. In effect, searches of private homes generally require a warrant.

T S H


Briefing

November 2013 Tax crimes

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

I suspect that very few taxpayers or even tax prac-titioners are aware of the numerous criminal of-fences set out by the Tax Administration Act. If they were, and of the consequences, they might have cause for concern. Apart from offences by SARS personnel, the act envisages three types of of-fences: those involving noncompliance with ‘tax Acts’, those involving tax evasion, and those in-volving the unauthorized filing of returns.

Noncompliance with tax Acts Section 234 deals with offences involving noncom-pliance with any of the tax Acts. It provides that a person who wilfully and without just cause

fails or neglects to register or notify SARS of a change in registered particulars;

fails or neglects to appoint a representative tax-payer or notify SARS of the appointment or change of a representative taxpayer;

fails or neglects to register as a tax practitioner; fails or neglects to submit a return or document

to SARS or issue a document to a person when required under a tax Act;

fails or neglects to retain required records; submits a false certificate or statement; issues an erroneous, incomplete or false docu-

ment; refuses or neglects to furnish, produce or make

available information, documents or things, reply to or answer truly and fully any questions put to him or her by a SARS official, take an oath or make a solemn declaration, or attend and give evidence as and when required by the act;

fails to comply with a directive or instruction issued to him or her by SARS under a tax Act;

fails or neglects to disclose to SARS any material facts that should have been disclosed under the act or to notify SARS of anything that he or she is required to so notify SARS of under a tax Act;

obstructs or hinders a SARS official in the dis-charge of his or her duties;

refuses to give assistance required during a field audit or criminal investigation;

holds himself or herself out as a SARS official; fails or neglects to comply with the provisions

dealing with the collection of tax debts from third parties, if given notice by SARS to transfer assets or pay amounts to SARS under the relevant pro-visions;

dissipates assets or assists another person to

dissipate assets so as to impede the collection of taxes, penalties or interest; or

fails or neglects to withhold and pay tax to SARS as required under a tax Act,

is guilty of an offence and, upon conviction, subject to a fine or imprisonment for up to two years.

But the taxpayer’s intent is critical.

Evasion of tax Section 235 provides that a person who, with intent to evade or to assist another person to evade tax or to obtain an undue refund under a tax Act,

makes or causes or allows to be made any false statement or entry in a return or other docu-ment, or signs a document without reasonable grounds for believing it to be true;

gives a false answer, orally or in writing, to a request for information made under the act;

prepares, maintains or authorizes the prepara-tion or maintenance of false books of account or other records;

uses, or authorizes the use of, fraud or contriv-ance; or

makes a false statement for the purposes of obtaining a refund of or exemption from tax,

is guilty of an offence and, upon conviction, subject to a fine or imprisonment for up to five years.

Here, again, the taxpayer’s intent is what mat-ters.

Unauthorized filing of returns Finally, s 237 provides that a person that submits a return or other document to SARS under a forged signature, uses an electronic or digital signature of another person in an electronic communication to SARS or otherwise submits to SARS a communica-tion on behalf of another person without that per-son’s consent and authority, is guilty of an offence and, upon conviction, subject to a fine or to impris-onment for up to two years.

Conclusion To summarize, a comment by Costa Divaris in a recent set of seminar notes:

A criminal offence is committed…only if the sanctioned act or omission is proven, the act or omission fails the wilfully and without just cause test (in other words, there must be an intentional fault), and a court finds the defaulter guilty, the state having to prove guilt. t s h


Davey’s Locker

November 2013 Multiple-trust structures A capital gains tax pitfall

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

I am not a fan of multiple discre-tionary trusts in a pyramid struc-ture. Although I concede that there are circumstances in which such structures can ring-fence trust assets, generally speaking, a well-drafted, single discretion-ary trust will suffice. In fact, a danger of the multiple-discretionary-trust structure is SARS’s approach to the CGT im-plications.

Conduit principle The effective rate of CGT for natural persons is 6,5 to 13,3%, while a trust’s effective rate is 26,7%.

Nevertheless, courtesy of para 80(2) of the Eighth Sched-ule to the Income Tax Act, a capital gain realized by a trust may be attributed to a benefici-ary who is a natural person. In other words, the conduit princi-ple results in the application of the lower rate relevant to natural persons.

CGT pitfall The SARS interpretation (as evi-denced by Comprehensive Guide to Capital Gains Tax—Issue 4) is such that, within a multiple-trust structure, a second attribution is not recognized for CGT purposes. To quote:

Example—Consecutive vesting of capital gain by multiple trusts

Facts: Trust B is a beneficiary of Trust A

and Walter is a beneficiary of Trust B. Trust A and Trust B are discretionary trusts.

Trust A disposes of an asset in year 1 resulting in a capital gain which the trustee vests in Trust B in the same year of assessment. The trustee of Trust B then vests the same capital gain in Walter in year 1. All parties are residents.

Result: Under paragraph 80(2) the capital

gain must be disregarded by Trust A and accounted for by Trust B. The attributed gain in Trust B in not one that arises from the disposal of an asset by Trust B. It cannot therefore be on-attributed to Walter.

A band-aid CGT solution would be to add the ultimate natural person beneficiaries to all the trusts in the structure, thereby ensuring the ability to attribute such gains directly.

[This topic, of a ‘dead trust bounce’, was also covered in 54 TSH 2007, 63 TSH 2008 and 79 TSH 2009.—Ed]

t s h


Shortcut Keys in Word by Duncan S McAllister ©2013

November 2013

Captions

If you work with large documents involving sequen-tially numbered objects, such as equations, figures and tables, you may find MS Word’s Captions fea-ture useful.

A caption is a sequentially numbered heading, which can be placed above or below the target object. It consists of a ‘label’ and a number. For example, ‘Table 1’ is a caption comprised of the label ‘Table’ and the number ‘1’.

There are three types of default captions, namely, equations, figures and tables. Here I illus-trate the use of captions for tables.

To bring up the Captions dialog box, use one of the following shortcut sequences:

ALT, I, N, C Word 2003, 2007 & 2010 ALT, S, P Word 2007 & 2010

Say that you will be inserting numerous tables in your document and wish to number them sequen-tially. Insert the first table (ALT, A, I, T). Next, place your cursor anywhere in the table and open the Captions dialog box, using the shortcut sequence just described. Table 1 will appear in the Caption box. You can add to the text in this box, for exam-ple, by typing ‘—Prescribed rates of interest’.

Tab once (or ALT + L) and the Label combo box should state ‘Table’. The other options in the drop-down list are Equation (E) and Figure (F).

Tab again and you will be at the position combo box. There are two options: ‘above selected item’ and ‘below selected item’. Since table headings are usually inserted above a table, ensure that you select this option.

Tab again and you will find a checkbox entitled

‘Exclude label from caption’. If you check this box by pressing the spacebar or ALT + E the caption will simply show the table number followed by the addi-tional text you inserted after it.

Since you want ‘Table 1—Prescribed rates of in-terest’ above your table and not ‘1—Prescribed rates of interest’, leave the checkbox unchecked.

Three buttons follow: New Label (ALT + N), Num-bering (ALT + U) and Auto Caption (alt + A).

The New Label button is used if you want to cre-ate a label other than equations, figures or tables. For example, this facility could be used to create an ‘Example’ label, which you could use to serve as part of the heading in sequentially numbered examples such as Example 1, Example 2 and so on.

The numbering button can be used to select a different style of table numbering, such as Roman numerals or alphabetical letters.

Finally, the Auto Caption button can be used automatically to insert the labels every time you insert a new table. There is a long list of objects to which you can apply this feature but the one appli-cable in the present context would be Microsoft Word Table.

Check that checkbox by pressing the spacebar if you want to activate auto insertion of the caption every time you create a new table. Do not select this feature if you plan to have some tables in your document without numbered headings. The long list of objects can be navigated by using first-letter navigation.

t sh


November 2013

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

‘The slaying of a beautiful hypothesis by an ugly fact’

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

The perils of reasoning by infer-ence and relying on circumstan-tial evidence were well illustrated by what happened in S v Nkub-ungu 2013 (2) SACR 388 (ECM).

The accused, a teacher and deputy principal at a secondary school, had been convicted by the trial court of murdering the deceased, a district manager in the Department of Education in that district.

There had been unhappiness over the appointment of a princi-pal at the school at which the accused worked, and, although the accused had applied for the position, another person had se-cured it. This unhappiness, on the part of the accused and the school governing body, led to the stopping of the introduction of the new principal. The accused was integral in stopping his introduc-tion.

On the day following that on which the new principal was sup-posed to be introduced, the ac-cused visited the offices of the deceased.

The deceased was found lying on the floor on his back in a pas-sage outside his office. He had been fatally shot, and the ac-cused was found standing next to the body, about four paces away from it, with his shirt stained with blood. No other person was found on the scene.

The accused was charged with murder. The case for the state

relied heavily on circumstantial evidence, since there was no direct evidence. The circumstan-tial evidence was sufficient to convince the trial court of the accused’s guilt.

The Eastern Cape High Court was, however, not convinced. Eksteen J (with whom Bartle J agreed) set out the two ‘cardinal rules of logic’ stated by Water-meyer JA in R v Blom 1939 AD 188 at 202–3, which have been relied on by our courts so often and with such great authority that they have attained a status ap-proaching that of a legislative enactment:

(1) The inference sought to be drawn must be consistent with all the proved facts. If it is not, then the inference cannot be drawn.

(2) The proved facts should be such that they exclude every rea-sonable inference from them save the one sought to be drawn. If they do not exclude other reasonable in-ferences, then there must be a doubt whether the inference sought to be drawn is correct.

Most cases involving circumstan-tial evidence turn on whether the second rule has been satisfied. In this case, the court could not get past the first. That rule, as HC Nicholas observed (in Fiat Iustitia: Essays in Memory of Oliver Deneys Schreiner (1983) 312 at 317, cited by Eksteen J at

[23]),

was given striking expression by TH Huxley: The great tragedy of Science—the slaying of a beautiful hypothesis by an ugly fact.

The ‘ugly fact’ in Nkubungu’s case was that the accused did not have a gun in his possession when he was found and could not have had sufficient time, between the shooting of the deceased and the time when he was found, to have disposed of a firearm.

The rule found this expression in the work on evidence by Star-kie:

[I]f any one established fact be wholly irreconcilable with the hy-pothesis, the latter cannot be true. Such an incongruity and inconsis-tency is sufficient to negative the hypothesis, even although it coin-cide and agree with all the other facts and circumstances of the case to the minutest extent… [I]f the incongruity cannot eventually be removed, the hypothesis must fall, although no other can be sug-gested....

In this case an attempt had been made by the state to remove the incongruity: forensic tests were carried out to determine whether any primary residue was present on the accused’s hands. These proved negative. The inexorable conclusion, then, was that the

November 2013


first rule could not be overcome. For this reason alone, the convic-tion could not stand.

But the court turned, in any event, to the second rule, and found that this, too, had not prop-erly been observed by the trial court, which had erred in not ex-ploring a reasonable alternative to the hypothesis relied on by the state.

There was no evidence of the distance from which the de-ceased had been shot, and there was uncontroverted evidence that there were several people seated on a bench close to the door of the deceased’s office close to the spot in the passage where he was shot. These ‘other co-existing circumstances’, said Ek-

steen J, certainly served to weaken the inference sought to be drawn. And, once it was ac-cepted that a rival theory such as this—that some other person may have shot the deceased—was reasonably possible, what was required was an examination whether there was ‘sound reason to exclude [i]t’ (at [30]).

This the trial court did not do. Eksteen J stressed that he did

not, in making these observa-tions, lose sight of the fact that, when the first witness began to emerge from the offices, the ac-cused and the deceased were the only persons present in the passage. This fact was not de-structive of the rival theory, since it was a ‘reasonable human reac-

tion for unsuspecting persons to flee the scene immediately when gunfire occurs in their immediate vicinity’, and, further, ‘human ex-perience teaches us that where a criminal commits an offence of this nature he frequently flees from the scene immediately so as to escape detection’. The fact that people were not seen in the pas-sage immediately after the shoot-ing did not, then, detract from the cogency of the evidence that people were present in the pas-sage very shortly before the shooting.

The failure of the trial court to explore this rival theory was thus clearly a mistake in the light of the second rule in Blom.

t s h

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