June 2010® ‘A Better Life For All—FIFA · © 2010 C Divaris/The Electronic Publishing Corp CC Postnet Suite 72 Private Bag X87 BRYANSTON 2021 Phone 011-234-2434 Fax 086-515-0955

© 2010 C Divaris/The Electronic Publishing Corp CC Postnet Suite 72 Private Bag X87 BRYANSTON 2021 Phone 011-234-2434 Fax 086-515-0955 [email protected].

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

His Excellency, Comrade the rev Dr Francois ‘Papa Doc’ Duvalier-Leckett, spokesperson in the Office of Costa Divaris:

‘A Better Life For All—FIFA’

—Cabinet offers to sell SA to world soccer body for R1, subject to restraints payable to President, senior ministers and Julius Malema.

In this issue: Listing Notebook Cases Briefing Davey’s Locker Evidence corner Shortcut keys in Word Accessibility: You can switch your subscription to the Word version of this newsletter, also free.

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue # 86

Unless otherwise indicated, everything listed here is cumulatively included in the Tax Shock, Horror Database, which is available monthly, quarterly or even individually on DVD by post for R140 per month inclusive of VAT at 14%.

SARS flyer 11 September 2009: ‘Phasing out of cash payments at SARS branches’. As pointed out in 85 TSH 2010, this initiative is illegal, constituting a violation of s 17 of the South African Reserve Bank Act. The Commissioner simply cannot refuse to accept legal tender.*

De Rebus December 2009: Why did no one tell me? Why did it have to wait until I caught up with my reading? Here is Darren Margo reaching critical mass over Interpretation Note 50 on R&D (77 TSH 2009). The bit that sent my eyebrows skyward was his ac-cusation that, after the allegedly poor show put on by SARS, SA’s membership pros-pects in the OECD ‘are surely placed in jeopardy’. (I have a clipping on file—79 TSH

2009—recording some favourable things Mr Margo had to say about the s 11D al-lowance itself & how it had helped his clients.)

De Rebus February 2010: Blow me down if Kosie Louw (SARS) doesn’t respond by laying into Mr Margo with disciplined vigour. It’s a devastating riposte.

De Rebus March 2010: Mr Margo tries desperately to show he is waving, not drowning. SARS payments 19 March 2010: FIN–RA–L01 rev 0 ‘Acceptable instruments of payments for noncore

taxes. Why does SARS carry this on its website when it has been supplanted by FIN–GP–02–GU1—A3 rev 0?*

SARS payments 24 March 2010: FIN–CH–L20 ‘ “Nontransferable” cheque payments’. Effective as from 1 April 2010.*

The Taxpayer May 2010: Trevor Emslie SC comes to the following conclusion on para 80 of the Eighth Schedule to the Income Tax Act:

And as CGT only applies to residents of South Africa, except in relation to immovable property (or an interest in immovable property) or the assets of a ‘permanent establish-ment’ in South Africa, there is no liability for CGT in the hands of a non-resident benefici-ary in respect of the disposal of other assets (in the absence of a permanent establish-ment) by a trust which vests the resulting gain in such non-resident beneficiary.

As one of my correspondents puts it, this represents a ‘continuation of the myth that trusts can distribute capital gains to nonresidents free of CGT’. In 79 TSH 2009 I thought I had disposed of the same idea expressed in the same publication by David Clegg & endorsed by none other than the esteemed David Meyerowitz SC. Strangely, Mr Emslie forgot to mention their contribution to the debate. As for TSH, if you’re high in the fiscal food chain, you might be inclined to believe that you have nothing to learn from it.

SCA decision 07 May 2010: Nkengana v Schnetler (65/09) [2010] ZASCA 64. This was about per-

June 2010®(For sale, cheap.)

0 0 8 7 7 1 9 2 6 4 3 3 Tax Shock, Horror newsletter by Costa Divaris Issue # 87 Database items: 7 192 Subscribers: 6 433.

87 Tax Shock, Horror 2010—June—2


formance under a property deal, with lots of loose ends bedeviling the facts. But performance is a critical issue in taxation, since it can determine the timing of a chargeable event (see 82 TSH 2010). Griesel AJA, who delivered the unanimous de-cision of the court, said (footnote removed):

[12] It is settled law that every party to a binding contract who is ready to carry out its own obligations under it has a right to demand from the other party, so far as it is possible, performance of that other party’s obligations in terms of the contract. Accordingly it was not disputed on behalf of the respondent that, for so long as the original deed of sale re-mains uncancelled (as in this instance), it remains open to the appellants—even at this late stage—to claim specific performance of the original agreement while tendering per-formance of their reciprocal obligations.

The authority cited was Farmers’ Co-operative Society v Berry 1912 AD 343 at 350. BPR 081 19 May 2010: Severe sleep-deprivation is the condition under which all issues of

this newsletter are prepared & so cannot excuse my thinking that it was para 9(7A) of the Seventh Schedule to the Income Tax Act rather than the stated para 9(7) that was the subject-matter of this binding private ruling. See the Monthly Tax Notebook.

GN 466 GG 33235 28 May 2010: Allocations to metropolitan municipalities of the general fuel levy reve-nue under item 3(2)(a) of Schedule 1 of the Taxation Laws Amendment Act 17 of 2009.

Parliament June: Let me get this off my chest. What is Parliament doing? Not that I’m complain-ing, but I think that bills & acts are emerging at the slowest pace in history. It must be the F*F* World Cup, which has brought everything except the ball to a standstill.

SARS Legal & policy June: It is gratifying to note that RF 1/98 has now been correctly posted to the up-dated lists of SARS practice notes. But GN 144 GG 32991, GN 148 GG 32979 & GN 151

GG 32991 continue to be listed as regulations yet were published as notices.* SARS What’s new June: And what a pleasure it is to report that this month the SARS ‘What’s new’ sec-

tion has been professionally compiled.* New IRP 6 form June 2010: As usual, undated, this seemingly genuine SARS tsatske demands that ‘a

new format IRP 6 return’ must be used by provisional taxpayers as from 26 June 2010. It bears no title but its filename is ‘Letter to inde eFilers regarding 2010 filing (IRP 6)’. ‘Old format’ returns ‘will no longer be available on eFiling as from this date’. Can you even begin to imagine the incompetence of an institution that continues to make profound systemic changes, seldom authorized in law, on the fly? I reckon the megalomaniacs involved at SARS must be some of the scariest people on the planet. We urgently need to launch a war against someone—anyone—so as to enlist them & thus divert their energies before they destroy & consume us.

New IRP 6 form June 2010: Also undated but at least obtained directly from the SARS website is this tsatske addressed to ‘Dear Taxpayer’ & headed ‘Changes to the provisional tax process’. I don’t know when this item was posted (certainly not before June) but it is effective as from 28 June 2010. Megalomania at this level is truly scary. I would deal with these blokes only if heavily armed & in the presence of trusted bodyguards in greater number than those they must surely employ in order to protect themselves from the righteous wrath of the taxpaying populace. Raving lunatics! Incompetents! My greatest fear is that their seemingly ramshackle IT systems & procedures will one day fail, plunging the entire country into the abyss.*

New VAT 201 form June 2010: Also undated & not so much scary as simply bloody stupid is the intro-duction, without any real notice, of a new VAT return. How were vendors meant to adapt to the change? Tell me this, Arseholes, did any of you ever hold down a re-spectable job in the real world? What about vendors with integrated accounting/VAT systems? They might require months to adapt. No document supports this item.*§

eFiling June 2010: Also undated & undocumented is the news that ‘Investec has been inte-grated into the SARS eFiling channel’. It sounds painful.*§

Updated guide 01 June 2010: AS–UIF–01 rev 4 ‘Quick reference guide on unemployment insurance fund’.*

New guide 01 June 2010: AS–UIF–01–FAQ1 rev 0 ‘Frequently asked questions—unemployment insurance contributions fund’.*

Updated guides 01 June 2010: AS–SDL–01 rev 2 ‘Quick reference guide for skills development levy’. With AS–SDL–01–A1 rev 1 ‘Fasset codes & contact details annexure’; AS–SDL–01–A2 rev 1 ‘Bank SETA codes & contact details annexure’; AS–SDL–01–A3 rev 1 ‘CHIETA

SETA codes & contact details annexure’; AS–SDL–01–A4 rev 1 ‘CTFL SETA codes & con-tact details annexure’; AS–SDL–01–A5 rev 1 (CETA SETA); AS–SDL–01–A6 rev 1 (ETDP

SETA); AS–SDL–01–A7 rev 1 (ESETA SETA); AS–SDL–01–A8 rev 1 (FOODBEV SETA); AS–SDL–01–A9 rev 1 (FIETA SETA); AS–SDL–01–A11 rev 1 (ISETT); AS–SDL–01–A12 rev 1 (INSETA); AS–SDL–01–A13 rev 1 (GWSETA); AS–SDL–01–A13 rev 1 (MAPPP SETA); AS–



SDL–01–A15 rev 1 (MQA SETA); AS–SDL–01–A16 rev 1 (MERSETA); AS–SDL–01–A17 rev 1 (SASSETA); AS–SDL–01–A18 rev 1 (GRISETA); AS–SDL–01–A19 rev 1 (PSETA); AS–SDL–01–A20 rev 1 (Services SETA); AS–SDL–01–A21 rev 1 (THETA SETA); AS–SDL–01–A22 rev 1 (TETA SETA); AS–SDL–01–A23 rev 1 (W&RTETA SETA). I know what you must be asking: ‘Well, where is AS–SDL–01–A10?’ Where, you might as well ask, is HWSETA? If I were not laughing so much, I’d be crying. (It’s always the CHIETA SETA that sets me off.)*

New guide 01 June 2010: AS–SDL–01–FAQ1 rev 0 ‘Frequently asked questions on skills devel-opment levy’.*

eFiling updated SOP 01 June 2010: AS–EF–10–S1 rev 1 ‘Standard operating procedure—activate/deactive eFiler’. Ask no questions, hear no lies.*

eFiling registration 01 June 2010: AS–EF–05 rev 1 ‘eFiling registration’.* Draft bills 01 June 2010: This, a little Birdie told me, is the day on which the parliamentary

portfolio committee held public hearings on the draft Taxation Laws Amendment Bills. Yet the date for the public to submit comments was set as 11 June 2010! Ac-cording to Parliament’s committee section:

Further consultation in the form of workshops will take place between National Treasury/SARS & stakeholders. Details of these workshops you may request from Ms Cindy August (National Treasury) on 021 4646114/5. The Committee must still determine a date where National Treasury/SARS must report-back to the Committee on submissions & concerns raised during the public hearings & workshops.

And, yea, verily, my colleagues, left & right, are being invited to such workshops, with nary an invitation directed at moi. Public Enemy #1, Keith Engel (National Treasury) is busy, busy, busy, always hurtling along his destructive, mindless path. It’s not, I imagine, that he is unable to twig that those able to afford to attend these bun fights—a detumescence of vested interests & academics—are the very last ones he wants to make an input. It’s just that he enjoys the attention they bestow upon him. I’m sure its Yes, Prof, No Prof, three bags full, Prof, from morn to dawn.§

SARS release 01 June 2010: Accused pleads guilty to charges of possession & dealing in illicit goods.*

Treasury release 01 June 2010: MOF’s meeting with the banking industry (with annexure §). SARS release 02 June 2010: SARS customs officials detain 33 000 suspected counterfeit Bafana

Bafana jerseys.* Business Day 03 June 2010: ‘The ANC has its own investment company that relies on empower-

ment deals, thus it relies on black business for funding, & in turn black business re-lies on the ANC for tenders.’—Jenny Cargill, at the Cape Town Press Club.

Business Report 03 June 2010: SARS officials seize suspect Bafana jerseys, bringing the total of such goods seized so far to R100 m.

Business Day 03 June 2010: The South African Reserve Bank Amendment Bill amounts to ‘na-tionalization by stealth’—Professor Chris Visser (UWC School of Business), who ar-gues that the SARB should either ‘respect shareholders’ rights or fully compensate [them] financially for the loss of their rights’. I must say that my own sympathies have swung, holus bolus, over in favour of the private shareholders.

Sake24 03 June 2010: Some very serious allegations by disgruntled SARB shareholders. Sake24 03 June 2010: One of life’s little mysteries—why would anyone ever be in favour of

nationalized enterprises & ever-larger government?—is being cleared up for me this month. Take this report on Eskom’s R2,3 b (Yes, ‘b’) provision for bad debts, 60% of which is attributed to Soweto, & most of which is older than four years. Being in government means that you can do exactly what you bloody please. Wouldn’t it be interesting to see the national accounts restated so as to incorporate the fine ac-complishments of the parastatals? Next, try this thought experiment: imagine the accounts then restated further, so as to include, at their market value, all the ‘public’ assets, mostly poorly catalogued or even unrecorded, amassed by the Nats & their predecessors. This simply has to be one of the richest nations on earth.

Beeld 03 June 2010: Or this denial by the Tshwane municipality that it favours ‘ANC dis-tricts’ in deciding whose services to cut for nonpayment. A municipal official puts fail-ures to terminate services to nonpayers down to bribery. So that’s OK, then.

GN 475 GG 33241 04 June 2010: Request for a levy in the red meat industry under the Marketing of Agricultural Products Act.

SARS release 04 June 2010: Two more busts net R17 m suspected counterfeit soccer shirts.* SARS release 04 June 2010: 500 000 DVDs worth R27 m destroyed.* SARB speech 04 June 2010: By the deputy governor at the financial market department’s annual

cocktail function.



SARB release 04 June 2010: The governor ‘presents to’ the parliamentary standing & select com-mittees on finance on the South African Reserve Bank Amendment Bill, 2010.

Beeld 04 June 2010: The wider community, prominently including Free State farmers, gets together to sort out the township of Phahameng. If you want service delivery, who are you gonna call?

Business Day 04 June 2010: More discussion on the South African Reserve Bank Amendment Bill. The Economist 05 June 2010: ‘If governments set out to create inflation, investors are likely to no-

tice and react.’ Even if inflation could be created, it is unlikely to reduce real gov-ernmental debt. First, unfunded retiree benefits are effectively indexed to inflation. Secondly, the maturity profile of governmental debt is usually short. Thus inflation will lead to higher nominal rates. Even if governments could force & keep interest rates down, they would run into the consensus supporting low inflation.§

Business Times 06 June 2010: NPA scuppers deal between King, SARS. A settlement of no less than R630 m was allegedly on the table. Meanwhile a UK court has lifted a freezing order on some of Dave King’s ‘entities in that country’.

Sake24 07 June 2010: On the address by Daniel Mminele (SARB), which is seen as a re-sponse to a report by Peter Attard Montalto (Nomura International) predicting that, perhaps as soon as October 2010, the Treasury is going to transfer funds to the SARB to increase the purchase of foreign reserves, & will relax exchange controls even further.

Sake24 07 June 2010: She Who Must Be Obeyed reportedly instructs SCOF to pass her bill on the SARB without amendment. Perhaps I mistranslate.

Updated guide 08 June 2010: Issue 3 of the magisterial Comprehensive Guide to CGT by Duncan McAllister (SARS) has been replaced on the SARS website in order to cater for three amendments listed at the back of the Guide. ‘The main reason’, says Duncan, ‘for this was to correct the interpretation of para 51(2)(b)(ii).’ This is the CGT provision al-lowing ‘an interest in a residence’ (bloody dumb term, if you ask me) from a trust to a natural person free of targeted transaction costs.

SARS release 08 June 2010: 15 750 counterfeit jersey’s detained at Kopfontein border post.* Treasury release 09 June 2010: MOF’s meeting with the Manufacturing Circle. Sake24 09 June 2010: MOF confirms that the circular to municipalities warning them not to

buy soccer tickets for politicians & their spouses has not been withdrawn. Even though no such circular was sent to national governmental departments, the same rules apply against fruitless & wasteful expenditure.

Updated tables 10 June 2010: Table A & Table B of average exchange rates updated.* SARS release 10 June 2010: Exemption for fringe benefit tax on 2010 FIFA World Cup items. See

the Monthly Notebook.* Beeld 10 June 2010: The well-known Magnus Heystek’s story of his treatment at the

hands of the SARB. It turns out that he was indeed the victim of the forfeiture to the SARB reported in 59 TSH 2008. In 1995 he goes to an ATM, only to find all his ac-counts blocked—by the SARB, which, he discovers, alleges that the excon amnesty was wrongly granted to him. Without access to funds, he is compelled to negotiate, unrepresented, with the SARB. Barring one account held as a ‘deposit’, his funds are released. He hears nothing until, in February 2008, the blocked account, containing R194 113,66, is seized. In August 2009 he is in the Pretoria High Court, against the SARB, whose senior counsel repeatedly refers to him as ‘the accused’. On 12 January 2010 the judgment on the merits is handed down—in Mr Heystek’s fa-vour, & unflattering of the SARB, which has apparently taken it on appeal.

The Times 10 June 2010: Only four of the 247 municipalities audited by the Auditor-General for the year to June 2009 were given unqualified audits. For the rest, losses amounted to R5 b & unauthorized spending to R2,4 b.

Beeld 11 June 2010: Workers at Eskom’s Medupi power station in Limpopo are given free lunches, outside of any company canteen, cafeteria or dining room, & thus taxable. How do I know this? I am looking at a photograph of their lunch-packs, unrelieved of their contents, save by the force of impact, launched against the administrative buildings, in protest against free, cold lunches. They have been lobbying for more than a year for free, warm lunches. I say: Let these swine, hot or cold, eat tax!

Sake24 11 June 2010: SARS tables law exempting R750 worth of gifts to employees having Business Day to do with the World Cup with effect as from 1 March 2010 & before 11 July 2010. BPR 087 14 June 2010: CGT consequences arising from restructuring activities involving

trusts.* SARS release 14 June 2010: SARS & SAPS seize R25,6 m of narcotics.* SARB release 14 June 2010: Governor on the expiry of the term of office of Dr Renosi Mokate,

deputy governor, on 31 July 2010.



Business Day 14 June 2010: Editorial on Transnet & its recognition of primary responsibility for the 3% decline in coal exports over the past five years.

Business Report 14 June 2010: The MOF, writing in his personal capacity, about SA’s achievements in hosting the World Cup. He continues to impress in his new role, this being the best & probably most reliable item of its kind I have read. How, I wonder, does the world’s most successful failed state have (post-1994) such good finance ministers?

GN 599 GG 33300 15 June 2010: Imposition of levies on medical schemes under the Council for Medi-cal Schemes Levies Act.

SARS release 15 June 2010: Three men arrested for attempted smuggling of 48,3 kg of rhino horn valued at R2 416 750.*

The Star 17 June 2010: Anger over arrests of orange ‘ambush’ fans. Crime is out of control but we manage to beat up on citizens of the Netherlands having a bit of fun, all in the name of the protection of intellectual property; FIFA’s property.

Concourt decision 18 June 2010: Case CCT 89/09 [2010] ZACC 11. The issue here was whether the municipal or provincial spheres of government, or both, enjoy the ability to rezone land & establish townships. The wonderful ambiguity that has until now prevailed in this space has enabled those with influence or a willingness to bribe to wreak havoc with so-called town planning through the property-equivalent of treaty-shopping. Know this: in future all bribes are to be offered solely to your local municipality.§

New guide 21 June 2010: FIN–GP–02–GU1 rev 0 ‘Reference guide—SARS payment rules’. With FIN–GP–02–GU1—A1 rev 0 ‘SARS payment rules—payment examples’; FIN–GP–02–GU1—A2 rev 0 ‘SARS payment rules—SWIFT message example’; FIN–GP–02–GU1—A3 rev 0 ‘SARS payment rules—acceptable methods of payments for noncore taxes’; & FIN–GP–02–GU1—FAQ1 rev 0 ‘Frequently asked questions—SARS payment rules’.*

SARB release 21 June 2010: Appointment of Naidene Ford-Hoon to the position as head of the financial services department & CFO, with effect as from 19 July 2010. She takes over from Gerrie Terblanche, who will soon go into retirement.

Business Day 22 June 2010: SARS recovers R106 m through prosecutions. This three-year effort somehow strikes me as being unimpressive in an economy that is perhaps as much as one-third unrecorded.

SARB release 23 June 2010: Dr X P Guma has been appointed as senior deputy governor by the President in consultation with the governor with effect as from 29 May 2010.

Business Day 23 June 2010: SARS forked out R352 m on anticorruption, security. This two-year effort appears to have enjoyed not much success in rooting out bribery.

Updated guide 24 June 2010: Another small amendment has been made to the Comprehensive Guide to CGT. There are two ways to view such changes. 1. What the hell! Upload-ing & downloading are so easy, why not keep this baby up to date on a daily basis? 2. Update at fixed intervals, so that you don’t end up with each taxpayer or SARS of-ficial referring to a different version of the work; if necessary, keeping a regularly updated roster of intended changes available on the SARS website. Once you realize that workers in this field have to deal with hundreds of different documents, out of a total population of thousands, you cannot go for the first choice unless SARS has a website approaching the mundane rationality & stability of the Tax Shock, Horror Database or can source some brilliant, futuristic, online file-management system without financing the ANC’s next election campaign.

SARB speech 24 June 2010: Dr M Mnyade (SARB) at the launch of the June 2010 Quarterly Bulle-tin.

The Times 24 June 2010: The brilliant Jonathan Jansen (UOVS): ‘For the Cup, we deliver; but serving citizens is a problem.’

Sake24 24 June 2010: The backlog of Johannesburg municipal rates-clearance certificates stands at 45 000.

Sake24 24 June 2010: The Johannesburg municipality admits the backlog but denies its extent. At any particular time the backlog stands, it avers, at about 2 000.

dailyview 24 June 2010: Brian Kantor (Investec) (OK, so I used to rag the guy; now I see his point):

The evidence that inflation has so little to do with inflationary expectations will hopefully encourage the Reserve Bank to ignore inflationary expectations and focus on the domes-tic causes of inflation over which they do have some influence. The concern with infla-tionary expectations that forced interest rates up and kept them up has proved highly damaging to the SA economy—damage that is still being sustained in the form of lost output and employment.

GN R 566 GG 33326 25 June 2010: Amendment of the rules (DAR/71) under ss 21 & 120 of the Customs & Excise Act.

Business Day 25 June 2010: SA urged to curtail state spending to weaken the rand—advice from



Chile’s former finance minister, Andres Velasco, & Ricardo Hausmann (Harvard).§ Companies 25 June 2010: Francois van der Merwe (The Tobacco Institute of SA) says that 20% & Markets of cigarette sales are illegal. The revenue loss is R2,2 b in tax & R2,2 b in sales. New FAQs 28 June 2010: AS–IT–PT–05-FAQ2 rev 0 ‘Frequently asked questions—provisional

tax’. Does SARS really believe that anyone really believes that its FAQs are really FAQS, as opposed to a tiresome chore delegated to some fiscal Sad Sack?*

Business Day 28 June 2010: Phillip de Jager (UCT) says that banks should ‘drop the anticompeti-tive use of prime as the reference rate for interest calculations [see 85 TSH 2010] in favour of the Johannesburg Interbank Agreed Rate’. I just don’t get it.

Business Day 29 June 2010: SARS steps up control over illegal imports. Business Day 29 June 2010: SA is losing out because of increases in real wages, electricity, utility

& transport costs & a currency that is 25% overvalued, says Peter Montalto (No-mura International). Sell dollar puts, he says, accumulate reserves at a faster pace, & relax outflow exchange controls. Such measures ‘would be enough to shift the trend in the currency without provoking an uncontrolled sell-off’.

Sake24 29 June 2010: New VAT form to help root out fraud. Yeah. New IN 30 June 2010: Interpretation Note no 58 ‘The Brummeria case & the right to use

loan capital interest free’. I am not even looking at this, since it is bound to be the greatest codswallop ever. But I will say that Brummeria is the most stupid tax case ever reported (see 55 TSH 2007 & 58 TSH 2008).*

Draft IN 30 June 2010: Draft interpretation note on trading stock applied, distributed or dis-posed of other than in the ordinary course of trade.*

Updated IN 30 June 2010: Interpretation Note no 33 (Issue 2) ‘Assessed losses: companies: the ‘trade’ & ‘income from trade’ requirements’.*

SARS release 30 June 2010: South African gets World Customs post. Erich Kieck (SARS) to head capacity building at the World Customs Organization.*

Beeld 30 June 2010: More on the reasons for nationalization: to date, state entities have spent R48 m on tickets to the World Cup.

SARB blonde moment 30 June 2010: The SARB claims to have added to its publications a document on so-called Nigerian letter scams it first released on 25 January 2005.

SARS updates 30 June 2010: SARS officials have moved heaven & earth to fix the glitch (‘a browser compatibility issue’) preventing me from becoming a subscriber. Alas, now that I can at last access the service I see that stupid, illegal ‘terms & conditions’ are still inex-tricably intertwined with it. No, it’s worse. SARS purports unilaterally to apply these to any visitor to its site. Just how many times do I have to ask someone, anyone, to read s 12(8) of the Copyright Act? This is what it says:

(8)(a) No copyright shall subsist in official texts of a legislative, administrative or legal na-ture, or in official translations of such texts, or in speeches of a political nature or in speeches delivered in the course of legal proceedings, or in news of the day that are mere items of press information. (b) The author of the speeches referred to in paragraph (a) shall have the exclusive right of making a collection thereof.

How do I know about s 12(8)? Because, before I launched the Tax Shock, Horror Database, I sought advice from one of the best IP practitioners in the country.

SARB invitation 01 July 2010: For comments on the proposed Exchange Control Voluntary Disclo-sure Programme & amendment of the Exchange Control Regulations, 1961.

SARB release 01 July 2010: Proposed Exchange Control Voluntary Disclosure Programme & amendment of the Exchange Control Regulations, 1961.

SARB VDP offer 01 July 2010: Voluntary disclosure programme. This is a brilliant idea, removing some insane quirks in the excon system. If you or your clients miss this opportunity to regularize all excon affairs, frankly, you’re nuts. Opportunities for levy-free report-ing & regularization are afforded to or on immigrants, foreign inheritances & lega-cies, foreign-earned income, unauthorized foreign loans, approved foreign invest-ments, & unauthorized foreign corporate investments. Administrative relief is also of-fered for looped structures & donors to discretionary trusts. And general administra-tive relief is offered on a variety of contraventions. The deadline is 31 October 2011.

New excon regulation 01 July 2010: Regulation 24 on ‘administrative relief’. Also a memorandum on the objects of regulation 24 & the VDP.

SARS speech 01 July 2010: The cipher whose image adorns the SARS website on the launch of Tax Season 2010. Only a month ago, the ‘tax season’ was called the ‘filing season’.*

SARS release 01 July 2010: Start of the 2010 tax season for millions of SA’S taxpayers.* 2010 tax season 01 July 2010: ‘How to complete your individual tax return (ITR 12)’; ‘IT 12–

Comprehensive Guide 2010’; ‘ITR 12 quick guide—how to eFile your income tax re-turn (ITR 12); ‘How to complete the return of income: trust (ITR 12)’; ‘How to com-



plete the IT 14 return’; ‘How to eFile your provisional tax return’; ‘Personal income tax (PIT)—Taxpayer centricity (client—approach functionality on eFiling’ (I’m not making this up); ‘Source codes 2010’; ‘Tax rate tables 2006–2010’; ‘Budget 2009/10—tax pocket guide’ (from the latest Budget); AS–GN–32-S1 rev 0 ‘Standard operating procedure—submit notice of objection or appeal—eFiling’ (7 December 2009; the filename restricts this to individuals); ITR–DD ‘Confirmation of Diagnosis of Disability (1 June 2010); ‘Insurance companies—additional information to be sub-mitted & attached to IT 14’; ‘Mining schedule & tax consumption’ (!) (don’t ask me; I only work here); AS–EF–11–FAQ2 rev 0 ‘Frequently asked questions—taxpayer cen-tricity (client—approach functionality on eFiling); AS–EF–12–FAQ1 rev 0 ‘Frequently asked questions—Provisional tax—eFiling’; AS–IT–67–FAQ2 rev 0 ‘Frequently asked questions—request for return, completion & submission of income tax returns’; & AS–IT–67–FAQ3 rev 0 ‘Frequently asked questions—request for return, completion & submission of income tax returns—eFiling’.*

BPR 088 01 July 2010: Contributed capital of a foreign limited liability co-operative.* Business Day 01 July 2010: Power theft costs Eskom, councils R4,4 b. Still puzzled why anyone

would want to nationalize huge chunks of the economy? The Star 01 July 2010: SARS advert: Coming soon—tax season 2010.

* On the SARS website. § Not included in Tax Shock, Horror Database.

LOST & FOUND TSH Database This month 111 items were added to the Tax Shock, Horror Database. Provisional tax tables Since forever the Commish has failed to gazette the annual provisional tax tables. Exempt grants & Since 1 February 2006 the MOF has neglected to issue the Gazette notice required scrapping payments to make s 10(1)(y) effective. Don’t tell the taxi industry.

MONTHLY TAX NOTEBOOK

De R1,26 non curat lex

The KZN assessment centre has proudly informed a taxpayer married in community of property of his failure to declare R2,52 in interest earned from Discovery Health, of which 50% should have been

reported in his return. It promises a revised as-sessment and threatens the imposition of a maxi-mum penalty of 200% of the additional tax ‘in case of similar omissions in future years’.

Tax refunds now running smoothly—you don’t say!

Peter Maspero writes:

Just in case you didn’t know, you published a phishing scam. If you did know, it might have helped to com-ment to that effect. Printed baldly, it, due to spelling grammar etc, puts SARS in a poor light.

Vic de Waldorf writes:

Your tax refund insert I am sure was a scam email you received as that amount is similar to what was on what I received. I should be so lucky to get a refund.

Pearson Botha writes:

This is a scam. Example from client below, click on a link and end up at a fake bank website. And check out the grammar and spelling. Here are the properties of the fake e-mail, below is a genuine one. The scam-mers use various e-mail addresses. These do smell as if they originate from within SARS.

Good grief! All you needed to tell it was a scam was to read the title to the piece.

Latest acts—Treasury in contempt once again

Luke O’gilvy, Bsp Seminars® data-manipulation intern, has discovered a difference between the Taxation Laws Second Amendment Bill, 2009 and the Taxation Laws Second Amendment Act 18 of 2009 unauthorized by Parliament. It concerns the effective date of the substituted s 88 of the Income Tax Act, which, in the amending act, is given as

(2) Subsection (1) shall come into operation on a date to be determined by the Minister of Finance in the Ga-zette and will apply to all amounts payable by or to the Commissioner on or after such date, and where pay-

ment was already suspended on such date, that sus-pension will lapse on the earlier of the expiry date thereof or six months from the date so determined by the Minister.

while the bill gives it as

(2) Subsection (1) shall come into operation on a date to be determined by the Minister of Finance in the Ga-zette and will apply to all amounts payable by or to the Commissioner on such date, and where payment was already suspended on such date, that suspension will lapse on the earlier of the expiry date thereof or six



months from the date so determined by the Minister.

The words in bold italics have been illegally added to the final version appearing as an act. Otherwise,

the two 2009 amending bills are identical to the two 2009 acts. I find it hard to imagine how someone could feel free to effect such a change in such a manner.

PAYE eFiling blues

Rogerio Russo, the man to whom everything fis-cally possible and impossible happens, was strug-gling this month to pay his clients’ PAYE:

Suddenly, even though SARS should be generating returns and not the taxpayer, we cannot generate emp 201 returns. When we try, the following message appears: There has been an error. Please try again or contact

us if the problem persists; (73515183). We have reported the problem to SARS via e-mail, with

no adequate response. On Friday the comment was: ‘We have not had this problem today.’

Today being the final day for payment, this is what

happened: SARS: We know we have a problem.

US: We can’t make payments today without re-turns. Today is the last day for EMP 201s.

SARS: You can make a payment without a return. US: That is against the Act. (Phone put down and

the call ended.)

Every time we have ‘phoned we have spoken to a different person, and the story repeated from the be-ginning. One individual promised to revert back to us, to no avail.

So at this stage we have no answer on how to lodge the returns or make the payments.

New VAT return f iasco

And who else but Rogerio Russo would immedi-ately feel the effects of the insane introduction by SARS of a new VAT return without anything like ade-quate notice?

Have you seen the latest VAT 201?. It has been amended without proper notice. It was changed during the weekend of 26 June 2010.

If you have zero-rated sales, you need a customs code, otherwise you can’t lodge or even save the re-turn. If you have VAT on imports, you now need to list it separately, and, if you have no customs code, can’t save or lodge the return.

I have a client that exports software via the internet.

It is simply downloaded to the overseas customers and paid from overseas and registered to the overseas company. There are no customs documents ever lodged or prepared. In fact we were advised by the clearing agent at the time that documents were not re-quired. Thus we do not have a customs code. Now we can’t lodge the VAT return. I have e-mailed SARS on two occasions, but still no reply.

Even though the VAT return quite clearly states that it may be lodged on eFiling by 30 June 2010, the SARS website treats a filing on that date as being late.

I really wish someone would tell them that they don’t know what they are doing, and that they would get their act together.

Wear the T‐shirt, pay the tax? What tosh!

SARS may have caved on this issue but it did so in a particularly pusillanimous fashion (see the Monthly Listing). To uphold the law is more impor-tant than saving face, and, I reckon, Peter Franck has got the law right when he asks: Did you really have to piss off your staff off by taxing them on the fringe benefit of the ‘Football Friday’ T-shirts you gave them?

According to an article by Sanchia Temkin in Business Day, Adrian Lackay, the SARS spokesper-son said that employers giving their staff soccer shirts to wear on Football Friday were required to declare their value as a fringe benefit and deduct employees’ tax. This ruling applied to employees in the private as well as the public sector, and even to members of Parliament.

On a R200 T-shirt, it probably meant R40 to R80 in tax. It also implied that employers registered for VAT were required to declare output tax on the ‘fringe benefit’, say R200 x 14/114, or R25.

I would argue that these T-shirts constitute a uni-form which employers require their employees to wear on Football Fridays so as to show the organi-

zation’s patriotism as well as its support for our team, Bafana-Bafana.

From a VAT perspective, T-shirts are not food or beverages or any of the other no-nos referred to as ‘entertainment’ in the VAT law. Thus the VAT on their purchase is claimable as input tax.

As for the Income Tax Act, T-shirts given to em-ployees for free or below cost could constitute a taxable fringe benefit under para 6 of the Seventh Schedule. Under s 18(3) of the Value-Added Tax Act the employer would then have to declare out-put tax equal to the tax fraction (14/114) of the value of the T-shirts (their cost to the employer).

There is, however, an exemption in s 10(1)(nA) of the Income Tax Act. This applies

(nA) where an employee is as a condition of his em-ployment required while on duty to wear a special uniform which is clearly distinguishable from ordi-nary clothing, the value of any such uniform given to the employee by his employer, or so much of any allowance made by the employer to the em-ployee in lieu of any such uniform as is reason-



able;

Clothing bearing the employer’s branding is most certainly a uniform, which the dictionary defines as ‘distinctive clothing for members of an organiza-tion’. Such clothing is also clearly distinguishable from ordinary clothing. While designer labels are considered fashionable by some people, to wear a T-shirt bearing your employer’s logo is not to make a fashion statement—it promotes the employer’s organization and the esprit de corps of the employ-ees. The purpose of the employer in giving branded clothing to its employees is to advance its business, not to reward the employees.

In my view, the employer does not have to de-clare the value of employer-branded clothing as a fringe benefit for income tax, or declare output tax on its cost. The employer, should, however, insist that staff receiving branded clothing wear it to work on specified occasions.

The same argument would apply to Football Fri-day T-shirts.

Do I have authority for this view? No, but I most certainly have precedent on my side. SARS dishes out tons of its branded clothing to its employees, and, to the best of my knowledge, has never de-clared the value of such items as a fringe benefit.

What better example could you ask for?—PFR

Bank charges—I recant

The reason why I attend every seminar I present under the aegis of Bsp Seminars® is that there is seldom an occasion when I don’t learn something new. Take, for example, our latest seminar on VAT, where, at the Cape Town session, a knowledgeable regular explained the subject of exempt financial transactions, which I have struggled to understand since the exemption was considerably narrowed in 1996.

Here is a taste of the offending provisions:

VATA s 2(1) Financial services 2. (1) For the purposes of this Act, the following activi-

ties shall be deemed to be financial services: (a) The exchange of currency (whether effected by

the exchange of bank notes or coin, by crediting or debiting accounts, or otherwise);

(b) the issue, payment, collection or transfer of own-ership of a cheque or letter of credit;

Provided that the activities contemplated in para-graphs (a), (b), (c), (d) and (f) shall not be deemed to be financial services to the extent that the considera-tion payable in respect thereof is any fee, commission, merchant’s discount or similar charge, excluding any discounting cost.

Why didn’t anyone previously explain that when, say, Rennies makes a turn on currency rates it is engaged in an exempt activity, but when it charges me a conversion fee it is engaged in a standard-rated activity?

That way, I wouldn’t have been so confused about bank charges in 37 TSH 2006, which, taking the form of a fee or charge, cannot represent a consideration for an exempt financial service.

Binding private ruling 081 revisited

As suggested in the Monthly Listing, I have no idea why, in the last issue (86 TSH 2010), I thought that this ruling was concerned with para 9(7A) of the Seventh Schedule to the Income Tax Act when it plainly declared that it was given under para 9(7):

(7) No rental value shall be placed under this para-graph on any accommodation away from an em-ployee’s usual place of residence in the Republic pro-vided by his employer while such employee is absent from his usual place of residence in the Republic for the purposes of performing the duties of his or her em-ployment….

You can easily see that this nil-valued (and thus tax-free) benefit depends upon an award of the accommodation by the employee’s employer, and you ought to know that the Seventh Schedule ap-plies only in the context of employment as under-stood under the labour law. The employees con-cerned were ‘seconded to the South African sub-sidiary from offshore based [sic] group companies’. This subsidiary is an SA ‘resident’. The employees are nonresidents ‘seconded to South Africa’:

Upon completion of their assignment they are trans-ferred back to their foreign employers or, in exceptional

circumstances, to another entity within the group. The employees are required, for the purpose of

obtaining work permits in South Africa, to sign em-ployment contracts with the Applicant.

The employees remain in the employ of their foreign employers. The foreign employment contracts are their primary contracts of employment and take precedence over their South African employment contracts with the Applicant.

Say what? These chaps had no usual place of residence in SA; nor was the accommodation sup-plied by their ‘primary’ employer, the offshore group. They could not possibly benefit under para 9(7).

Perhaps, then, I was right after all, and the ruling was made under par 9(7A):

(7A) Subject to subparagraph (7B) [containing some severe limitations], no rental value shall be placed un-der this paragraph on any accommodation provided by an employer to an employee away from such em-ployee’s usual place of residence outside the Repub-lic—

(a) for a period not exceeding 2 years from the date of arrival of that employee in the Republic, for the purposes of performing the duties of his or her



employment; or (b) if that accommodation is provided to that em-

ployee during the year of assessment and that employee is physically present in the Republic for a period of less than 90 days in that year.

Say what? Once again, the ‘primary’ employer did not provide the accommodation, and the nil-valued relief cannot be extended to three years as pur-portedly allowed by BPR 081. Nor can an outsider say whether the limitations of para 9(7B) were rele-vant.

Can someone please tell me what the hell is go-ing on here?

On the facts as I read them, the true employer under our labour law is the SA resident company, which is just as well, since it was the employer declared to our immigration authorities. It provided the accommodation. (That is one of the given facts.) The applicable provision is thus para 9(7A) read with para 9(7B), not para 9(7).

The ruling must fail, not only because it applied the incorrect provision but because it granted relief beyond the limitations of the law and failed to con-sider the possible application of para 9(7)(B).

I call on SARS to close down this initiative or to provide the unit concerned with access to what my colleague Tony Davey calls ‘opinion shopping’.

Tax charged on a zero‐rated supply

The definition of the term ‘input tax’ in s 1 of the Value-Added Tax Act defines the concept mainly as ‘tax charged under section 7 and payable in terms of that section’, while s 7(1) makes it clear that ‘tax charged’ in this context means ‘charged at the standard rate’. What happens when a supplier in-correctly adds a VAT ‘charge’ to a supply zero-rated under s 11(1)? If nobody does anything, the recipi-ent cannot find any ‘input tax’ to deduct, while the supplier would be vulnerable to an assessment raised upon the authority of s 31(1)(e) and thus have to disgorge to SARS the VAT purportedly charged. The proper response is for the recipient to raise a contractual claim against the supplier, and for the supplier to apply for a refund under s 44(2):

(2) Subject to the provisions of subsection (3), where— (a) any amount of tax, additional tax, penalty or inter-

est paid by any person in terms of this Act to the Commissioner was in excess of the amount of tax, additional tax, penalty or interest, as the case may be, that should properly have been charged under this Act; or

(b) any amount refunded to a vendor in terms of sub-section (1) was less than the amount properly re-fundable under that subsection,

the Commissioner shall, on application by the person concerned, refund the amount of tax, additional tax, penalty or interest paid in excess or the amount by which the amount refunded was less than the amount properly refundable, as the case may be.

Pale males who eFile & e@syFile

Pearson Botha writes:

Your favourite ‘Tax Practitioner’ here. So you suspect that there is an ‘anal retentive, pale-male contingent at SARS’ [86 TSH 2010]? They do exist. I even know which church they all attend together…(bastards!). Log onto eFiling, and do an EMP 201 return to see how a spiteful Calvinist can make a simple, accurate and secure transaction into a high-risk abortion.

A downgrade if you like. Technologically retarded. A dedicated text box for each character. Text enters left to right, values right to left, like watching tennis, as the user waits for Adobe to load the next digit. Just imag-ine the chaos if the banking industry were (suicidally) to adopt this technology? An embedded decimal point? ‘They’ favour the decimal comma, but ASCII rules, so, like the Calvinist stars on the nipples in Scope maga-zine [Oh, how I miss that august journal!—Ed], ‘they’ have censored the decimal point. Maybe Tax Practitio-ners are too stupid to use decimal points on their own?

Might as well photocopy the thing, fill it in by hand, staple a cheque and post it, since it has been designed to replicate a paper image. [Expletive deleted.] I want to poke out my eye with a sharp stick!

In about 2001 (I was one of the first users of eFiling, so I know what I am talking about) it took about twenty-five to thirty seconds to complete the transaction at 100% probability that payments were sourced from the correct bank account (about fourteen clicks). It took a

further fifteen to twenty seconds to e-mail completed returns and payment confirmations to client (five clicks). Sweet, secure, fast, life changing. Beautiful, no driving to client for paperwork, no more begging for cheques from client, no more forging (stupid client’s) signature on unsigned cheque and no more running to SARS at midnight to deliver.

First upgrade (2002?) adds risk of sourcing pay-ments from incorrect client bank account (add thirty seconds—100%—to transaction time and in-creased risk of failure to initiate transaction) (about two extra clicks). Fifteen to twenty seconds to e-mail com-pleted returns and payment confirmations to client (five clicks).

The latest abortion closes the transaction midway, resulting in further multiple mouse clicks to resume. Thereafter risk of paying outstanding random tax types from random taxpayers via (incorrect) client bank ac-count increases exponentially, especially after a few beers, and it’s a few minutes before the midnight dead-line. Transaction time approximately 400%-plus of pre-vious effort. Extra two minutes to e-mail completed re-turns and payment confirmations to client. (Minimum twenty-five clicks.) Our speed has decreased from (say) one minute in 2001 to eight minutes in 2010, cou-pled with an outrageous transaction risk.

SARS also seems to use multiple versions of the ‘award-winning’ (your words?) [Nope. SARS claims to



have won an award from Adobe’ see 68 TSH 2008.—Ed], slow-motion, graphics-intensive, Adobe shit, mak-ing retrieval, printing and storing a real circus. Conflicts abound.

I know you never regarded eFiling as highly as I did, but now I really see your point.

Doing IRP 5 recons (on their childish, award-winning software) brings tears to my remaining eye (‘Let’s clear all the master-file data and make those suckers recap-ture it all again!’).

They must have employed thousands of program-mers to make such simple processes so complex.

And don’t you find their mandatory ‘source codes’ to be so irrelevant, so outdated and so bombastic and in-trusive? Hundreds of ‘mandatory’ source codes but no relevant calculations based thereon. This leaves the ‘Taxable Income’ figure open to manipulation or error. Just like using an abacus.

Pass me that stick please, I want to poke out my other eye.

I don’t want to be a Tax Practitioner any more. Do you have a vacancy for a tea man with no eyeballs? Failing that, a white, male filing clerk (able to write with joined up letters)? I also do bookkeeping and Visual Basic programming, I read sheet music and can play the piano a little. I don’t do Tax!

All strength to your pen.—PBO

It got worse when I sought permission to publish:

You may publish by all means. I don’t think those suck-ers can read, but maybe Pravin Gordhan is able to read, and does something about my complaints. I want to send him a letter about the service standard at SARS in general but I don’t have the time, and I can’t afford the heavy lifting, transport and delivery cost for that volume of paper.

Those lazy drones at SARS are a dead hand on eco-nomic activity and contribute to poverty in spite of their facile, childish advertising.

The law via your PC: criminal defamation

I happen to be sitting with a senior counsel hugely experienced in criminal law, and decide to use a temporary lull in business to expand my layman’s grasp of the law by asking what ‘criminal defama-tion’ means. In a flash, he pulls out a textbook from his briefcase and finds a citation of the leading case, together with a very brief commentary.

While I tried for a while to carry around a huge tog-bag containing the latest writings of interest in my own field, today it takes the form of a tiny net-book, loaded with several databases, both private and public. This is what I whip out in response to the intended intimidation by textbook.

I enter the name of the case into the South Afri-can Law Reports Archive (Jutastat) search func-tion, and then search, both in the Archive and the Update sections, for other hits for the string ‘crimi-nal defamation’. Within three of four minutes I am rewarded with a pretty good idea of the limitations of an action for criminal defamation, far surpassing what is on offer in the textbook.

Intimidation stakes: Stand-off. We are able, on a commonly informed basis, to agree that an action for criminal defamation, while it might be hot in Zimbabwe, is no big deal in sunny SA. In apprecia-tion, I decide to upgrade my netbook.

The leading case The case is Rex v Fuleza 1951 (1) SA 519 (A), in which Van Den Heever JA, delivering the principal judgment of the court, gave a fascinating account of the history of the law on criminal defamation (libel, slander or injuria verbis), finding that, in Southern Rhodesia, it was still a crime.

Of the two separate judgments, the significance of Fagan JA’s emerges from this extract from S v Momberg 1970 (2) SA 68 (C):

A useful guide mentioned in Fuleza’s case and applied both in S v S and R v Walton to determine whether an injuria is of such a nature as to warrant a criminal prosecution is whether it is

‘likely to have results that may detrimentally affect the interests of the State or the community’.

Fagan JA’s views found support not only in Mom-berg and the cases cited there but in R v Mac-donald 1953 (1) SA 107 (T), R v Chipo and Others 1953 (3) SA 692 (SR), Sachs v Die Werkerspers Uitgewers Maatskappy Edms Bpk and Others 1952 (4) SA 419 (T), and S v Jana 1981 (1) SA 671 (T). (Both democracy and the law demand respect for a minority judgment!)

In Sachs De Villiers J summed up the import of Fuleza in the following terms (citations removed):

That defamation is still a crime in our Common Law appears from the case of Rex v Fuleza…. That case also indicates however that…the public prosecutor has no right to take proceedings unless the defamation is a serious one affecting the common weal, and that…the practice was not to prosecute in lighter cases.

The second most important case Next comes S v Dziva 1971 (4) SA 185 (R). Yes, it is a Rhodesian case, and the presiding judge was the well-known Beadle CJ:

…. The distinction between criminal defamation and criminal injuria is that in the one case the injury is to the fama of the complainant, and in the other to his dignitas, but most serious charges of criminal defama-tion will injure both the dignitas and the fama of the complainant at one and the same time; for example, to call a woman a prostitute in the presence of many wit-nesses will undoubtedly injure her dignity but at the same time it will also injure her reputation. In this in-stance both the crime of criminal injuria and criminal defamation would be committed.…

There is no doubt that in the circumstances of this case criminal defamation is the more serious offence of the two. To injure a man’s dignity may be a serious of-fence, but it is not so serious as the offence of defama-tion. In the case of defamation the injury is published to the world and not only the man’s dignity suffers but



also his reputation with his fellow men. In this case if the accused had merely called the complainant, a re-spectable female teacher, a prostitute and nobody else had heard him say so, the offence of criminal injuria would have been committed, but to publish to all her pupils that she was a prostitute is undoubtedly the more serious offence of the two. On these facts I would also consider that the charge of criminal defamation is the more appropriate one, and there is no doubt that the accused’s dominant purpose was to injure the complainant’s reputation in the eyes of her pupils. By any test, therefore, the correct charge in the instant case was criminal defamation, and to this extent the charge sheet is at fault.

The Namibian case of Kauesa v Minister of Home Affairs and Others 1995 (1) SA 51 (NM) includes a finding, made on a balance of probabilities, of criminal defamation.

In S v Gibson NO and Others 1979 (4) SA 115 (D)

the Sunday Express, its editor and a reporter were charged with contempt of court and criminal defa-mation. In what appears to me to be a brilliant judg-ment, Milne J discharged the accused. On the charge of criminal defamation, he said:

In view of the conclusions to which I have come, it is unnecessary (and in view of the length that this judg-ment has already reached, undesirable) to consider the interesting question as to whether (a) the crime of criminal defamation is restricted to ‘serious’ cases or cases of an aggravated nature and (b) whether this case falls within the category of ‘serious’ defamation.

What of the new South Africa? In Du Plessis and Other v De Klerk and Another 1996 (3) SA 850 (CC) there are a couple of hints (certainly nothing close to a finding) that the common-law offence of crimi-nal defamation might be ‘inconsistent with the right of freedom of speech’.

Can a suicide note be a will or a codicil?

Stanley R Levy writes: Every person to whom I have posed this question immediately asks whether there were two witnesses to the suicide note, and, on learning there were none, claims that is it was invalid.

Section 2(3) of the Wills Act reads as follows:

(3) If a court is satisfied that a document or the amendment of a document drafted or executed by a person who has died since the drafting or execution thereof, was intended to be his will or an amendment of his will, the court shall order the Master to accept that document, or that document as amended, for the purposes of the Administration of Estates Act, 1965 (Act 66 of 1965), as a will, although it does not comply with all the formalities for the execution or amendment of wills referred to in subsection (1).

Case no 187/09 was heard in the Supreme Court of Appeal in March 2010. Both parties agreed that the only issue to be decided appeal was whether the suicide note written by the deceased was in-tended by him to be his will as contemplated by s 2(3).

The deceased was a senior pilot employed by South African Airways whose wife had died in 2002. They had an only child, who was the oppos-ing respondent to the application. After the death of his wife, the deceased met the appellant, and they developed a relationship. They lived together from 2003. In February 2004, after an argument, the appellant left the deceased’s home and went to stay on her own. In February 2005 she returned to her country of origin but kept in contact with the deceased. He visited her and persuaded her to return to South Africa and stay with him as from December 2005.

On the morning of 25 February 2007 she left home and went to work. The deceased was at home. While at work, she spoke to him over the telephone. On her return, she discovered that he had committed suicide, having shot himself in the

bathroom. A suicide note was found on the kitchen counter, under a crucifix.

The note was dated the same day as the suicide. In it, the deceased wrote:

You can have this house, you will obviously sell it and should meet all your future needs.

The court found that in this statement the de-ceased was giving clear instructions on what should happen to the house. The note went on to say:

Also I authorize Standard Bank to give you immediate access to Plusplan, there is R579 000,00 which will not leave you battling…. My will is in the brown envelope in the safe. I leave everything else to Jeremy as stated therein.

The court found that the deceased wanted this note to be acted upon on the basis of its final sen-tence. He was conscious of the fact that he had a will, and that it did not make provision for the ap-pellant; hence the instructions in the suicide note. The instructions were clear and unequivocal. It could thus be reasonably inferred that his instruc-tions were meant to be implemented by the bank and his executors.

The note was placed by the deceased—apparently a committed Christian—at a place where it could be seen, under the crucifix. This fact fortifies my own view that he wanted his instruc-tions to be implemented upon his death.

Counsel for the respondent, the deceased’s child, argued that the deceased intended to give instructions for the drafting of a formal amendment to his will, hence the absence of a formal signature on the note. It carried just the name ‘Wally’. Coun-sel further submitted that the language in the sui-cide note was that of a donatio mortis causa.

The court nevertheless ordered that ‘the Master of the High Court is directed to accept the docu-ment annexed to the Notice of Motion as Annex-



ure A as an amendment to the will of the late…for the purposes of the Administration of Estates Act 66 of 1965’.

Was the deceased of sound and disposing mind, memory and understanding and capable of doing any act requiring thought, judgment or reflection while writing a suicide note?

Section 4 of the Wills Act states that:

Every person of the age of sixteen years or more may make a will unless at the time of making the will he is mentally incapable of appreciating the nature and effect of his act, and the burden of proof that he was mentally incapable at that time shall rest on the person alleging the same.

Should counsel for the respondent not have included the possible application of s 4 as an alternative for the court to consider? In his suicide note the deceased records that:

This depression and continuous pain and battle with my health is no longer tolerable.

Depression is caused by a chemical imbal-ance in the brain. Can a depressive act ration-ally? Suffering from both depression and pain, would the deceased have understood the con-sequences of his suicide note? Many suicides act while under the influence of drugs or alco-hol and so are incapable of understanding what they are doing or of making a valid will. I do not have a copy of the autopsy report or of the inquest findings and thus do not know whether alcohol or drugs played a role in this matter.

Yet even the prescribed drugs that I assume

the deceased was taking for his health prob-lems could have had severe side effects af-fecting his judgment.

In Lewin v Lewin 1949 (4) SA 241, Roper J said:

The mere fact that the testator understands or intends the dispositions which he is making does not mean that he can appreciate the effect of his act. It is necessary further that he should have been capable to comprehend and appreciate the claims of his various relations upon his bounty, without any poisoning of his affections or perver-sion of his sense of right, due to mental disorder and generally he should have the ability to discern and discretely to judge all of these circumstances and all of these circumstances which enter into the nature of a rational and fair and just testa-ment.

Could the deceased have realized, while writing a suicide note, the consequences of his action? That a dispute between the two beneficiaries to his will would be contested as far as the Supreme Court of Appeal? That the respondent would file a condi-tional counterclaim seeking relief in the event the application was granted? (The court below dis-missed the application and did not deal with the counterclaim. The parties agreed that, if the appeal was successful the counterclaim would be adjudi-cated by the High Court, from which a further ap-peal might be lodged.)

At the end of the dispute will there be anything of the deceased’s estate left to enjoy, or will it all have been spent on legal costs, with both parties using the services of two counsel?—SRL

Waiving not only debts but discretion

In the inaugural edition of the quarterly Business Tax & Company Law, co-editor Milton Seligson SC

stumbles from one fiscal catachresis to another, demonstrating how difficult it is nowadays to write about tax.

The hellish hierarchy The topic is the waiving of debt, in fact, the hellish hierarchy set out in para 12(5) of the Eighth Schedule to the Income Tax Act (see Bsp Semi-nars® How Trusts Pay All Taxes ABC 2 ed).

The first possible consequence (para 12(5)(aa)-(B)) is a loss of the forgiven debtor’s balance of assessed loss under s 20(1)(a)(ii). The author al-leges that what is reduced is the ‘balance of as-sessed loss carried forward from a previous tax year’, blithely overlooking the decision in Commis-sioner for Inland Revenue v Louis Zinn Organiza-tion (Pty) Ltd 1958 (4) SA 477 (A), where Schreiner ACJ, as he then was, said that the reduc-tion ‘takes place at the stage when that balance is determined for use in the future’, that is, after the balance brought forward has been comingled with the taxable income or assessed loss of the year in which the waiver occurs.

Next comes a possible recoupment under

s 8(4)(m) (para 12(5)(aa)(B)). If spouses are involved, any remaining amount

might be relieved from the CGT by para 67 (para 12(5)(a)).

Then, if para 3(b)(ii) applies (recovery or re-coupment of base cost upon disposal of asset in previous year of assessment), it must be applied (para 12(5)(aa)(A)).

Finally, if para 20(3) applies (reduction of expen-diture on account of income tax allowance or de-duction, or on account of recovery of recoupment of base cost not already hit by s 8(4)(a) or para (j) of the definition of the term ‘gross income’ in s 1, or is exempt under s 10(1)(y) or (yA), and otherwise qualifies, and is not excluded by the proviso to para 20(3)), it must be applied (para 12(5)(aa)(B)).

These last two possibilities are not mentioned by the author, who, after dealing with the two cases reported so far on para 12(5), proceeds to an alto-gether understandable, beginner’s misunderstand-ing of para 35(1)(a), which, in including as pro-ceeds

(a) the amount by which any debt owed by that per-son has been reduced or discharged,

is not duplicating the function of para 12(5) but



allowing for set-off (if you sell me your asset, I’ll let you off the amount you owe me for stock pur-chased). (Hint: Take a look at para 9.1.1.4 of the SARS Comprehensive Guide to CGT’ Issue 3.)

Thus there is no need, as the author suggests, to read para 35(1)(a) (payment in full by way of set-off) as being subject to para 12(5) (debt forgive-ness); two entirely different sets of circumstances are envisaged.

Donations tax Then things look up. Can the donations tax apply to the waiver of a debt? Well, in principle, Yes, for crying in a bucket, yet the author fails to mention that both the CGT and the donations tax would then apply.

I have never bought into the Welch’s Estate v Commissioner, South African Revenue Service 2005 (4) SA 173 (SCA) finding that a common-law donation and a s 55(1) ‘donation’ are identical, but then nothing turns on the issue, as a lawyer would say, albeit for a higher fee. Ordinarily, however, a creditor forgiving a debtor’s debt has anything but charity in mind. If Welch is correct, very few forgiv-ing creditors have any desire to enrich their debtors at the expense of impoverishing themselves and so could never make a s 55(1) ‘donation’.

But stay! I digress. How can anyone discuss a possible donations tax liability without considering the value of the property supposedly ‘donated’? Ordinarily, creditors forgive debts that are commer-cially valueless. The donations tax values such property at nil (s 62(1)(d)), while para 12(5) adopts a nominalistic approach. These subtleties are lost on the author.

STC, CGT & VAT Worse follows, in the mention of a possible STC liability under s 64C(2)(b) when the creditor is a company and the forgiven debtor that company’s ‘connected person’. Yes, Yes, a deemed dividend is possible but then you must say something about para 12(5).

In the first place, para 12(5)(bb) and (cc) repre-sent exclusions that might in the context be appo-site. Secondly, the disposal by a creditor of a debt owed by a connected person is the subject-matter of para 56, although in a different context. And, thirdly, all dividends are included in ‘gross income’ (para (k) of the definition in s 1), and all inclusions in gross income are excluded from CGT ‘proceeds’ (para 35(3)). Wouldn’t it at least be interesting to wonder how such a setup gels with the deemed proceeds seemingly ordained by para 12(5)(b)(ii)?

Then, back to flummoxed. How on earth might para 34 (debt substitution) be relevant? When a creditor waives a debtor’s debt there is a ‘disposal’ of an asset but, puleeze, not to the debtor.

And so, finally, on to VAT, where the surrender of a right is a ‘service’. I agree that the waiver of a debt cannot amount to the ‘transfer of ownership of a debt security’ and so seemingly cannot amount to an exempt ‘financial service’ under s 2(1)(c) of the Value-Added Tax Act. (Strange that the same point was not raised by the author in connection with

para 34.) I agree that such a waiver would not be characterized by any consideration and so would not even begin to be a chargeable event for VAT purposes. But what if the parties are ‘connected persons’ and s 10(4) is potentially of application?

If s 2(4) is applicable (VAT has not yet been ac-counted for on the outstanding consideration for a taxable supply; not mentioned by the author), s 10(4) cannot possibly apply, thanks to s 10(4)(c).

And if the debt is simply a claim for money? I would argue that the supply was not made in the course or furtherance of the creditor’s enterprise and the waiver therefore fails to trigger s 7(1)(a).

A second opinion Michael Stein adds these comments: I am not quite sure how the application of s 20(1)(a)(ii) and para 12(5)(aa)(B) would interface. Paragraph 12(5) presumably applies at the date of the waiver of the debt (during the year), while s 20(1)(a)(ii) kicks in only at the end of the year. Presumably, since the determination of taxable income is an annual event, one would have to wait until the end of the year to establish whether and to what extent the closing balance of assessed loss has been re-duced by the waiver of the debt. Paragraph 12(5) would be inapplicable to that extent.

Just to mention that the definition of a ‘donation’ in s 55(1) expressly includes ‘any gratuitous waiver or renunciation of a right’. As you say, this right must be valued (at its fair market value), and there can be a donation for donations tax purposes only to the extent of the value of the right that is waived.

Section 64C(2)(b) deems a dividend to be de-clared to a shareholder when ‘the shareholder or any connected person in relation to that share-holder is released or relieved from any obligation measurable in money which is owed to that com-pany by that shareholder or connected person’. I assume that there will also be deemed to be a divi-dend received by the shareholder when this provi-sion applies, which will constitute gross income of the shareholder (but exempt from income tax under s 10(1)(k)(i)) and therefore not ‘proceeds’ for CGT.

Surely para 34 has nothing to do with the waiver of a debt. It applies when a debt has been dis-charged (settled) by a debtor by disposing of an asset to the creditor and deems the creditor to have acquired the asset at a cost equal to the mar-ket value of the asset for base-cost purposes for CGT. It has no relevance to the debtor and therefore has no bearing on the application of para 12(5), which is relevant only to the debtor.

The only relevance of para 56 is that it denies the creditor a deduction when it disposes (for ex-ample, waves) a debt owing by its connected per-son at a loss, one of the exceptions being when the disposal results in the determination of a capital gain for the debtor under para 12(5).

Finally, not mentioned at all by the author in deal-ing with the consequences for the creditor is para 38. This presumably applies when the debt waived has a value and the waiver constitutes a donation, but is made subject to para 12(5)!—MLS

Feature Supplement to 87 Tax Shock Horror 2010

Cases

June 2010

Winners & Losers In That Other Beautiful Game

Current & Past Case Reports

by Julian Ware © 2010 J Ware ([email protected])

Expenditure— issue of shares CSARS v Labat Africa Ltd

North Gauteng High Court (2009)—72 SATC 75 (judgment delivered by Sapire AJ; Webster J & Louw J concurring): When a company issues its own shares in exchange for a trade mark it is actually incurring expendi-ture under s 11(gA) of the Income Tax Act. The subsequent change to legislation under s 24B(1), deeming the issue of shares to be expenditure actually incurred, did not detract from the issue. The court confirmed the lower court’s view that, so long as an unconditional legal obligation was incurred, the requirement for a deduction under s 11(gA) was met. In other words, it differentiated between the incurral and the discharge of a liability.

Trusts— donations tax Taxpayer v SARS

ITC 1840 (Gauteng Tax Court) (2009)—72 SATC 79 (judgment delivered by Mathopo J): Under a mistaken belief that that they were entitled to do so, the trustees of the taxpayer trust made substantial awards to six other family-related trusts, which were set off against interest-free loans previ-ously granted by the taxpayer trustees to the related trusts. Because, as it turned out, the related trusts were not beneficiaries of the taxpayer trust, SARS argued that the awards were exposed to donations tax. The tax-payer counter-argued that, since it lacked the power to make the awards, they were ultra vires the deed and, hence, were invalid and could not have constituted a donation. Strangely, the court held that the set-off itself was a donation giving rise to donations tax. Even though the awards were void inter partes, their invalidity did not detract from the fact that they gave rise to a liability for donations tax. Illegal contracts, said the court, have fiscal consequences. The awards were held to be gratuitous disposals falling outside the ambit of the s 56(1)(l) exemption, since, having been made to non-beneficiaries, they could not have been made under or in pursuance of a trust. Surprisingly, the court appears to have missed the point (perhaps it was not argued by counsel for the taxpayer) that, under s 55(3) of the Income Tax Act, a donation is deemed to take effect only upon the date that all legal formalities for a valid donation are complied with. An invalid donation can hardly be a valid donation. [After years of wrestling with this issue, only lately have I come to the conclusion that a trust cannot be liable to the donations tax. But that was in the context of legal dispositions only.—Ed]

Input credits— value-added tax Taxpayer v SARS

ITC 1841 (Gauteng Tax Court) (2009)—72 SATC 92 (judgment delivered by Van Oosten J): Gratuitous acts do not constitute a supply of goods or ser-vices for consideration. They do not qualify as taxable supplies under the Value-Added Tax Act. Since they are nonsupplies, input credits relating to them may not be claimed by a VAT vendor. Although s 10(23) deems cer-tain supplies made for no consideration to have a nil value, it does not deem a nontaxable supply for no consideration to be a taxable supply for no consideration. This judgment, dealing with the supply of religious ma-terial to recipients free of charge by an association not for gain, is sure to come as a shock to most taxpayers and their advisers.

t s h


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Briefing

June 2010 Pension concession

by Michael Stein © 2010 M L Stein ([email protected])

The opening words of the definition of the term ‘gross income’ in s 1 of the Income Tax Act include in the gross income of a resident the total amount, in cash or otherwise, received by or accrued to or in favour of the resident. And they include in the gross income of a nonresident the total amount, in cash or otherwise, received by or accrued to or in favour of the nonresident from a source within or deemed to be within the Republic. Excluded are receipts or accruals of a capital nature, and in-cluded are several special inclusions.

Thus the gross income of residents of South Af-rica is determined on a worldwide basis, while that of nonresidents is limited to receipts or accruals derived or deemed to be derived from a South Afri-can source. The deemed-source rules are to be found in s 9.

Although the definition of the term ‘gross income’ encourages the belief that these rules are relevant to nonresidents only, since they alone are con-cerned with the source of receipts or accruals, there is an exception to the rule that residents are unconcerned with source.

Source of pensions Section 9(1)(g) deems to be from a local source qualifying pensions (or annuities), wherever they are paid and regardless where the funds from which they are paid are situated.

Section 9(1)(g)(ii) applies to pensions granted by a person, whether or not residing or carrying on business here, if the services for which the pension was granted were performed within the Republic for at least two years during the ten years immedi-ately preceding the date from which the pension first became due. This, then, is the trigger for the application of this provision: at least two years of the services rendered to earn the pension must have been rendered in the Republic in the ten-year period ending immediately before the pension first became payable.

The proviso to s 9(1)(g)(ii) then lays down how much of the pension will be deemed to be derived from a local source once the trigger is activated. If the pension was granted for services that were rendered partly within and partly outside the Re-public, only a portion will be deemed to be derived from a local source. This is so much of the pension as bears to the full amount of the pension the same

ratio as the period during which the services were rendered in the Republic bears to the total period during which the services were rendered.

In other words, the portion of the pension that is deemed to be derived from a local source is de-termined on the basis of the ratio that the total pe-riod of local service bears to the total period of ser-vice rendered anywhere in the world. (For this pur-pose, services rendered in the territory of the for-mer Republic of Transkei, Bophuthatswana, Venda or Ciskei are deemed to have been rendered within the Republic.)

For example, say you rendered three years of your last ten years of service in SA, a total period of service in SA of fifteen years, and a total period of service anywhere in the world of thirty years. Half your pension (15 ÷ 30) will be deemed to be de-rived from a local source.

Rule for residents Now, you might say, what has all this to do with local residents, when source is generally irrelevant to them and they are usually subjected to tax on a worldwide basis? The answer lies in s 10(1)(gC)(ii), which is easy to overlook.

This exempts from income tax pensions received by or accrued to a resident from a source outside the Republic that are not deemed to be derived from a source here under s 9(1)(g) in consideration of past employment outside the Republic. (Assume that the actual source of a services-related pension is the service rendered and is located where the service was rendered.)

Thus, if you are a resident, the part of a pension derived by you derived from foreign services and not deemed to be derived from a local source un-der s 9(1)(g)(ii) is exempt from income tax in this country.

The upshot You can draw the following conclusions from these provisions:

If you did not render at least two years of your last ten years of service in SA, your pension will be entirely tax free in SA.

If you rendered at least two years of your last ten years of services in SA, a portion of your pension will be tax free here, the portion being

June 2010


based on the ratio that the period of your foreign services during your entire period of working to earn the pension bears to the total period of these services.

These rules effectively apply both to residents and nonresidents.

Problems and proposals One of the problems with these provisions is that they are not easily accessible, in that the deemed-source provision is in one place, while the com-plementary exemption is elsewhere. It is therefore easy to overlook the exemption. If the two provi-sions were to be integrated, this problem would be resolved. (The problem is not unique to the present matter and is one of the reasons why BSP Semi-nars® is soon to present seminars on VAT and CGT based on a ‘thematic’ approach to the laws, draw-ing together all the provisions relevant to a particu-lar topic.)

Another problem is that para 2(1) of the Second Schedule to the Income Tax Act, which deals with

the determination of the amount of retirement fund lump-sum benefits and retirement fund lump-sum withdrawal benefits to be included in gross income under para (e) of the definition of ‘gross income’, applies

[s]ubject to the provisions of section 9(1)(g).

How exactly this provision is to be applied without the invocation of the usual ‘mutatis mutandis’ rule is problematic, since what applies to pensions or annuities may not necessarily simply and neatly be applied to lump sums, but this is one of the prod-ucts of legal drafting that is prone to resort far too often to facile cross-referencing. In any event, the reference to s 9(1)(g) in para 2(1) can be relevant only to nonresidents, since s 9(1)(g) is of conse-quence to residents only when coupled with the exemption in s 10(1)(gC)(ii). Paragraph 2(1) is not made subject to s 10(1)(gC)(ii).

[On the topic of para 2(1), see 83 TSH 2010.—Ed] t s h

Seminar s296: Full-day session

THEMATIC VAT

All the transactions referred to in the law, in alphabetical order.

accommodation, commercial; advertisement; agent; agreement, credit; aircraft, foreign-going; ancillary transport services; ANFG; auc-tioneer; bet; board and lodging; body corporate; body of persons; branch; charter party; constitutional institution; container, returnable;

corporate restructuring; crew; customs controlled area; death; debts, bad; designated entity; diplomat, consul; dispensation, special; donation; donor funding, international; donor, international; driver; dwelling; dwelling, lease of; educational service; employee organiza-tion; enterprise, cessation; enterprise, multiple; entertainment; environmental duty; excise duty; export country; exported; financial ser-vice; fixed property; fixed property, expropriation; foreign donor funded project; going concern; goods and services, domestic; goods and services, donated; goods, imported; goods, imported; goods, second-hand; grant; hearse; housing development scheme; housing

subsidy scheme; ICA; IDZ; inbound duty and tax free shop; indemnity payment; input, denied; insolvency; insurance; lay-by; levy; loan obligation; lodging; metal, precious; misrepresentation, by recipient; motor car; municipality; operator; overpayment by recipient; PBO; pilot; pooling arrangement; pre-incorporation supplies; prize; public authority; public higher education institution; public higher educa-tion institution, merger; race; rental agreement; repossession; residence, private; resident of the Republic; right of occupation; rounding

off; sale, in execution; services enterprise; services, imported; share block company; share block conversion; share block developer; ship, foreign-going; stamp duty; tax avoidance; tax treaty; transfer duty; transitional metropolitan council; transport business; trust fund;

warehouse, licensed customs and excise storage; warranty; winnings; WO

Seminar s297: Full-day session

THEMATIC CGT


asset, acquisition of; asset, change of use of; asset, conversion of; asset, disposal of; asset, extinction of; asset, intangible; asset, micro business; asset, nondisposal of; asset, personal use; asset, personal use, change of use of; asset, replacement; asset, scrapping of; asset,

small business; assets, identical; attribution; club, recreational; collective investment scheme; company, foreign; compensation; competi-tion; connected person; damages; debt; deposit, forfeited; disposal, conditional; disposal, involuntary; disposal, part; disposal, short-term; distribution, corporate; distribution, trust; dividend; dividend, extraordinary; donation; estate, deceased; estate, insolvent; expropriation;

farming development expenditure; financial instrument; foreign exchange; gambling; game; insurance, long-term; land restitution; li-cence, communication; mineral right; nonresident; option; partnership; PBO; proceeds; proceeds, deferred; residence, change of; resi-dence, primary; resident; resident, CFC becoming; retirement benefit; rollover; share, listed; share, listed; spouse; trust; value-shifting

arrangement

Notes: First edition. Standard: Advanced.


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

Davey’s Locker

June 2010 Living annuities Tax relief upon post-retirement commutation

by Tony Davey © 2010 A H Davey ([email protected] www.tonydavey.com)

Nature of a living annuity Upon retirement from a retire-ment fund (pension or retirement annuity), a compulsory life annu-ity, being either a conventional annuity or a living annuity, must be purchased with at least two-thirds of the member’s fund value. An exception allowing for a full commutation arises when the member’s total fund value does not exceed R75 000.

Living annuities, as distinct from conventional annuities, have become increasingly popu-lar in an inflationary environment as a means of preserving or even increasing the value of retirement benefits, since the underlying investment portfolio comprises asset classes such as equities, property and bonds. Naturally, the usual risk-and-return investment principles ap-ply.

In 2008 statutory recognition of such annuities was granted by the insertion of a definition of a ‘living annuity’ in s 1 of the In-come Tax Act.

Proposed tax treatment It is trite tax law that an annuity is inherently subject to tax, in that the definition of the term ‘gross income’ in s 1 includes, under paragraph (a)

any amount received or accrued by way of annuity, including any amount contemplated in the defi-nition of ‘living annuity’….

The specific inclusion of a ref-erence to a ‘living annuity’ in the definition, sparked by a contro-versial tax court decision, puts beyond all doubt the fact that a living annuity contains no capital element for tax purposes and is inherently fully subject to tax. It follows that, upon commutation of a living annuity, which is al-lowed if its value falls below R75 000 or upon the death of the annuitant, the commuted lump sum is included in gross income and subjected to tax.

Nevertheless, in an act of be-nevolence, the 2010 Taxation Laws Amendment Bill proposes that such commutations should qualify for the special conces-sionary retirement table (albeit upon an aggregated basis)—the R300 000 tax exemption and the sliding-scale rates—and is to be effective as from 1 March 2011.

This outcome is achieved by proposed amendments to the definition of a ‘lump sum benefit’ in para 1 of the Second Sched-ule to the act, and to paras 2, 3 and 3A of the schedule.

It is important to note the ap-plication of the aggregation prin-ciple. In essence, if the commu-tation occurs during the mem-ber’s lifetime (value below R75 000 threshold) or upon the member’s death, aggregation occurs for the member. If the commutation occurs during the successor annuitant’s life or

June 2010


upon the successor’s death, aggregation occurs for the suc-cessor.

For example, if upon the death of the first annuitant, the original member of the retirement fund, the second annuitant commutes the living annuity, the tax-free portion available is R300 000 less any portion already used by the first annuitant, for example,

upon retirement. Thereafter the special-rate tables apply. Upon death of the second annuitant (assuming there was no commu-tation), the third annuitant may benefit from any tax-free portion unused by the second annuitant.

The tax is always recoverable from the actual recipient of the commuted lump sum.

t s h

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June 2010

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

Hearsay & the interests of justice

by Andrew Paizes © 2010 A Paizes ([email protected])

So how does a court apply the provisions of s 3(1)(c) of the Law of Evidence Amendment Act in deciding whether it is in the inter-ests of justice to receive hearsay evidence? It is clear from the cases that, although each of the factors set out in that paragraph (and listed by me last month in 86 TSH 2010) has to be taken into account, the courts adopt a ro-bust and flexible approach, in which the factors are considered in aggregate.

The most important considera-tions to have emerged from the cases include the following:

Courts are less inclined to receive hearsay in criminal cases when the evidence is adduced against an accused person than in civil cases.

The potential dangers of the evidence and the extent to which those dangers are re-duced on the facts of the par-ticular case are of great impor-tance: how likely it is that the absent actor or declarant may have lied or made an honest mistake by reason of defective memory or perceptive capacity is often of pivotal importance.

The degree and quality of prejudice suffered by an ad-versary is also significant. The fact that cross-examination is denied that party will ordinarily be highly prejudicial to him. The fact that cross-examination would not, in a

given case, have been of much help or that there was some effective substitute for it will reduce the extent of the prejudice.

The fact that the declarant or actor could not testify because he is dead or unfit to testify or cannot be found will enhance the prospect of admissibility.

The cases illustrate these points. In S v Mbanjwa & another

(2000 (2) SACR 100 (D)) a woman died after sustaining severe burn injuries. Before she died she told three people in a nearby shop that it was the two accused who had attacked her, forced her to drink petrol, doused her body with petrol, fastened her hands, tied her to a tree with a telephone cord, and set her alight. This be-cause she was having an affair with the husband of one of the accused. The evidence of what she told the three witnesses was held to be admissible.

The court accepted her sincer-ity: although she did, on her own version of the facts, have a mo-tive falsely to implicate the ac-cused, would she have lied in these circumstances? She was on fire, in pain from severe injury, had just run 280 metres to the shop in this state, and had given her account after being ques-tioned by the three witnesses in a logical and systematic way.

Her memory and perceptive powers were unlikely to be defec-

tive, given the short time-span of the events and the ample oppor-tunity she had to see the identity of her assailants. Her narrative powers seemed fully intact: she was specific and lucid in her ac-count, and appeared to the three witnesses to be rational in spite of her ordeal and suffering. There was, moreover, corroborative supportive evidence: medical evidence showed that she had inhaled inflammable liquid; melted plastic wire had been found tied to a nearby tree; and there was evidence that the two accused had attempted to flee shortly after the incident.

In S v Shaik & others (2007 (1) SACR 247 (SCA)) an encrypted fax was tendered in evidence to prove corruption. The fax, on the face of it, incriminated the author of the fax, the appellants, as well as an eminent national political figure. The court considered it highly unlikely that the author of the fax would falsely have ad-vised his superiors that one of the appellants had requested the payment of a bribe in return for the favours mentioned in the fax. He would, said the court, have taken great care to reflect accu-rately his understanding of the events described in it, since a false account of those events would have had very serious ad-verse consequences for him, and it was highly unlikely that he would have exposed himself and the others to the dangers of such

June 2010


exposure if it had not been nec-essary to do so.

The encrypted form of the fax was an indication that he was aware of these dangers. He had no motive to lie to his superiors; he would have been most reluc-tant to compromise a valuable good relationship with an influen-tial figure; and the sensitive and potentially dangerous contents of the fax made honest error unlikely: he would have taken

great care to reflect accurately the events he described.

There were, too, other factors: It was unlikely that cross-examination of the author of the fax would have yielded positive results for the appellants, since all the indications were that he was so dishonest and unreliable that the denial of cross-examination would not be preju-dicial. The communication was made shortly after the events

described in the fax took place, so that memory was not in ques-tion. And there was material evi-dence corroborating the contents of the fax.

The court concluded that it was in the interests of justice to re-ceive the evidence in terms of s 3(1)(c).

t s h

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JULY 2010

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Shortcut Keys in Word by Duncan S McAllister

June 2010

Finding stuff—IV

I now examine ways of accessing a particular point in a document using the Go To command and other shortcut keys in MS Word.

To open the Go To dialog box, press F5 or CTRL + G. Or, using the ALT sequence keys press ALT, E, G (Word 2003 and 2007), and, if you have time on your hands, ALT, H, ZN, FD, G (Word 2007). Mouse users can double-click the page number on the status bar to open the Go To command in the Find and Replace dialog box.

Alternatively, if you have the Find and Replace dialog box open on Find (CTRL + F) or Find and Replace (CTRL + H), use CTRL + Page down to navigate to the Go To tab. To get to a particular page in your document simply enter the page number and hit enter. By selecting a particular item in the Go to what: menu (ALT + O) you can also access any of the following:

Page (default) Section Line Bookmark Comment Footnote Endnote Field Table Graphic Equation Object Heading

After pressing ALT + O, press the first letter of the item to select it. To select Equation press ‘E’ twice.

To navigate from your present position use the + and – keys. For example, to move four pages for-ward type +4 in the Enter page number: box (ALT + E). I sometimes use this feature to check the for-matting of footnotes, which can become inadver-tently italicized when placed after case names. Thus, ALT + O (access Go to what: drop-down menu), F (select Footnotes), ALT + E (Enter foot-note number), +1 (enter this to advance one foot-note at a time), enter (to go to the first footnote). Then press esc to get rid of the Find and Replace dialog box and use CTRL + Page up or down to move from one footnote to the next.

Accessing the last editing point in a document Use Shift + F5 to locate the last editing point in a document. It stores the last three editing points, so you can press it up to three times to go back to previous editing points. Pressing it a fourth time will return you to where you started.

In Word 2003 this feature can also be used to locate your last editing point in a document when you first open it. Unfortunately it does not work in Word 2007. You can work around this deficiency by inserting a couple of asterisks at your last editing point before you close your document. When you next open the document search for the asterisks using CTRL + F.

t s h

June 2010


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