‘legislative chaos has rendered all tax law moot’ · 2020-05-05 · 119 tax shock, horror...

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

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

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

‘Legislative Chaos Has Rendered All Tax Law Moot’ As SARS pretends to professionalize tax practitioners, it continues to hire its own staff off the street, leaving them technically untrained,

while very few tax practitioners enjoy any hope at all of accessing, much less applying, the law.

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue # 118

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

monthly, quarterly or even individually on DVD by post for R161 a month inclusive of VAT at 14%. This is perhaps the only newsletter in the world with its own stylebook (also free), by Costa Divaris & Duncan McAllister (new 9 ed):

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

Source codes 29 October 2008: CGT main asset type source codes.* Who the hell knows 19 August 2011: ITREG processing statuses PAYE–REG–03–G01–A01. Something to do

with the registration of employees. In 113 TSH 2012 it was wrongly dated ‘2012’.* Updated SARS guide 08 June 2012: Motor vehicle rate per kilometre PAYE–GEN–01–G03–A01 rev 4.* Updated SARS guide 08 June 2012: Subsistence allowance—foreign travel–GEN–01–G03–A02 rev 4.* Updated SARS guide 01 October 2012: Guide for employers in respect of (love that ‘in respect of’!) em-

ployees’ tax (2013 tax year) PAYE–GEN–01–G04 rev 9.* Updated SARS FAQs 01 October 2012: Frequently asked questions—employees’ tax PAYE–GEN–01–

FAQ01 rev 1.* Updated SARS guide 01 October 2012: Guide for employers in respect of fringe benefits (2013 tax year)

PAYE–GEN–01–G02 rev 5.* Updated SARS guide 01 October 2012: Guide for employers in respect of allowances (2013 tax year)

PAYE–GEN–01–G03 rev 4. (I somehow missed all of these PAYE items last year.)* Updated SARS guide 01 October 2012: Voluntary disclosure programme GEN–VDP–02–G01 rev 1.* SARS guide repeated 01 December 2012: SARS payment rules GEN–PAYM–01–G01 rev 10. This is not new

(117 TSH 2012). Yet it is marked ‘2013’ & alleged to be ‘Updated!’.* LSNP notice 05 November 2012: Contingency fee agreements. In the light of recent develop-

ments (read on), I checked whether the articles on this topic in an undated extract from Society News on the LSNP website on this date (one written by Ronald Bobroff) are still there. No, they are replaced by the two judgments cited below. (I wonder how these come to be better copies than I downloaded from the SAFLII site? Are judgments retyped?)

Draft regs 07 December 2012: Draft amendment of rules under ss 64D & 120 of the Customs & Excise Act, relating to the VAT zero-rating of indirect imports (117 TSH 2012).*

Draft form 14 December 2012: Draft CR 1 General application for customs refund.* Updated form January 2013 (undated): Application for registration of diesel refund VAT 102D. All

registration forms under the Customs & Excise Act require radical redesign so as to improve both compliance & enforcement. They need to be more specific about qualification for registration. DNS

GN 7 GG 36063 09 January 2013: Draft climate change sector plan for agriculture, forestry & fisher-ies, for public comment. I see future taxes & much hot air but boggherol else. §

First Trust 19 January 2013: Don’t fear the sequester (chief economist, Brian S Wesbury): Most importantly, this whole argument about spending cuts is based in Keynesian econom-

ics and misses the point. Federal spending is way too high. And every dime the government spends must be paid for by the private sector, in the form of taxes or debt (which is just taxes at a later date). The bigger the federal government, the smaller the private sector, the

Issue: 119 Tax Shock Horror Database items: 11 864 2,94 GB Subscribers: 6 303 February 2013

119 Tax Shock, Horror 2013—February—2


less dynamic the economy is and the fewer jobs are created. FIC release 21 January 2013: Scam letters: warning to public. People pretending to be the FIC. FIC PCC 15 22 January 2013: The acceptance of a smart card identification document issued by

the department of home affairs for client identification & verification purposes. Sur-prise! It’s acceptable. Includes the usual, illegal © claim. So, sue me!

GN 146 GG 36181 22 January 2013: Extension of the closing date for submission of comments on the draft policy directive on the export of ferrous & non-ferrous waste & scrap metal. Is-sued by the (giggle) economic development department.

GN 147 GG 36182 22 January 2013: Extension of deadline of four weeks to comment on the draft ex-port control guideline on the export of ferrous & non-ferrous metal waste & scrap.

Updated form 23 January 2013: IT 77 Registration as a taxpayer or changing of registered particu-lars: individual. Hooray! Way to go! Congratulations! The form itself is dated! DNS

Updated form 23 January 2013: IT 77C Registration as a taxpayer or changing of registered par-ticulars: company. DNS

Updated form 23 January 2013: IT 77R Registration as a taxpayer or changing of registered par-ticulars: trust. DNS

GN 25 GG 36082 25 January 2013: Your tax dollar wisely invested. Here’s CreateAfrica Trading CC (zero B-BBEE contribution level) securing a R1 682 707 contract ‘to conduct a Na-tional Audit of Community Arts’. What are ‘Community Arts’? §

GN 33 GG 36090 25 January 2013: Draft policy directive on the export of ferrous & nonferrous waste & scrap metal. To work for the ITAC you need not necessarily be an economic illiter-ate but it probably helps. It pursues its own, fantastical agenda, nevertheless:

The availability of quality scrap at competitive prices is therefore an important factor in the performance of the scrap processing industry.

In clear: Local producers & dealers will bloody-well sell locally, at lower than interna-tional prices, or not at all. Fantasies: They will not stockpile or illegally export. Cur-rent levels of scrapping will endure, despite lower returns.

A failure by local industry to respond sufficiently and timeously to increased demand will lead to greater levels of imports. That would expose the infrastructure-build programme to import risks and currency fluctuations.

In clear: Local steel producers are too dumb to respond to increased demand, other than through imports. Fantasies: Effectively compulsory local scrap reprocessing will obviate the need for new steel mills & higher imports. The ‘infrastructure-build programme’ won’t be at all reliant upon imports, & will be transacted entirely in rands. It’s OK to steal from scrap producers & dealers to give to manufacturers.

GN 34 GG 36091 25 January 2013: Draft export control guidelines on the export of ferrous & nonfer-rous metal waste & scrap for comment. Export controls (& import controls) arise un-der s 6 of the International Trade Administration Act.

Updated BRS 31 January 2013: Business requirements specification—VAT 201 supporting data submission SARS_External BRS—VAT Supporting Data File Structure_v7 0 0.docx. Without bodyguards, I would hate to meet the loonies who produce this mysterious stuff. How did they come up with their file-naming system? Illegal © claim. DNS

First Trust Advisers 31 January 2013: Brian S Wesbury: Government must be funded by either borrowing or taxation. Both take resources from the

private sector. In other words, the bigger the government is, the smaller the private sector is. If government spending could actually create wealth, then there would not be one im-poverished person in the entire world—it would be too easy to fix. But government spending does not create economic growth. If anything, more government spending (once govern-ment gets past a certain size) hurts the economy.

SARS notice February 2013 (undated): Last payment for March 2013 is 28 March. See the Monthly Notebook for an examination of this assertion.*

SARS notice February 2013: Companies Act no 71 of 2008 & effect on approved or exempt com-panies. Remember to include fiscal requirements before you register your MOI.*DNS

SARS notice February 2013: New process for registration of tax practitioners: SARS is in the process of engaging with various bodies in the sector, to establish whether

they meet the above criteria, and will publish a list of ‘recognized controlling bodies’ shortly. Individual tax practitioners are required to be members of such bodies in addition to their registration with SARS. We will be communicating regularly with the ‘recognized controlling bodies’ and individual practitioners around the new process for registration of individual practitioners.

No matter how fond you might be of left-wing prepositions (around), you still are going to be hard-pressed to introduce such a massive change in such a short time. I sense a coming cock-up cum back-down. And what about SARS employees? What are their qualifications for wielding far more power than any poor sap of a tax practi-



tioner. How many of them even have a matric? How many have criminal records? How many of them are truly under anyone’s supervision? And, while its FAQS time, how much do they earn?*

Updated SARS guide February (undated) 2013: A guide to managing your SARS employer account.*DNS Updated SARS guide February 2013: An employer’s guide to the AA 88 third-party-appointment process. I

would check every word of this sinister document before acting on any supposed instruction from SARS.*DNS

Updated SARS guide February 2013 (undated): e@syFile™ Third-party appointment user guide. DNS Updated SARS guide February 2013 (undated): e@syFile™ Third-party appointment user guide. This

one’s filename proclaims it to be ‘1.21’. Is it a different document? DNS SARS notice February 2013: Updated version 6.2.1 of e@syFile™ Employer is available. DNS Updated SARS form February 2013 (undated): Claim for refund REV 16. DNS Updated SARS form February 2013 (undated): Request for a tax deduction directive after retirement &

death annuity commutations Form E. DNS Updated SARS tsatske February 2013 (undated): e@syFile™ Employer—requesting a statement of ac-

count (EMPSA). I wonder what the dickens ‘EMPSA’ means, & why the dolts dishing out this dreck can’t ever date their droll documents. Then, I see for the first time, the things include a disclaimer! I doubt whether a taxing authority may simultaneously require taxpayers to abide by its publications while claiming that their requirements are nonbinding, the statute law notwithstanding. DNS

Updated SARS tsatske February 2013 (undated): e@syFile™ Employer—payment allocation. DNS Updated SARS tsatske February 2013 (undated): Help-You-eFile. DNS SARS release notes February 2013 (undated): Release notes: e@syFile™ Employer version 6.2.1.

These short documents have enormous file-sizes yet are distributed electronically. I suppose it’s hopeless to ask for better technology to be applied. DNS

Missing forms February 2013 (undated): The SARS daily Notification Service claims that several updated forms have been posted to the SARS website, but the links offered are bro-ken, & there is no way of telling on the SARS Forms page whether the forms involved have been updated. Is it really so difficult to date everything? §

New act 01 February 2013: Taxation Laws Amendment Act 22 of 2012. The official version is now available on SA Government Online & the NT site. Another 130 pages of badly drafted amendments, a substantial part of which will be out of date within twelve months, through further amendments & amendments to amendments.

New act 01 February 2013: Taxation Laws Amendment Act 22 of 2012. The SARS version. I wonder if the Legal & Policy crew prefers these to the GPW version because of the GPW’s ‘(Secured)’ treatment of its PDF files (see the Monthly Notebook). But can we be sure the two versions are identical? I can’t help thinking that SARS should stick to the official, gazetted version. SARS in any event elsewhere posts GPW ‘(Secured)’ files on its website. I suppose that one government department cannot remove re-strictions imposed by another. Someone should give the GPW a kick in the bum.*

Treasury release 01 February 2013: NT withdraws suspension of transfers to Nala municipality. Well, that was quick (118 TSH 2013). Still, the poor buggers had to endure a visit from Treasury officials, who found them to be ‘on the right track’. OK, OK, I get it. The rea-son why everything is suddenly hunky-dory is that the municipality agreed to hold a meeting to pass a resolution! In SA, meetings are potent tokens, easily filling the gap left by unperformed actions. Now watch Nala turn to nada.

Treasury release 01 February 2013: Implementing twin peaks regulation in SA. Glad you asked: The ‘Twin Peaks’ approach entails creating a prudential regulator housed in the South Afri-

can Reserve Bank (SARB), and transforming the Financial Services Board into a dedicated market conduct regulator.

FRRSC report 01 February 2013: Implementing a twin peaks model of financial regulation in SA, published for comment by the Financial Regulatory Reform Steering Committee. §

SARS posting 04 February 2013: Fees for binding private rulings & binding class rulings.* Ron Warren† 05 February 2013: An officer and a gentleman. I salute his memory. FSB release 05 February 2013: FSB (Financial Stability Board) completes peer review of SA. ‘Si-

pho is a promising student but could do a lot better.’ GN 65 GG 36115 05 February 2013: Sectoral determination 13, farm worker sector, SA, under the Ba-

sic Conditions of Employment Act. The new minimum wage for farm workers, as from 1 March 2013, with increases for the next two years set as CPI & 1,5% (pre-sumably, percentage points). In my book, one of the cruelest forms of taxation.

GCIS release 06 February 2013: Setting the record straight on the role & mandate of the GCIS. A long screed on Ranjeni Munusamy’s column in the Daily Maverick on 1 February criticizing government’s communication skills. The release itself makes her point.

Updated SARS guide 06 February 2013: Registration of employees for income tax purposes PAYE–REG–



03–G01 rev 4. Accompanied by an attachment, ITREG processing statuses PAYE–REG–03–G01–A01, supposedly updated on the same date but still carrying an effec-tive date of 19 August 2011 & showing no sign of any change. See above.*

Sake24 06 February 2013: SA on ‘blacklist’, by Jan de Lange & Dewald van Rensburg: Die mineraalreg-hoof van een van die land se grootste regsfirmas het egter gistermiddag

aan Sake24 gesê ’n internasionale eksplorasiegroep met wie hy gisteroggend kort ná Shabangu se toespraak vergader het, het gesê Suid-Afrika is nou een van vier lande waarin dié groep geen beleggings doen nie. ‘Die ander lande is Afganistan, Irak en Iran. Dis nogal ’n skok om dit te hoor’, het hy gesê.

It’s easy to guess who told this sad tale. SARS release 07 February 2013: SARS enforcement & customs operations for January 2013. Gre-

tha Wilson found guilty on fraud & forgery relating to tax clearance certificates. I am glad to report that names are no longer given of SARS employees & others accused but not yet found guilty of wrongdoing. As for the list of customs ‘successes’, I am beginning to wonder whether this monthly listing is a good idea. In human affairs, the desired variable is always maximized—no matter what. In other words, if you want lots of small drug busts, you’ll get lots of small drug busts.*DNS

Updated IN 68 07 February 2013: Provisions of the Tax Administration Act that did not commence on 1 October 2012 under proc 51 GG 35687 (issue 2). See the Monthly Notebook.*

BPR 135 07 February 2013: Improvements effected on land under a long-term lease. Duh.* Integritax 07 February 2013: An item on ‘Timing of deductions’ treats s 11(l) of the Income Tax

Act (employer’s lump-sum contributions to retirement funds) as a real provision of the law. As I have repeatedly proved in our seminar notes, this is a dead letter. It is of no force or effect. In fact, it cannot be either interpreted or applied.

NT & SARS release 08 February 2013: SA & USA opening negotiations on Foreign Account Tax Compli-ance Act inter-governmental agreement.*DNS

GN 63 GG 36123 08 February 2013: Applications for permits for rebate of the full duty on worn cloth-ing & other worn articles of textile material used for the manufacture of industrial wiping rags & cleaning cloths will be dealt with according to the revised guidelines on ITAC’s website, with effect as from this date. I didn’t notice any such thing in my monthly review of the site, & could not find it upon a second look. When I searched for the string “guidelines” I came up with GN 1301 GG 32600 of 2 October 2009 (79 TSH 2009—you must admit, what a newsletter!). That can’t be right.

GN 102 GG 36119 08 February 2013: Application & cost-recovery fees for binding private rulings & binding class rulings under s 81(1) of the Tax Administration Act.*

GN 103 GG 36119 08 February 2013: Additional considerations under s 80(2) of the Tax Administration Act for which an application for a binding private ruling or binding class ruling may be rejected.*

Updated IN 39 08 February 2013: VAT treatment of public authorities, grants & transfer payments (issue 2). This is a hugely complex field, making this interpretation note critical. I might have missed it before but I think this is only the second time I have encoun-tered a SARS document with a click-through list of contents. Good so!*

IN 36 withdrawn 08 February 2013: Withdrawn ‘with immediate effect’, since it was valid only to 1 October 2006.*

IN 37 withdrawn 08 February 2013: Withdrawn ‘with immediate effect’, since it was valid only to 1 October 2006. These interpretation notes dealt with written statements issued by the Commissioner & the now-deleted s 76I of the Income Tax Act.*

IN 38 withdrawn 08 February 2013: Withdrawn ‘as a result of public notice no 102 published in Ga-zette 36119 of 8 February 2013’. This dealt with the costs of binding private rulings, & has been replaced by GN 102 GG 36119 of 8 February 2013. (Will the SARS Legal & Policy crew please note that the definition in the Tax Administration Act of a ‘public notice’ can have no effect on the correct manner of citing a Gazette notice.)*

SARB release 11 February 2013: Appointment of Kuben Naidoo as adviser to the governor & Leon Myburgh as head of the financial markets department.

SARS release 11 February 2013: Warning to taxpayers on scams. It appears that’s it is not only SARS that is using the SARS logo to pull off scams. Must protect the franchise!*DNS

New IN 69 12 February 2013: Game farming. The suspense is at last at an end. A brilliant sec-tion on what is farming (a sensitive subject). Game-farming competently dealt with. A pity that a farmer’s consumable stores are dealt with by way of a footnote only. A good point on foxes, rodents & the like. I am very interested in the section on the ownership of game, which, at first glance, I think is inadequate. Since it is a patri-monial issue, I’ll add it to the list of items for possible treatment in a future issue. The good news is that the standard value of game livestock remains at zero. Those responsible for this interpretation note can be justly proud of their work. It is not only



professionally done & academically impressive but could go straight into the Bsp Stylebook as an example of top-notch professional writing. I know very, very, very few accountants or lawyers who could come anywhere close to this standard. It is time I lifted my general disapproval of interpretation notes, & I hereby do annul it.*

PN 6/1999 12 February 2013: Practice Note 6 of 1999 on game farming withdrawn.* Business Day 12 February 2013: Advocates body deputy resigns over bill. By Franny Rabkin, on

the resignation by Izak Smuts SC as deputy chairman of the General Council of the Bar over the ‘council’s stance on the Legal practice Bill. By this account, Adv Smuts is worth watching as potential TSH Honour Roll material.

High Court case 13 February 2013: De La Guerre v Ronald Bobroff & Partners Inc and Others (22645/2011) [2013] ZAGPPHC 33. Just how often does the point need to be made? There is no such thing as a common-law contingency fee agreement, &

the Contingency Fees Act is exhaustive on its stated object, and any contingency fee agreement not in compliance with it is invalid.

On contingency fees, see 104 TSH 2011, 113, 114, 115, 116 & 117 TSH 2013. High Court case 13 February 2013: South African Association of Personal Injury Lawyers v Minister

of Justice and Constitutional Development (32894/12) [2013] ZAGPPHC 34. SAAPIL swallowed a bitter one here. There is no such thing as a common-law contingency fee agreement, & the Contingency Fees Act is perfectly constitutional. SAAPIL’s cur-rent president, according to his firm’s website, is Ronald Bobroff.

GN R 96 GG 36147 15 February 2013: Automotive production & development programme (APDP) regula-tions. Set by the ITAC under the department of (Ha !Ha! Ha! Sorry, can’t help it) eco-nomic development. I’ve long wondered how these things work:

The APDP consists of rebates and refunds of the relevant customs duties as legislated in the Customs Act.

I see. You slap a duty on cars & parts, refund some of it to your chums, to the ac-companiment of much rigmarole, & call it industrial development. It’s what the Nats did, for the ‘infant car industry’—for fruitless decade upon decade.

GN R 106 GG 36147 15 February 2013: Withdrawal of provisional payment (PP/140) under s 57A of the Customs & Excise Act. A Chinese manufacturer of acetaminophenol overcomes at least one C&E hurdle. No matter. We’ll get ya the next time!*

Business Day 15 February 2013: In a letter to the editor, Michael Fridjhon writes: When the African National Congress (ANC) was elected in 1994, it swiftly made clear that it

understood that power without cash flow was meaningless. Accordingly, it focused its best brains on tax collection and created a revenue service, empowered by legislation, which runs roughshod over citizens’ rights and is among the most efficient in the world. In short, when there is a perceived priority, the political will, and no squeamishness about means and ends, even our inept government can get things done.

Best brains? Among the most efficient in the world? But I’m not about to write a wine column on fine anti-freezes of the world—he’s got the rest right.

ITAC release 19 February 2013: Import tariff support. Hefty tariff increases for imports of frozen half-shell mussels, pasta, geosynthetic clay liner, set-top boxes, windscreens, coni-cal steel drums, television antennas & lawn mower blades. ITAC unprofessionally is-sues its releases in Word. Its economics are even more old-fashioned.

Updated IN 29 19 February 2013: Farming operations: equalized rates of tax (issue 2).* Updated BGR 9 19 February 2013: Taxes on income & substantially similar taxes for purposes of

SA’s tax treaties (issue 2). Is the dividends tax covered by our tax treaties? My inter-est was piqued by the bit about informing treaty-signatories of the dividends tax law. Which version was that, I wonder? And was it presented with a date & time stamp? Wouldn’t it be a lag if, after all that has been done to be rid of the STC, the dividends tax fails to satisfy the principal criterion for its (miserable) existence?*

Draft DR rules 22 February 2013: Dispute-resolution rules promulgated under s 103 of the Tax Administration Act. These would replace those of GN 467 GG 24639 of 1 April 2003, from which they differ, considerably. I hope that adequate notice will be given of the changeover, although I have no expectation whatsoever that SARS staffers mugging & beating up taxpayers will ever be familiar with such rules.*

SARS notice 22 February 2013: Enhanced third-party-appointment (AA 88) function on e@sy-File™ Employer. DNS

Treasury release 25 February 2013: Impact of the rebasing & reweighting of the consumer price in-dex (CPI) on inflation-linked government bonds.

SAITP notice 25 February 2013: The head of education at the SA Institute of Tax Practitioners, in my view, the most likely beneficiary of the SARS effort supposedly to professional tax practitioners, makes this announcement:

I am is pleased to announce that the Quality Council for Trades and Occupations (CQTO)



appointed the SA Institute of Tax Practitioners as the Development Quality Partner (DQP) for the occupational qualification Tax Technician. The decision was taken by the broader ac-countancy industry, employers and other stakeholders at the scoping meeting held on 25 January 2013.

To which I say: the huge educational bureaucracy (HEB) we have created since 1994, with its innumerable pigeonholes for recognized qualifications (IPFRQ), has helped to produce one of the crappiest educational & training systems in the world (CE&TSIW). I expect no different outcome from this latest extension of the system. §

Business Day 25 February 2013: High income tax rates drive firms into the informal sector. By Loane Sharp (Adcorp). The other factor he cites are our labour laws.

Budget 27 February 2013: Budget speech by the MOF. I’m glad I don’t waste time anymore watching this guff live. Get this:

A tax review will be initiated this year to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustain-ability, amongst other things.

Tax policy? The Treasury wouldn’t recognize a tax policy stuck far up its left nostril.* Budget 27 February 2013: National Budget Review. As usual, I keep only selected chapters. National Budget 27 February 2013: Chapter 1 ‘A new trajectory for national development’ is full of Review probably empty promises but is interesting to compare with last year’s chap 1. For

example, the 3% deficit target has moved out by at least a year, as has the spendi-ng target of 31%. We are treading water, borrowing to finance current consumption, a practice the state continues to characterize as ‘a sustainable countercyclical ap-proach’. And budgeted infrastructure spending over the next three years remains essentially unchanged. Were past targets met? The text suggests not. Good grief! I see a proposal ‘that foreign businesses that sell digital goods in South Af-rica…register for VAT’. That might well screw up my own computer environment, while raising, I suspect, very little revenue. In any event, how will they police it?

National Budget 27 February 2013: Chapter 3 ‘Fiscal policy’ is as impressive-looking as always; it’s Review just that I no longer believe it. National Budget 27 February 2013: Chapter 4 ‘Revenue trends & tax proposals’. Carpetbaggers Review around the world will be watching developments with the ‘employment tax incen-

tives’ keenly. I once met a representative of a US company specializing in hoovering up such things, mainly in Africa. Expect no real impact on employment. If tax con-cessions had economic effects, we would be Finland rather than on the way to be-coming Greece. The proposals on trusts are unintelligible, unsurprisingly so, since the Treasury doesn’t understand them at all (in company with many of our judges & almost all of our counsel). The main problem is that the current law on trusts cannot be computerized & so is utterly unenforceable, given the absolute lack of training of SARS staffers. What the Treasury has overlooked is the reliance of ANC elites upon trusts to achieve all sorts of weird & wonderful results, not including the payment of much tax. On past form, this initiative should fizzle out within a year.

National Budget 27 February 2013: Annexure C ‘Miscellaneous tax amendments’. I hope they finally Review clap captive insurers, although new laws aren’t at all necessary. But they continue

to make clowns of themselves over international shipping, which will never return to SA (while diamond-cutting never even made landfall). How much time & effort they could have saved simply by reading this newsletter! Don’t take decisions or give ad-vice without at least glancing at this document.

National Budget 27 February 2013: Annexure W3 ‘Gateway to Africa & other reforms’. Probably a Review doomed initiative but worthy of examination by potential economic rent-seekers. Budget 27 February 2013: Budget 2013 Highlights. Budget 27 February 2013: Budget 2013 People’s Guide. Too massive to keep, but you

would have seen it in every newspaper, perhaps even The New Age.*§ Budget 27 February 2013: Budget 2013 Pocket Guide.* Budget 27 February 2013: 2013 Retirement reform proposals for further consultation. Again! Budget 27 February 2013: Taxation proposals tabled on 2013–02–27 at 14h58 with effect

from 14h58 on 2013–02–27. That’s quite tight. Includes tariff changes.* Budget 27 February 2013: Impending changes—subsistence allowances.* Excon circular 27 February 2013: No 5/2013 Statement on exchange control, drawing attention to

the EXCON reforms mentioned in annexure W3 in the Budget documents. GN 145 GG 36192 27 February 2013: Fixing of rate per kilometre for motor vehicles for the purposes of

s 8(1)(b)(ii) & (iii) of the Income Tax Act.* GN 147 GG 36195 27 February 2013: Notice under s 13quat(8) of the Income Tax Act of area demar-

cated by Cape Town as urban development zone. First new UDZ in an age.* The Star 27 February 2013: Why do we stifle people’s ambitions? By Herman Mashaba (Free



Market Foundation). GN 148 GG 36198 28 February 2013: Determination of daily amount for meals & incidental costs for

purposes of s 8(1) of the Income Tax Act.* GN R 134 GG 36184 01 March 2013: Appointment of authorized dealer in foreign exchange with limited

authority—Ayoba Foreign Exchange (Pty) Ltd. * Found or to be found on the SARS website. On the SARS What’s New page. (DNS) SARS daily notification service.

§ Not included in Tax Shock, Horror Database.

LOST & FOUND TSH Database This month 139 items were added to the Tax Shock, Horror Database. Land subdivision Since 16 September 1998, the President has failed to proclaim the Subdivision of

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

Act to gazette requirements for the registration of consultants to principals. Provisional tax tables Since 25 April 2003, SARS has failed to gazette the annual provisional tax tables. PAYE tax tables Since 1 March 2011, SARS has failed to gazette the annual PAYE deduction tables. Exempt PBOs Since who knows when, SARS has ceased publishing the list of approved PBOs. SARS website Asked to make a PAYE calculation, I looked in vain in the Tax Shock, Horror Data-

base for the full suite of documents that used to comprise the once-excellent SARS PAYE Guide for 2012–13. Without much hope, I entered the string “tax tables” in the search function on the SARS website & made a startling discovery. There are two, entirely different pages headed ‘PAYE for employers’, the hidden one bearing a subti-tle of ‘Statutory rates & tables’. Had I encountered it before? Yes, once, & filed it un-der its subtitle. How do you navigate to it from the SARS home page? I dunno. But I had lost the PAYE Guide issued on 1 March 2012 & had to be satisfied with the reis-sue on 1 October 2012.

SARS DNS This month I mark all the documents issued by the SARS daily notification service. You cannot rely on it to be kept up date, but it includes items not highlighted in any way (& possibly not even included) on the SARS website.

MONTHLY NOTEBOOK

Shakespeare’s corner

Shirley Renwick responded to a SARS letter of find-ings, only to receive this reply:

Hi Shirley The fact is that when the company pays PAYE they are

deducting money from the employees and pay it on behalf of the employees to SARS. The total amount that was paid to SARS on behalf of the employees some of that amount was returned to them. It would only be cor-rect to recalculated PAYE or tax amount based on

individual base. If it was before the refund was paid to the employees then the refund was going to be re-duced by the amount of those adjustments made. The PAYE amount was calculated taking into account all the deduction per individual. But if you still don’t agree to the fact mentioned please complete the objection form and submit to me.

Kind regards [I am too vicariously embarrassed to reveal a name.] Team Member: Audit

SARS beats up on an invalid

Oreste Nusca (Truworths Ltd) might become my favourite correspondent:

Thank you very much for the monthly Tax Shock, Hor-ror publication. I cannot imagine how much time and effort it takes to compile it, and all this for free!

But things grew serious when she responded to a remark in 118 TSH 2013:

Further, it is definitely THAT TIME OF THE YEAR. I submitted my Mom’s tax return via eFiling on

22 January 2013. The original assessment arrived within minutes, obviously ‘selected for audit’, since she was due a refund of all provisional taxes paid. My Mom (78 years of age) is a diabetic, has had a colostomy, and is also disabled, since she has had her one leg amputated below the knee. Thus she is confined to a frail-care institution, and has incurred a considerable amount of qualifying medical expenses. I duly up-

loaded all the supporting documentation the evening of 23 January 2013, which included a full listing of the ex-penses incurred (R297 K) and all her bank statements confirming the outflow of all the funds to the various service-providers (as in previous years of assessment). First thing on 24 January, with probably no one having even looked at the list and supporting documentation, I get an additional assessment with: Grounds for assessment: DECLARATION INCORRECT.

Declaration section: NET MEDICAL DEDUCTIONS.

Adjustment Reason: DEDUCTIONS DISALLOWED.

Now they are demanding ‘Additional tax/Under-statement Penalty’ of R42 825,75, ‘Penalty: Under es-timation—Provisional tax’ R4 601,44 and ‘Sec-tion 89quat(2) interest on underpayment of provisional tax’ R4 196,06. In total, they want R137 K.

Needless to say, I have not slept well since then and, since I am not seasoned in dealing with this crowd, and am frightened about how to proceed.



Sorry, I forgot Derek Keys & Chris Liebenberg

The words ‘ceaselessly’ and, far more famously, ‘amorphous’ I and many others will always associ-ate with one of SA’s greatest sons, Trevor Manuel, currently national planning minister.

But, for all his achievements, he wasn’t, as I in-ferred (118 TSH 2013), the new SA’S first minister of finance; he just seemed to be. In fact, he was its third.

The history of a ‘dividend’ (1)—who gets the law right?

The emergence of the Taxation Laws Amendment Act 22 of 2012 on 1 February 2013 enabled me fully to update my History of a ‘Dividend’. At the same time, because the commercial publishers have by now updated their consolidations of the tax law (whether on the basis of bills or acts remains to be seen), I was able to compare my rendition against the work of others. Even though I have been consolidating legislation for most of my ca-reer, I came out of this exercise shaken. It is so complicated trying to make sense of amendments, amendments to amendments, and amendments to amendments to amendments, not to mention the bewildering array of effective dates, that I doubt whether any one rendition of the tax law in the country is altogether accurate.

To make matters worse, my personal challenge is greater than the norm, since in this publication (as in other, similar publications) one of the objects is to record the law as it stands at particular mo-ments in time.

A month ago, I picked up amendments to amendments in Act 24 of 2011—promulgated on 10 January 2012—but somehow overlooked four substantive amendments, three of which amended

the definition of a ‘dividend’ in s 1 (now s 1(1)) of the Income Tax Act as at I January 2011, that is, in the distant past (of promulgation), while the fourth substituted the entire thing as at 1 April 2012, that is, in the immediate future (again, of promulgation).

I had also missed the 1 January 2011 and 1 April 2012 versions of the definition of the term ‘contrib-uted tax capital’. which is fast becoming unintelligi-ble (complexity is gradually being transferred from the one definition to the other, with early, foolhardy attempts at stark simplicity now in ruins).

The first oversight explains a claim I made in 118 TSH 2013—which at the time even I thought was odd—that the current definition of a ‘dividend’ has subsisted since 30 September 2009. What tosh!

On the other hand, a commercial publisher missed an amendment to an amendment to an amendment affecting the effective date of the latest amendment to the definition of the term ‘contrib-uted tax capital’ in s 1(1). It caught the amendment to an amendment but not the amendment to an amendment to amendment. (Are you following?)

To even things out, I had missed an amendment to an amendment to the definition of the term ‘ef-fective date’ in s 64D(1).

Readers have their say—legal drafting

Clive Hill, no doubt tongue in cheek, sends TSH this quotation from an unnamed source:

‘National Treasury said they will appoint two additional tax law writers from 1 March 2013. Anyone interested can probably contact them.’ He goes on to say:

A chance, maybe, for Costa to rewrite our Income Tax Act?

These (low-paying) posts, I told him, were adver-tised a long time ago (114 TSH 2012). To which he replies:

If you haven’t covered it in a previous issue already, you might want to describe the historical attempts to rewrite the Act, including Adv Eddie Broomberg’s at-tempts in the ’90s, which I recall, were undermined by the authorities, leading to his withdrawing from that project.

I recall that Eddie was twice appointed to the task, and always (romantically) believed that I had inad-vertently scuppered the first approach, by asking whether it had been put out to tender. This is the first time I hear of possible conflict.

Apart from the impossibility of an outsider’s work-ing with ‘the authorities’, it’s an altogether impossi-

ble task. The precious input from the case law has to preserved, unintended consequences avoided, potential abuse of power guarded against, and a plausible succession plan instituted, since the pro-ject would take several years to reach finality.

As a child, it took me a long time to understand the cartoon in which the petrol jockey asks the driver of a large American automobile to switch off the engine because ‘She’s gaining on me’. (Ac-cording to the worldwide web, it’s attributed to Pe-ter Arno in The New Yorker as well as Bill Caldwell in the Daily Star).

The same problem would bedevil work on the act—how could you possibly rewrite while still keeping up with the constant flood of amend-ments? Any attempt not addressing this issue would end in a shambles in just a few years.

The most intractable problem is that vested in-terests would never allow the job properly to be tackled. You have to start with the principles of le-gal drafting; from those draw up a drafting template to be used consistently over the next fifty years; and then set up an exclusive school of legal draft-ing teaching both principles and how to apply the template, as well as some computer programming.



Beating your browser into shape

In recent months Firefox has been driving me mad, insisting upon the installation of Adobe Reader before opening PDF files (117 TSH 2012). This month it got worse, with PDF files being opened inside the browser, that is, as HTML files. Luckily, my first experience of this phenomenon occurred while Evan Pierce (Pierce Technology) was in my office.

He showed me how to fix both problems. You simply go to Options and then Applications and set anything and everything referring to Adobe to your preferred PDF software; it need not even be an Adobe product. The few keystrokes involved save me hours wasted in shifts from Adobe Reader to Adobe Acrobat.

SARS notice on March payments

SARS has issued a notice on its website and possi-bly by other means unknown to me, claiming that the last date for payment in March 2013 is 28 March, owing to the public holidays at the end of the month (see the Monthly Listing). Since March is the last month of the state’s financial year, this is a happy outcome for SARS, but is it lawful?

In s 162(1), the Tax Administration Act calls for tax to be paid by the day ‘notified by SARS or as specified in a tax Act’.

Does this provision give SARS the discretion to set dates for payment willy-nilly? Certainly not, on account of the maxim expressio unius est exclusio alterius—the express mention of one thing ex-cludes all others. In other words, if any ‘tax Act’ specifies a date for payment, SARS cannot usurp the National Assembly by replacing the law with its own discretion. If the provision were meant to af-ford SARS the extraordinary power to render stat-utes nugatory in this aspect, the wording would

surely have been far stronger and explicit. While it is interesting to comb through the vari-

ous tax Acts looking for specified dates for pay-ment, there is no need to, since they are all in any event subject to an overriding provision, which sARS ought to have cited in its notice.

This is s 244(1) of the Tax Administration Act, performing for all ‘tax Acts’ the function once car-ried out, for the Income Tax Act alone, by s 89sex of the Income Tax Act, now deleted:

244. (1) If— (a) a day notified by SARS or specified in a tax Act for

payment, submission or other action; or (b) the last day of a period within which payment,

submission or other action under a tax Act must be made,

falls on a Saturday, Sunday or public holiday, the ac-tion must be done not later than the last business day before the Saturday, Sunday or public holiday.

Son of amendments to amendments

With my head reeling from the avalanche of fiscal legislation that has recently descended upon us, I simply had to update my Amendments to Amend-ments (118 TSH 2013) so as to reflect the emer-gence of the Taxation Laws Amendment Act 22 of 2012 on 1 February 2013.

Without such an exercise, there is simply no way to understand the effect of these arcane provisions, which can utterly change the face of the law as you might know it.

Here is a rare glimpse into a world accessed by only a very select few. Amended are:

The Income Tax Act 101 of 1990 (two amend-ments)!

Amendments to the CFC law not yet in effect (two).

Amendments to exemptions not yet in effect (two).

Amendments to the effective date of provisions catering for Sharia-compliant financing (nine).

A CGT provision already in effect—deleted long before its effective date!

The effective date of an amendment to the defi-nition of the term ‘gross income’—changed by a period of fifteen months!

Section 8EA of the Income Tax Act—deleted

with effect from before it became effective. Amendments to exemptions—deleted with effect

from before they actually became effective (two).

The effective date of amendments to exemp-tions already in force since 1 March 2011.

The effective date of amendments to exemp-tions (two).

An erroneous effective date of an exemption. The effective date of the new R&D deduction—

shifted from April 2012 to October 2012! The effective date of medical credits (two). Reorganization reliefs—guillotine clause in-

serted (three)! Termination relief—substantive retroactive

amendment! CGT cross-reference cock-up. CGT participation exemption—substantive retro-

active amendment! Effective dates for amendments to the CGT par-

ticipation exemption. Amendments to CGT capital distributions—shifted

back in time by fifteen months (two)!

What amazes me is how the National Assembly is so packed with talent that it masters this class of amendments with the same effortless ease as it glides through the conventional ones.



The dividends tax—a legislative history

Tax is as much about timing as it is about under-standing and applying the law. In the distant past, amendments to the tax laws affecting individuals tended to apply to a forthcoming year of assess-ment ending on the last day of February, while those affecting companies tended to apply to a financial year commencing upon a particular date, usually a date in or at least partly in the future.

Today’s style of legislative change is perfectly displayed in what you might fondly believe is the ‘new’ dividends tax.

Coming into operation Thanks to GN 1073 GG 34873 of 20 December 2011, it came into operation on 1 April 2012. Ex-actly what ‘came into operation’ at that moment?

The tax was inserted in the Income Tax Act by the Revenue Laws Amendment Act 60 of 2008 (promulgated on 8 January 2009).

It was junked and substituted, holus bolus, by the Taxation Laws Amendment Act 17 of 2009 (30 September 2009).

Then thirteen amendments and fifty-three amendments to amendments (the way I count such things) were effected by the Taxation Laws Amendment Act 7 of 2010 (2 November 2010).

Finally, twenty-four amendments were effected by the Taxation Laws Amendment Act 24 of 2011 (10 January 2012).

Ordinarily, you might not have expected so much activity with a tax that has been cogitated over and planned for years, but at least all of these devel-opments were forward-looking.

1 April 2012 Was this, then, the law as at 1 April 2012? Hell no. To find out what that was you had to wade through:

The one amendment effected by the Rates and Monetary Amounts and Amendment of Revenue Laws Act 13 of 2012 (9 October 2012).

The three amendments effected by the Tax Ad-ministration Laws Amendment Act 21 of 2012 (20 December 2012).

And the twenty-six amendments effected by the Taxation Laws Amendment Act 22 of 2012 (1 February 2013).

Right on! You had to wait until 1 February 2013 to know what was the law on 1 April 2012! It reminds me of the CGT, which is still being written to this day but featured even more amendments backdated to its inception.

October to December 2012 Next come a batch of amendments with effect as from 1 September 2012, 1 October 2012 and 20 December 2012 (thus, at this point, the tax was changing almost on a monthly basis):

The seven amendments (one still not in force) effected by the Tax Administration Act 28 of

2011 (4 July 2012). The seven amendments effected by the Tax

Administration Laws Amendment Act 21 of 2012 (20 December 2012).

And the three amendments effected by the Taxation Laws Amendment Act 22 of 2012 (1 February 2013).

This is a mixed bag, including forward-looking, simultaneous and backward-looking amendments.

1 January 2013 Then comes 1 January 2013:

The ten amendments effected by the Taxation Laws Amendment Act 22 of 2012 (1 February 2013).

That’s also backward-looking, although only by a smidgen.

1 April 2013 Finally, you get to travel into the future, namely, 1 April 2013, where you will have to contend with:

The two amendments effected by the Taxation Laws Amendment Act 22 of 2012 (1 February 2013).

Where is this going? Counting the early substitution of the entire tax as a single amendment, there have been, by my count, 150 amendments to a tax that is not yet a year old. And with so many of these amendments being backward-looking, it would be insane to expect anyone to have obeyed or enforced the law.

Nor is there any reason to hope that the flow of amendments will abate. They will keep on coming, for years, with, as usual, a wide variety of effective dates, in the past, in the present, and in the future.

Nor will this body of law become more intelligi-ble. It has been growing steadily more complex, and the drafting is so pathetic (at least two drafts-persons are involved, one being based on Mars, while their supervisor has been on the Space Sta-tion circling the earth) that the law is hugely difficult to understand. All concerned have no idea whatso-ever how laws are meant to be written but simply play out their neurotic bad habits, again and again and again. Any meaning is buried by a thicket of needless cross-references, of the ‘as contemplated in’ variety. So much crass incompetence!

My greatest concern is that ill-disciplined torrents of amendments make it extremely difficult to de-fend yourself against assessments raised long after the event. Hence my latest compilation of the law: The Dividends Tax—A Legislative History, now available for purchase.

To put everything into date order was a nightmar-ish undertaking. I could never have completed the task without the help of the LexisNexis consoli-dated version of the current law, which enabled me to ensure that I had not left any provisions out.



Assessments—more dirty tricks from SARS

The SARS Alberton office, going one better than the Large Business Centre at Megawatt Park (117 TSH 2013), has perfected the art of making it impossible for you to protect your rights upon receipt of an assessment. It is sending out assessments, no doubt fondly believed to be in accordance with the dictates of the Tax Administration Act, with no

workable indication of how or where to respond! That is what happens when high school gradu-

ates (if only) try to read a statute. Neither ‘SARS Contact Centre ALBERTON 1528’ nor

‘Website; SARS.gov.za’ is a valid address, while the contact number supplied, ‘0800007277’, does not appear to be an operational number.

More secrets of PDF f iles from the GPW

As explained in 118 TSH 2013, these days PDF files from the Government Printing Works are, for no discernible reason, all ‘(Secured)’ files, meaning that they are inaccessible; for example, you cannot copy text from them, or convert them to Word or WAV (sound) files.

Since I am compelled to process such files, I now process all PDF files, from whatever source before including them in the Tax Shock, Horror Database, so as to save space on the DVD. Direc-tories in the database exclusively containing files so processed have names ending with the letter ‘c’.

(A subscriber to the DVD recently complimented me on the directory-structure of the database, which, indeed, took years to perfect. I wasn’t pleased, since I knew that (a) the directory-structure is good, and (b) it was probably the first time he had ever consulted the database—by con-trast, I use it several time a day.)

To recap, the process goes like this: 1. Remove restrictions, if it is a ‘(Secured)’ file. 2. Remove metadata, invisible attachments and the like. 3. Re-

duce file size. But I had not allowed for a further development

in the GPW’s campaign to force us to access Gover-nment Gazettes elsewhere. (Is it a sweetheart deal, I wonder? Who sells access to Gazettes?). This month its files on SA Government Online were strange, in that, if I carried out all three steps, they ended up being full-on images and so entirely in-accessible. But, if I left out step 2, all was well.

My new process thus goes like this:

Remove restrictions, if necessary. Reduce file size. The file is compulsorily

saved. Remove metadata etc. If you cannot copy the

text, discard the file without saving it. You are left with an accessible file, of the

smallest possible size.

If you know that the file comes from a source not booby-trapping its files, use the old process; it’s quicker. Don’t apply the process to PDF files you have created, unless you know what you are doing.

From the man who spotted my trust blunder

Anville van Wyk (Van Wyk Fouche Inc) is always a welcome correspondent, and always sharp, yet impeccably polite:

Thanks for TSH, most informative , entertaining, etc, even the occasional swipes at the legal profession. That is where we have an edge on others: we get used to things not always going our way. So, we take it on the chin. The profession has become cheap, I am afraid to say: very easy to become one, the training is shocking. If doctors were trained like lawyers, there would be a lot of dead people around.

Agree with you on the ‘attorney’ who overcharged you and then stole from the fiscus! The reaction of the Law Society is shocking!

On s 10(1)(k)(ee) [of the Income Tax Act]. Am I missing something: is the provision not applicable only to ‘ any dividend received by or accrued to a com-pany’?

Kindest regards. Keep up the good work.

Many years ago, I was witness to a car accident. The police investigating (that’s what they did, those days; they investigated road accidents) rejected my statement out of hand, for being in utter contradic-tion of the statements of other eyewitnesses. That’s

when I learned that you cannot trust the senses, whether yours or another’s.

And that’s what happened with my piece in 118 TSH 2013 on ‘dividends’ (not ‘foreign dividends’) derived and distributed by a so-called discretionary trust in the same financial year. I knew that the exclusion from the s 10(1)(k)(ee) exemption ap-plied only to companies—after all, I had worked pretty hard on it in the context of corporate share-incentive schemes (117 TSH 2012). But, writing the piece, when I specifically looked for it, I could not, I swear, see the word company. Perhaps uncon-sciously still troubled, and very unusually, I sent the piece to no fewer than three colleagues for review, and heard from not one of them.

So the new law is mad but not as mad as I por-trayed it, in that only companies will have to pay normal tax on dividends derived in such circum-stances from such a trust. I still don’t see how the supposedly related s 64F(l) exemption from divi-dends tax will work, or, indeed, how the dividends tax applies to trusts in the first place. While I re-main convinced that a massive breach of principle has taken place, the Budget indicates that trust principles are in any event about to be junked.



Readers have their say—prescription

Karen Lamprecht writes:

Please can you let me know how to deal with SARS when they say that [a matter] is prescribed. In many of the instances they are saying are prescribed we have been fighting on and off for years, and it is only their delay that has drawn out the process.

There are all sorts of deadlines, for example, for asking for reasons, lodging an objection or appeal-ing against a disallowed objection. These all work against the interests of taxpayers. SARS, on the other hand, has very few deadlines to meet, at least, on the face of the law, and, in any event, takes not the blindest notice of any of them.

A great many practitioners think that, as long as they are corresponding or otherwise interacting with SARS, the deadlines go into limbo.

It would be flattering of SARS to wonder whether they are not lured into this trap but the truth is probably far more mundane. When a matter is fi-nally examined by someone who knows something about the law, usually after at least three years, the weak spot in the taxpayer’s position is, well, spot-ted, and then it’s overkadovers. Only when practi-tioners start being sued for professional negligence in not protecting their clients’ interests by following due process will we see any improvement in the lamentable state of tax practice.

The history of a ‘dividend’ (2)—was this STC change legal?

Where will this drafting chaos end? And what con-stitutional rights are being trampled in the process?

For example, I am concerned by the very latest wording of s 64C(4)(a), an exemption from the now-defunct STC rendered effective as from 1 January 2011 (!) by s 82(1) of the Taxation Laws Amendment Act 22 of 2012, promulgated on 1 February 2013.

The preceding bill came out on 25 October 2012, and the first draft of the bill came out on 13 March 2012 (there were two drafts). Thus, if the amend-ment affects taxpayers’ interests, no matter how insanely vigilant they were, they would not have enjoyed any notice whatsoever.

The trouble is that I cannot easily say—and not for the first time—whether the amendment pro-motes or harms taxpayers’ interests. The exemp-tion used to apply

(a) where the amount constitutes a dividend,

Now it applies

(a) where the amount would have constituted a dividend as defined in section 1 without regard to paragraphs (i), (ii), (iii) and (iv) of that definition;

The paragraphs referred to—elsewhere described as ‘subparagraphs’—represent exclusions from the definition of a ‘dividend’. I am a hopeless mathe-matician, but might this proposition be correct?

The exclusion used to address the reduced set of the transactions comprising a ‘dividend’, namely (essentially), a transfer to shareholders, but excluding things such as a reduction of con-tributed share capital.

Now it addresses the full set of such transac-tions, without reduction.

Therefore the exemption is wider than it used to be and so is favourable to taxpayers’ interests.

But stay! What about those taxpayers not the chums of the National Treasury and so unaware of this (once) upcoming relief (if I have maths right) from the STC? They would have missed the oppor-

tunity to make distributions free of the STC or, worse still, might have made such distributions and paid the STC under the law as it stood at the time.

(I have had personal experience, although only by way of hearsay, of the Treasury’s giving chums a heads-up of a forthcoming relief. It is one of the founding precepts of this newsletter that all fiscal information should be available to everyone and at the same time.)

The importance of paragraph-endings One final point. Although I am currently exploring other ways of converting GPW PDF files to Word, a very accurate method (not involving error-prone OCR) is to copy and paste.

The disadvantage is that each line copied is ren-dered as ending with a paragraph mark denoting the end of a paragraph. To get rid of superfluous paragraph marks, I use a find-and-replace tech-nique which aims at leaving behind only those marks genuinely at the end of paragraphs of text. But these will not necessarily be the paragraph marks of the original. For example,

(b) as consideration for the acquisition of any share in that company,

but does not include any amount so transferred or applied by the company to the extent that the amount so transferred or applied—

(i) results in a reduction of contributed tax capital;

differs dramatically in meaning from

(b) as consideration for the acquisition of any share in that company, but does not include any amount so transferred or applied by the company to the extent that the amount so transferred or applied—

(i) results in a reduction of contributed tax capital;

In the first version, item (i) is a paragraph of the definition of the definition of a ‘dividend’ in s 1(1) of the Income Tax Act, fully equivalent to para-graph (b). In the second, it is a subparagraph of paragraph (b). My previous methods of data ma-nipulation resulted in numerous errors of this na-ture, despite the most careful comparisons of the



layouts of original and derived documents. It was the idiot draftsperson’s reference to ‘subpara-graphs’ of the definition of a ‘dividend’ that led to my discovery that I had the layout wrong.

In order to limit such transmission errors, the

Treasury, I say again, should release legislation in both PDF and Word formats. Better still, it should junk our ancient, colonial style of presenting legis-lation, which is fatally dependent upon layout—the distance of the text from the margin of the page.

Provisional tax—first‐period payments vanish mysteriously

Regular correspondent Carl Nielsen (Dulverton Financial Services) sent me this cri de coeur:

Dear everyone at SARS who might listen, Please can you note what I think is a massive problem

with IRP 6s on eFiling. When I open the IRP 6, any first-period payment that was made is not appearing pre-populated on the form (I have just had one IRP 6 where it did appear, so it seems perhaps not to be a universal problem).

Also, weird penalties on the first period are appear-ing (presumably raised on the basis that the system seems to think that no first-period payment was made, and it has calculated them on some theoretical amount that SARS came up with).

The non-vigilant end-user could therefore easily be duped into an overpayment now if she or he does not notice that the first-period payment they made has not been carried on to the return as a credit.

I have taken this up with SARS via Eugene Joubert: the response was that updating historical information should pull it through. This does not appear to be the case.

Shirley Renwick had a similar problem:

I went on to eFiling provisionally to enter the informa-tion on an IRP 6 return. The return reflects the last year assessed as 2011, and did not pull through the first provisional payment. I was able to enter the first pay-ment on the form, but the problem is the basic amount. I started looking at all my clients, and the same situa-tion occurs for all of them.

I phoned the SARS call centre, and, apparently, there is a problem with their system! I tried to get some sort of answer regarding the imposition of penalties if a fig-ure other than the basic amount shown on the IRP 6 is used, bearing in mind that this is faulty. In addition, owning to the downturn in the economy, a number of my clients had reduced earnings in the 2012 year. The basic amount is 2011 plus 16%. They did not under-stand my question.

This obviously is a problem across the board. Has anyone else experienced it and got any kind of rea-sonable response from SARS?

Carl Nielsen then came back with this:

They claim that the issue is fixed. I haven't been able to test this assertion, having corrected all my IRP 6s manually.

TAA commencement—a remarkable cock‐up

In 118 TSH 2013 I promised to let you know whether s 64K(6), a provision dealing with the new but al-ready much-amended dividends tax, has or has not been deleted. Well, that minor issue has been ut-terly swamped by my closer reading of Interpreta-tion Note 68, now released as Issue 2 (see the Monthly Listing).

The IN is entitled ‘Provisions of the Tax Admini-stration Act that did not commence on 1 October 2012 under proclamation no 51 in Government Gazette 35687’. Even its title (which reminds me of the ancient song title Yes, we have no bananas) is remarkable—it’s an account of what did not com-mence! What it does—and it takes twenty-six pages to accomplish the task—is explain the effec-tive date of the Tax Administration Act, which was partially set in motion by proc 51.

I had some difficulty establishing that its original had been properly logged in this newsletter, since I had mistakenly listed it as IN 67 (116 TSH 2012), although it is correctly filed in the Tax Shock, Hor-ror Database. Far worse was my failure to examine the original issue carefully enough to discover its ‘Annexure B’, a nineteen-page exercise in obscurity that holds its own against even my own, most ab-struse publications on the text of tax legislation.

This annexure is entitled ‘Extent to which provi-sions of Schedule 1 to the Tax Administration Act,

2011, did not commence’. It includes ‘proposed’ annotations that I can only assume have been writ-ten in conjunction with and for the benefit of one or all of the commercial publishers of tax law. (From the style, I would guess it’s LexisNexis.)

I eventually got the hang of how to interpret it but remain astonished that the sheer incompetence and arrogance of our fiscal authorities has made the ascertainment of what is and what is not cur-rently our statute law so horribly complex.

And why? Because there was such an unseemly rush to get the Tax Administration Act—a truly shocking piece of legislation, with innumerable flaws, including several unconstitutional provisions, pace the luminaries who otherwise opined—into operation, even though the SARS so-called systems could not handle its interest provisions and no SARS officials I have yet to encounter, directly or indi-rectly, are even remotely au fait with its workings.

In Issue 2, Annexure B has grown by a page. It gives these differences between the two issues:

Section 64B(9) of the Income Tax Act (STC) has not yet been deleted.

Section 64K(6) (dividends tax) has not yet been deleted.

The main concern I have with this no doubt well-meaning interpretation note is that it unashamedly



expects you and me, first, to consult a twenty-page document to see which parts of the Tax Administra-tion Act are currently law, and, secondly, to read some of its provisions as being partly in force and partly not yet in force.

If we had any real leaders in this country, and if they were regularly presented with a précis of press commentary, and if this humble newsletter were included in such an exercise, surely someone would realize that our national tax affairs are in a state of crisis. (If my last issue, 118 TSH 2013, did not cause any heads to roll on the score of legisla-

tive chaos, nothing ever will.) Instead, those merely occupying the posts of

leaders listen to the mellifluous blandishments of business and professional commentators, who (a) have so little idea of the true state of affairs, (b) have so much to gain from the state, (c) have so much to hide from the taxman, or (d) all of the above, that they they’re permanently occupied kissing official butt.

We must never forget that, with some honour-able exceptions, many of them were just as ready to pucker up for the Nats. Good kissing, fellas!

Illegal amendments—the ULS strikes again!

What a relief it is now that the commercial publish-ers are catching up with the avalanche of badly drafted, badly conceived and badly presented tax laws of the recent past!

I am privileged to have access to the LexisNexis consolidated version of the Income Tax Act, which, until recently, was updated so as to include all amendments up to the Taxation Laws Amendment Act 24 of 2011, which was promulgated on 10 January 2012.

Over much of the past and, until very recently, all of the current year, every time I have wanted to look up a particular provision I have had to search the bills waiting to become acts and the acts wait-ing to be consolidated, in order to ascertain whether that particular provision will possibly be, will be or has been amended. I am almost ready to swear that, in the majority of searches, I have found a bloody pending amendment, or even more than one.

Here are the acts commercial publishers have been expected to consolidate since Act 24 of 2011:

The Tax Administration Act 28 of 2011 (promul-gated on 4 July 2012) (193 pages, English only).

The Rates and Monetary Amounts and Amend-ment of Revenue Laws Act 13 of 2012 (9 October 2012) (14 pages).

The Tax Administration Laws Amendment Act 21 of 2012 (20 December 2012) (31 pages).

The Taxation Laws Amendment Act 22 of 2012 (1 February 2013) (130 pages).

Belay that calculator! It comes to 368 pages. The entire Income Tax Act before these amendments (which, to be fair, do other things besides amend the Income Tax Act) is 843 pages long. You might say that this body of amendments is equivalent to roughly half of the Income Tax Act. If you are capa-ble of learning half an Income Tax Act over the space of eight months, you are reading this issue from your new country of residence. Howzit?

What those outside of the publishing industry usually fail to understand is that publishers gener-ally cannot wait for acts to be promulgated before commencing the onerous task of consolidation.

If they wait, say, to 1 February 2013 and, truly miraculously, are ready to go to press on 1 March 2013, customers, universities and so-called profes-

sional organizations will be having screaming hee-bie-jeebies all over the country. But if they go with the bills, so as to be ready when the acts appear, or even sooner, they expose themselves to the machinations of the unknown little shit who takes it upon himself—or, even, herself (I am starting to doubt that the culprit actually is Keith Engel of the National Treasury)—to alter bills passed by the National Assembly!

Believe me, most users of the legislation are so pathetically slap that they couldn’t give a toss whether it represents a true facsimile of the actual law. (Students, for example, are often deliberately instructed in outdated tax law. Imagine if your doc-tor or engineer were trained in that fashion!) But for true practitioners, even a misplaced comma might mean the difference between professional life and death. And publishers such as LexisNexis and Ju-tas understand the heavy burden of responsibility lying upon their shoulders. If you’re attentive enough, you’ll see all sorts of hints of their strug-gles to clarify with the authorities the finer points of consolidation and dates of coming into effect.

In short, amendments to bills after they are passed by the National Assembly are illegal, con-temptuous of our entire constitutional setup, im-moral and, above all, jolly inconvenient.

They are also difficult to find. Being essentially a one-man show, I am driven to the application of technology, which is not altogether reliable, apart from being prone to throw up a lot of false posi-tives.

The commercial publishers compare a bill with an act by what we used to call ‘calling’ it, meaning that one person reads the source document out aloud while a second compares what he or she hears with the target document. You have to vocal-ize (or otherwise represent) every little feature of the text, brackets (open, close), commas, stops, semicolons, bold text, italics, new lines, indenta-tions—the lot. It’s a soul-destroying task; I know, since I did it for hundreds of hours in the days of hot-lead printing. (Then, before we published any-thing, we checked it no fewer than eight times!)

With the entire nation’s interest at stake, you would think that the fiscal authorities (if they are aware of these illegal amendments—after all, it might be, say, a GPW machinist or safety officer with an interest in taxation who is responsible) would



make publically available a list of differences be-tween a bill and its act. Fuhgeddaboudit! It appears that I am not the only one who has tried, fruitlessly, to win any purchase on this issue. So those who care are driven to draw up their own lists.

The Tax Administration Laws Amendment Act And, in 118 TSH 2013, I neglected to make an ac-tual list of the differences between the Tax Admini-stration Laws Amendment Bill, 2012 and the Tax Administration Laws Amendment Act. When I did, I discovered that the comparison in 118 TSH 2013 was based on the bill before its amendment by the National Assembly.

I am in good company; I have discovered that a colleague has been carrying around—and relying upon—the wrong version of the bill, right up to the promulgation of the act! What is so terribly wrong with the current system is that bills should contain amendments of interest only in the fairly distant future, not in the present and the near, far and very far past. Then we might go back to focusing solely on acts. But then we should be able to be infallibly certain that a final bill and its subsequent act are identical in substantive content.

The actual list of illegal amendments, as shown in my recent compilation of the Tax Administration Act (now available for purchase), is four items long,

affecting s 10 (orphaned line deleted), s 26(2) (ef-fective date added), s 30(2) (effective date added) and s 83(1) (insertion of s 240A(2)).

The Taxation Laws Amendment Act 22 of 2012 Using two different versions of Adobe Acrobat, I have compared this act with the Taxation Laws Amendment Bill, 2012, ignoring amendments made to the headings of clauses/sections.

As far as I can make out, illegal amendments are to be found in s 22(6) (effective date; words added, to no substantive effect); s 23(1) (punctuation changed); s 23(1)(a) (numbering of s 12B(1)(i) of the Income Tax Act changed); s 58(1)(b) (stylistic change to the amendment of s 25BA(b)); s 61(1)(a) (punctuation of heading to s 28); s 79(1)(b) (punc-tuation of proviso added to s 47(2)); s 92(1)(a) (self-punctuation); s 92(1)(c) (punctuation of para 2(1)(b)(iA) of the Second Schedule to the In-come Tax Act); s 111(1)(a) (singular form changed to plural); s 122(1)(h) (punctuation of substitution of s 64B(3)); and s 146(1)(a) (capitalization of first word in s 8(2F) of the Value-Added Tax Act).

Now for the interesting bit It thus becomes possible to ascertain which version of the law commercial publishers used for their first releases of the consolidated tax law, the final bills or the actual acts.

The TAA: guess who reads this newsletter?

I may have dropped a hint or two here or there that the establishment and I will never be friends. The reason is partly congenital (I was born that way) and partly self-preserving (aspire to the right hand of power, and soon you’re optimizing railway time-tables to and from the Gulag). To the miniscule extent that it might be aware of my existence, the establishment coolly reciprocates my feelings.

Yet we all want a better world. So, as far as this newsletter is concerned, is anyone listening? The only way I can tell, since there are no official lines of communication, is by studying the sparse evi-dence, subject always to the threat of falling victim to the post hoc propter hoc fallacy (correlation does not necessarily imply causation).

Start with the SARB. The jury is still out but there’s a remote possibility that its treatment of updates to its Exchange Control Manual might have been in-fluenced by comments made here. (No need to snort; what have you done to move the Dark Mono-liths?)

Then there are indubitably those in the Legal & Policy division of SARS who closely study these humble pages, and I know because they are mak-ing great strides in improving the management of its database by SARS—the founding goal of this newsletter. At the same time, I have learnt from them how to improve my own techniques. I make the further, proud claim that we have learnt from each other how to better our research, writing, data-manipulation and data-presentation skills. These are rule-of-law people. I salute them.

As for the rest of SARS, excluding the sinister po-

liticos hovering far in the background, it can’t afford to take this newsletter seriously, and the politicos are unreachably off on a frolic of their own. (The previous Commissioner reportedly took great of-fence to the mere title of this newsletter, too thin-skinned to realize that it has nothing to do with his exalted self but with the inability of professionals in the field to keep pace with developments. If that was a problem back in 2003, when TSH was launched, what might you say now?)

Which brings me to the National Treasury or, at least that part of it writing—or, better, cocking up—most of our tax laws. The official attitude to TSH is:

We might look at it now and again but, unlike SARS, we don’t take it personally.

Really? Then explain this passage from the Memo-randum on the Objects of the Tax Administration Laws Amendment Bill, 2012 on the deletion of the definition of the term ‘registered tax practitioner’ in s 239 of the Tax Administration Act by s 81(1)(b) of the Tax Administration Laws Amendment Act, 2012:

The definition of ‘registered tax practitioner’ is used in other Chapters of the Act, and thus serves as a global definition that should be included in section 1.

A global definition? Only someone who has made a detailed study of my effusions on legal drafting in these pages or has attended several of our semi-nars would use that proprietary neologism.

But stay! The Tax Administration Bill is reliably understood to have been written by SARS person-nel. Isn’t it logical to expect them also to have writ-



ten the amendments to it (all ninety-three of them)? And would a Treasury official really have both-

ered to get rid of a cross-reference (the branded forehead of a drafting nincompoop) in s 217(1)(a)?

The proposed amendment is a technical correction in order to remove unnecessary cross-references.

(Need I add that, in a well-drafted statute or con-tract, all cross-references are ‘unnecessary’?)

And then there’s the final clincher—the style of

the amendments, which I have just had the chance of studying in the compilation of the consolidated text of the Tax Administration Act (which, as already noted, is now available for purchase). It just doesn’t seem to be the style of Public Enemy # 1, Keith Engel, of the National Treasury and his merry crew of drafting hooligans.

It’s tough when you don’t even know on which beach your faint, shallow footprints in the sands of time might fleetingly be featured.

VAT input credits—to claim or not to claim, that is the Q&A

Willie Badenhorst (ATC (Pty) Ltd) writes:

We have the current practice not to claim all our inputs in a specific period in order not to claim back from SARS. The first reason for this is that we would rather stay in control of our own cash flow that to wait for SARS. We all know the refund will not be on time. There will be a desk audit, then a visit to our premises and so on.

Our internal audit department and other accountants in our group are of the opinion this is illegal/not al-lowed. This is unfortunately an issue with every audit report.

Is there any section according to the Value-Added Tax Act or the Tax Administration Act that prohibits us to continue with this practice?

I have for years been saying that it is professional misconduct to claim a VAT refund, unless you are in the export industry or similar, and I should love to dare those Willie mentions to write to this newslet-ter in support of their opposing view. I'll publish every foolish word, I promise. Willie’s friends should try something new, like actually reading the law, most pertinently, the proviso to s 16 of the Value-Added Tax Act.

The idea behind this proviso was to encourage vendors to defer claims for refunds and so stream-line the system, to an extent minimizing refund

payments by SARS. SARS has wrecked the VAT sys-tem, essentially through being unable to stop the criminals within its ranks from stealing public funds, and a claim for a refund is now treated as if it is a claim for SARS’s money rather than the tax that the vendor has already overpaid to it.

But occasional correspondent Rogerio Russo (Du Toit Littleton Inc) has developed a fresh line:

Interesting new philosophy which I believe we should propagate: tell me if you like it.

As you know, of late SARS VAT audits have been a dime a dozen, notwithstanding their legal basis.

Most companies, over the last ten to twelve years, have been rolling input VAT in order to avoid audits and thereby always paying, albeit smaller amounts. Any in-voices leading to a VAT claim would be rolled and claimed in a period which simply reduced the VAT liabil-ity.

Now, since we are ALL getting VAT audits, willy-nilly, we should simply stop rolling input VAT and claim the refunds as they are due. After all, we are going to get an audit anyway.

Then we can demand the interest on the refund if they don't respond within twenty-one days. Of course, they will then try to get rid of s 45 [interest on delayed refunds]. I wonder if they will succeed.

I think it’s a brilliant idea.

Readers have their say—reduction of debt

Regular correspondent Juanita Roman (MD Ac-countants & Auditors CC) writes:

The new s 19 of the Income Tax Act (reduction or can-cellation of debt) is brought into effect on 1 January 2013 by the Taxation Laws Amendment Act 22 of 2012. [Actually, applicable to years of assessment commenc-ing on or after that date.]

From our reading a reduction or cancellation of debt can result in ordinary income, CGT or possibly dona-tions tax, owing to the debtor’s inability to pay.

One of our partners was advised in a seminar late last year that a shareholder’s loan-reduction or waiver of the debt will also be included in this section, and that there would effectively be no tax implication, or the CGT loss would be limited to nil.

In my view, a debtor's inability to pay would not of itself trigger the application of the new s 19. The amount owed has to be reduced, which must surely involve a change to the agreement between

the parties. A unilateral action would not trigger the section. Since the amount of any consideration is specifically envisaged in the definition of the 'reduc-tion amount', any form of payment, such as set-off or novation would also not trigger or at least miti-gate the application of the section.

‘Donations’ and deemed donations for donations tax purposes are specifically excluded (as they are from the new para 12A of the Eighth Schedule to the Income Tax Act, the equivalent CGT provision).

Despite what the SCA has foolishly said (Welch), such a 'donation' is not a common-law donation. It is, essentially, a gratuitous disposition, while a deemed donation is a cheap sale or an expensive purchase.

The amount of a consideration must, again al-lowing for an SCA decision, this time a truly horren-dously incorrect one (Brummeria), means money or money's worth.

Thus what is required to trigger the section is



some positive contractual action amounting to a reduction that is not gratuitous, not a cheap or ex-pensive sale (it is an open question whether motive plays a role) and not a transaction for full value (cheap and expensive sales could feature under this head as well). In other words, you're not al-lowed to receive consideration but the transaction must not be gratuitous (uncoloured by motive)!

The only answer is that you must make the re-duction for a consideration but a consideration that is not an amount! For example, it might facilitate some other transaction. (See also the article by Michael Stein in this issue.)

Then comes the real problem. How do you tell how a debt was used or what it funded? Money is famously fungible. Is the case law on the deducti-bility of interest (which SARS regularly spurns) meant to be repurposed so as to apply to s 19?

Perhaps a high school child wrote this law—one from a bad school.

I am not sure I understand the point about shareholder's loans but these, being debts, would be subject to the same rules. (You would also have to worry about the possibility of a transaction be-tween the parties amounting to a dividend, remu-neration or theft.)

Words & phrases: res ipsa loquitur (1)

What you are about to experience is a free tax newsletter entering a famous legal debate that has been raging for almost ninety years, and conclud-ing that many commentators waste an awful lot of time, mainly because, awfully learnedly, they quote each other instead of going back to original sources.

Even more remarkably, so great has been my personal dedication to this exercise that I even forced myself to glance over an entire chapter of a textbook—in truth, a barely warmed-over university thesis transformed into dead trees. (One day it will be recognized as a crime against humanity to waste natural resources on such futile pursuits.)

How to proceed, on the assumption, certainly accurate as far as I am concerned, that the investi-gator has no prior knowledge of the subject?

The database First, map out the database, taken, as usual, from SALR (Jutas, 1947 to the present). Try a search, simpliciter, for the targeted string, "res ipsa loqui-tur". Oops! Too may hits (117). Searching flynotes only, I find that there are twenty-eight hits for the string; searching headnotes, I find thirty-six. The exercise is going to be a doddle.

The leading cases Secondly, in order to discover the leading cases, use the flynotes-search and look for AD and SCA cases. Go to the end of the list and then search backwards in time, to find the earliest judgment of a superior court containing an introduction to the subject.

There is no need to read each judgment; simply look for the italicized expression res ipsa loquitur (the facts speak for themselves) and read the pas-sages relevant to it. But do be partial to famous judges. Shun anything to do with a foreign legal system, unless you are seeking a Masters or even a Doctorate from some shitty university, under the ‘supervision’ (quote me and my pathetic utterances as often as possible) of some mediocrity.

Bezuidenhout and Mieny The first case meeting these criteria is Arthur v Bezuidenhout and Mieny 1962 (2) SA 566 (A), where the brilliant Ogilvie Thompson JA (as he then was) delivered the judgment of an illustrious bench.

Proof by a plaintiff of an event properly falling within the maxim—that is to say, proof of an event which, in the absence of anything to the contrary, tells its own story—may justify an inference of negligence against the defendant. But, that inference may…be displaced by the remainder of the story: if the remainder of the story does not do so, then the inference remains—res ipsa loquitur. But…the Court is not called upon to de-cide the issue of negligence until all the evidence is concluded, until it has heard all the story which it is to hear….

…. The maxim res ipsa loquitur, where applicable, gives

rise to an inference rather than to a presumption. Nor is the Court, or jury, necessarily compelled to draw the inference….

…. As…is reflected in any specific statement of the res

ipsa loquitur maxim, once the plaintiff proves the occur-rence giving rise to the inference of negligence on the part of the defendant, the latter must adduce evidence to the contrary. He must tell the remainder of the story, or take the risk of judgment being given against him….

Groenewald In Groenewald v Conradie; Groenewald en Andere v Auto Protection Insurance Co Ltd 1965 (1) SA 184 (A), Rumpff JA added this important rider:

Ten slotte is dit wenslik om te beklemtoon dat die gebruik van die uitdrukking res ipsa loquitur, streng gesproke, alleen dan van pas is wanneer dit nodig is om enkel en alleen na die betrokke gebeurtenis te kyk sonder die hulp van enige ander verduidelikende getuienis. Alleen as die gebeurtenis op sigself en in sy eie lig beskou word, behoort die uitdrukking gebesig te word omdat anders die beperkte betekenis daarvan vertroebel mag word….

Sardi If your Afrikaans isn’t up to scratch, no matter; Holmes JA repeated the point in Sardi and Others v Standard and General Insurance Co Ltd 1977 (3) SA 776 (A):

In this Court, in seeking to establish negligence of the driver of the insured vehicle, counsel for the appellant referred to the fact that he swerved across the road. Wherefore counsel relied on the maxim res ipsa loqui-tur (the thing speaks for itself). He submitted that it was



for the respondent to adduce sufficient evidence to overcome the prima facie effect of the evidence that Coxon drove on to the incorrect side of the road. The maxim has no bearing on the incidence of the onus of proof on the pleadings. It is invoked where the only known facts, relating to negligence, consist of the oc-currence itself…. The occurrence may be of such a na-ture as to warrant an inference of negligence…. It is perhaps better to leave the question in the realm of in-ference than to become enmeshed in the evolved mys-tique of the maxim. The person, against whom the in-ference of negligence is so sought to be drawn, may give or adduce evidence seeking to explain that the occurrence was unrelated to any negligence on his part. The Court will test the explanation by considera-tions such as probability and credibility…. At the end of the case, the Court has to decide whether, on all of the

evidence and the probabilities and the inferences, the plaintiff has discharged the onus of proof on the plead-ings on a preponderance of probability, just as the Court would do in any other case concerning negli-gence. In this final analysis, the Court does not adopt the piecemeal approach of (a), first drawing the infer-ence of negligence from the occurrence itself, and re-garding this as a prima facie case; and then (b), decid-ing whether this has been rebutted by the defendant’s explanation….

That’s all, folks! Okay. That’s it. These are the leading cases since 1947, and, if you have read these quotations, you know not only as much as you need to about the maxim but as much as anyone might know. Any-thing else would be paraphrase or fantasy.

Headings in contracts

In the absence of express provision to the contrary, headings in contracts can be taken into account in interpreting the contract. It seems to me common sense that where a heading conflicts with the body of the contract, it must be the body of the contract which prevails because the parties’ intention is more likely to appear from the provisions they have spelt out than from an abbreviation they have cho-

sen to identify the effect of those provisions; but where the heading and the detailed provisions can be read together, that should be done.

—Cloete JA, delivering the judgment of the court in Senti-nel Mining Industry Retirement Fund v Waz Props (Pty) Ltd (799/11) [2012] ZASCA 124 (21 September 2012). Footnotes suppressed.

The history of a ‘dividend’ (3)—who will kill para (k)?

In 118 TSH 2013 I mentioned that there is still a para (k) of the definition of a ‘dividend’ in s 1(1) of the Income Tax Act in existence, even though the numerous paragraphs of the old-style definition fell away on 18 January 2009, and, I am sure, you won’t find para (k) in any of the commercial pub-lishers’ rendition of the law.

Nowadays we have two paragraphs of the defini-tion ((a) and (b)) and a steadily growing and in-creasingly complex handful of what the idiot drafts-person sometimes calls subparagraphs and some-time paragraphs ((i), (ii) and so forth), although, under our crazy way of writing statutes, they indubi-tably all qualify as paragraphs, being displaced by exactly the same distance from the margin of the page.

Here is my legislative history of this errant little para (k):

Amendment to amendment 2010 Taxation Laws Amendment Act 7 of 2010 Section 7(1)(gA) of Taxation Laws Amendment Act 17 of 2009 inserted by s 145(1)(a). Effective date set as 1 January 2011 and as applying to years of assessment commencing on or after that date by s 145(2). Outcome Paragraph (k) of the definition of ‘dividend’ in s 1 in-serted, with effect as from 1 January 2011 and as ap-plying to years of assessment commencing on or af-ter that date. Amendment to amendment to amendment 2012 Taxation Laws Amendment Act 24 of 2011

Section 145(2) of Taxation Laws Amendment Act 7 of 2010 substituted by s 168(1). Effective date set as date of promulgation of Act 24 of 2011 [10 January 2012]. Outcome Paragraph (k) of the definition of ‘dividend’ in s 1 in-serted, with effect as from 10 January 2012.

Allow me to render this message in clear:

The newborn para (k) was delivered by inclusion not in the principal act but, retroactively, in an amending act more than a year in the past.

The reason? Perhaps to give warning of an up-coming change—but to a nation that hasn’t the foggiest notion of what is an amendment to an amendment or where to look for it.

At inception, it was meant to take effect on 1 January 2011.

Fifteen months later, when the entire definition has already been twice-replaced, its effective date is moved up to 10 January 2012, less than a calendar-quarter away from the third, holus bolus replacement of the definition!

How did I find the amendment to an amendment to an amendment? By pure fluke. I searched my Amendments to Amendments for the string “145(1)”, having already manually searched, fruit-lessly, for the full complement of items marked as involving the definition of a ‘dividend’. But the amendment might just have easily been targeted at s 7(1)(gA) of Act 7 of 2010.

Feature Supplement to 119 Tax Shock Horror 2013

Cases

February 2013

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

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

Capex deduction— mining operations Armgold/Harmony Freegold Joint Venture (Pty) Ltd v CSARS

Supreme Court of Appeal (2012)—74 SATC 351 (judgment delivered by Leach JA; Navsa JA, Cloete JA, Heher JA & Pillay JA concurring): The tax-payer, a mining company owning and operating three mines, two profita-bly and one not, sought to deduct the full cost of capex incurred by it upon its profitable mines. It unsuccessfully treated each mining operation as a separate trade. There are two ring-fencing provisions to be considered. The first ring-fences capex to the pre-capex taxable income of the mine concerned. The second ring-fences the overall capex to the pre-capex taxable income from trade as a whole. Thus were the losses of the un-profitable operation brought into consideration so as to reduce the overall capex deduction, which was then apportioned proportionately between the profitable mines. Although SARS had applied an incorrect principle to limit the capex deduction, its arithmetical result was correct.

Estimated levies— RSC Thabo Mofutsanya District Municipality v Steyn-Enslin & Vennote & Others

Supreme Court of Appeal (2011)—74 SATC 366 (judgment delivered by Mthiyane JA; Heher JA, Maya JA, Bosielo JA & Majiedt JA concurring): A municipal council does not have the power to estimate regional service counsel levies or demand debatement of accounts from levy-payers in default. That power is reserved for CSARS. With the law being so clear, it was unnecessary for the court to develop the common law under the Constitution so as to vest the council with such a power. Since it did not plead that it was entitled to a submission of a return by the levy-payer, and raised the point during argument only, it lost the case, although it was granted thirty days to amend its particulars of claim, if it wished to.

‘Personal service’, mean-ing— SBC Taxpayer v CSARS

ITC 1860 (South Gauteng Tax Court—Case 12860 (2012))—74 SATC 371 (judgment delivered by Mbha J): In its financial statements, the taxpaying corporation had, in essence, described its main income as fees received for services rendered to clients. Was the carrying on of a business in key account-trade-marketing the provision of a ‘personal service’, and did the corporation qualify as a ‘small business corporation’ as defined in s 12E of the Income Tax Act? Since the term ’consulting’ is not defined in s 12E(4)(d), its ordinary meaning needed to be ascertained. Consulting services are provided by registered professionals or qualified persons. Since neither the taxpayer in its own right nor its sole member was a pro-fessional or qualified person, the taxpayer qualified as an SBC.

Assessment— VAT Taxpayer v SARS

ITC 1861 (North Gauteng Tax Court—Case VAT 889 (2012))—74 SATC 383 (judgment delivered by Hiemstra AJ): The vendor, a corporation with an accountant as its sole member, could not show the court that it was not party to a fraudulent scheme to raise a loan from a bank. It was held liable for output VAT and concomitant penalties on invoices raised by it for ficti-tious sales of goods. The judgment does not reveal the purpose of the scheme but it does reveal that the co-collaborators ducked the country. Was there a supply of goods in the first place, or, rather, a supply of ser-vices by the taxpayer for its part in the scheme? And, what of criminal charges?

t s h

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Briefing

February 2013 Debt-reduction & the CGT

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

Farewell, para 12(5) The notorious para 12(5) of the Eighth Schedule to the Income Tax Act has caught many a taxpayer and tax practitioner unawares. It effectively deems a capital gain to arise for a debtor whose indebted-ness is reduced or discharged by the creditor. It has been deleted, and consequential amendments have been made to various other provisions.

Hello, para 12A! At the same time a new provision, para 12A, has been inserted in the Eighth Schedule, so as to deal with the reduction or cancellation of debts.

What is involved is a debt (but not a ‘tax debt’ as defined in the Tax Administration Act) owed by a debtor that is reduced or cancelled by the creditor for less than full consideration. If the debt was used to fund deductible expenditure, for instance, on trading stock or an ‘allowance asset’ (essentially, an asset qualifying for deductions or allowances), the debt-reduction falls within the ordinary income tax rules covered by the clumsy new s 19 of the Act. Otherwise, the rules for capital gains will apply as a residual category, that is, when no deductions or allowances have been claimed.

If the debt-reduction is viewed as falling within the CGT sphere, it will first reduce the base cost of the capital assets (that is, not allowance assets or trad-ing stock) held by the debtor. A typical example is a holiday home. But this reduction will take place to the extent only to which it can be shown that the borrowed funds were used to acquire the capital assets still held by the debtor, and then only to the extent that these have any remaining base cost.

If the debt-reduction falls within the CGT sphere and the amount cannot be tied to an asset still on hand or the base cost of asset is fully depleted to zero, the reduction will be applied against the debtor’s as-sessed capital losses.

If the debt-reduction falls outside these CGT parameters, it generally has no further impact. In other words, if the debtor’s base cost and as-sessed capital losses are fully reduced in accordance with these rules, no capital gains arise.

Pre-valuation-date assets There are special rules for pre-valuation-date as-sets when a debt was used to fund expenditure incurred on such an asset. For the purposes of the determination of the date of acquisition of the asset

and the expenditure incurred upon its acquisition, creation or improvement, the person concerned is treated as having disposed of it immediately before the debt is reduced—for an amount equal to its then market value—and as having immediately reacquired it at that time for expenditure equal to that market value. This market value is reduced by any capital gain and increased by any capital loss that would have been determined had the asset been disposed of at that market value. The result-ing amount must be treated as base-cost expendi-ture actually incurred.

Non-applications Paragraph 12A does not apply to a debt owed by an heir or a legatee of a deceased estate, to the extent that the debt is owed to the estate and is reduced by the estate, and the amount by which the debt is reduced by the estate forms part of the property of the estate for estate duty purposes.

It also does not apply to the extent that the debt is reduced by way of a donation or deemed dona-tion for donations tax purposes.

Nor does it apply if the reduction of the debt gives rise to a taxable fringe benefit for the debtor.

It is difficult to envisage voluntary debt-reductions that do not fall within one of these pa-rameters but one example would perhaps be af-forded by prescription.

It is also inapplicable when the debtor and credi-tor are companies forming part of the same group of companies, unless the debt-reduction is part of a tax-avoidance transaction, operation or scheme. And it does not apply to a debt acquired directly or indirectly from a person not forming part of a group of companies. It also does not apply if one of the companies became part of the group after the debt arose.

It also does not apply when, essentially, the debtor is a company, the parties are connected persons and the debt is reduced in the course or in anticipation of the liquidation, winding up, deregis-tration or final termination of the existence of the company.

Effective date These amendments are effective as from years of assessment commencing on or after 1 January 2013.

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FIFA & Other Stand-alone Tax Laws



The History of a 'Dividend'



The Rise & Fall of the STC



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

Davey’s Locker

February 2013 Tax practitioners Some opinions more equal than others

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

Penalty table—s 223 The recently promulgated Tax Administration Act contains an understatement-penalty-percentage-table, which is to be welcomed, since it provides ob-jective parameters, as distinct from the decisions of the SARS penalty committee.

Naturally, the matter is not cut and dried, since penalty-percentages range from 25% to 200%, dependant, amongst other things, upon the categori-zation of the default and the de-gree of the taxpayer’s negli-gence or intent, which will con-tinue to spark dispute.

Penalty remittance—s 223(3) Relief is nevertheless available, since the legislation states that SARS must remit a penalty if the taxpayer was in possession of an opinion by a registered tax practitioner, provided that it

was issued by no later than the date that the relevant re-turn was due;

took account of the specific facts and circumstances of

the arrangement; and confirmed that the taxpayer’s

position is more likely than not to be upheld if the matter proceeded to court.

Whose opinion counts? In 112 TSH 2012 I considered the new requirements for tax practi-tioners to register with both a controlling body and SARS.

An exemption is provided by s 240 for lawyers (attorneys and advocates) providing advice solely in anticipation of or in the course of litigation to which the Commissioner is a party.

Such exempt persons are not required to be registered tax practitioners; thus, in my inter-pretation, their opinions do not qualify for the s 223 penalty-relief.

Suffice it to say that the short and simple solution (for which I have already taken my registra-tion-medicine) is for lawyers voluntarily to register as tax practitioners.

t s h


Shortcut Keys in Word by Duncan S McAllister ©2013

February 2013

Creating a table of cases—II

In 118 tsh 2013, I showed how to insert an alpha-betical table of Supreme Court and High Court cases into a Word document. For a table of tax court cases, a different approach is required, since, depending on the case numbers, Word may not list all the cases in strict numerical order.

For example, if you marked ITC 76, ITC 77, ITC 175, ITC 180, ITC 1020 and ITC 1025 AS CATE-

GORY 1 (C 1), they would appear in your table of cases as follows (only the first part of the case ref-erence is shown):

ITC 1020 ITC 1025 ITC 175 ITC 180 ITC 76 ITC 77

Word first sorts the numbers according to the first numeral to the left. It then sorts according to the second numeral, and so on—the same method used for sorting a list in alphabetical order.

One solution to this conundrum is to use different category numbers in order to arrange the case numbers in sequence. Under this approach you will not be able to insert the normal table of cases, since you would end up with three headings in the same table. Instead, you must insert TOA field codes, each with its own unique category number.

Marking the cases In order to sort the case numbers in the example into numerical sequence, you will need three cate-gories, say c 1, c 2 and c 3. ITC 76 and 77 will be in c 1, ITC 175 and 180 in c 2, and ITC 1020 and 1025 in c 3.

Follow the procedure for marking the cases in the main body of the document. Highlight the case and press ALT + shift + I. To select the category number, you can either press the Category button (ALT + G) in the Mark Citation dialog box or simply

edit the field code. For example:

[TA \l “ITC 1025” \s “ITC 1025” \c 2]

In this field code I changed c 1 to c 2.

Inserting the table Type the heading of the table at the appropriate place at the front of the document, for example: TABLE OF TAX COURT CASES.

Press ENTER to move to the next line. Press ALT, N, Q, F to bring up the field dialog box. Then navi-gate to the table of authorities field code (TOA), using first-letter navigation (that is, type TOA).

If you tab twice you will get to the ‘preserve for-matting’ checkbox. Make sure it is ticked if you want to retain your formatting from the citation in the main body of the document (press the space-bar to check or uncheck the box).

Tab twice again and hit OK. A field code will ap-pear in the document. Since you need three differ-ent field codes in this example, repeat the process twice more, inserting the field codes one below the other.

With your cursor on the first field code press SHIFT + F9 to edit the field code. After TOA insert \c 1 as shown below:

[TOA \c 1 \* MERGEFORMAT]

For the second field code, repeat the procedure and insert \c 2.

And for the third field code, insert \c 3. Make sure you don’t have any double spaces in the field codes.

Press SHIFT + F9 to toggle off the field codes. Be-fore publication be sure to Update each of the field codes by pressing F9.

This is not a very elegant solution but it does work, especially if there are not too many catego-ries.

t sh


February 2013

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

Changing a little bit of the world—Part II

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

And so I chose a definition of hearsay that would address all the problems I mentioned in 188 TSH 2013. It was a definition that squared with the very reasons for excluding hearsay—the fact that hearsay is potentially unreliable, since you do not have the original declarant or actor in court, sub-ject to cross-examination, the oath, public and adversarial scru-tiny and the obligation to place his testimony within an ordered, contextual setting arising out of the formal structure of question and answer.

The definition I chose was this:

Hearsay evidence means evi-dence, whether oral or in writing, the probative value of which de-pends upon the credibility of any person other than the person giving such evidence.

If you apply this definition to the three situations I mentioned in 188 TSH 2013, situations that illustrated the deficiencies of the old definition, it is immediately apparent that better answers are supplied by the new definition.

If W testifies in court that A said to him ’I can speak’, or ‘I am alive’, then, even though that evidence is an out-of-court statement by a person other than the testifying witness, W, and would thus wrongly fall foul of the old definition, the new definition yields the correct result.

Since the probative value of the evidence rests entirely on the

credibility of W himself, the evi-dence is not hearsay. The other side can cross-examine W, who is under oath and testifying in open court, on his veracity, his powers of perception, his hearing capacities, his motives for lying, his memory and any other rele-vant factor. It is he who professes to have heard the words that go to establishing whether A could speak, or was alive, and no prejudice ensues to the other side by reason of being denied an opportunity to cross-examine the out-of-court declarant, A.

The second situation is even more revealing of the superiority of the new definition: If W pro-duces a letter written by A to X, which conveys clearly the sense that A believed he was writing to a person who was sane and in full possession of his faculties, the old definition does not estab-lish that this evidence is hearsay, since it was not tendered to es-tablish the truth of anything ex-pressly asserted in the letter by A.

But the new definition illumi-nates the real problem. Since the probative value of the evidence rests on the credibility of A, not W, the evidence is hearsay. It is A the other side wishes to cross-examine, not W. They might like to attack his sincerity, powers of perception, judgment in assess-ing something as nebulous as sanity, or even his memory. This they cannot do, since A is not in

court. He is not under oath. His demeanour is not under scrutiny. He does not impart the informa-tion within a broader contextual setting. And there is no question-and-answer sequential unfolding of his story.

There is, in short, every reason for treating this evidence with the greatest caution before consider-ing it fit to be received. There is, then, every reason to treat it as ‘hearsay’.

So, too, with the third situation. A sea captain who inspects his ship before inviting his family on board for a voyage is not saying, in words, ‘I believe this ship to be seaworthy’. But this is what his conduct gives us to believe. Can, we, however, trust his sincerity, judgment, powers of perception, state of mind and sobriety?

Would you, on the other side, have any questions you would have liked to ask him under cross-examination? That is pre-cisely the issue. The probative value of this evidence depends on the credibility of, in this situa-tion, not the maker of a statement but the actions of an actor—the captain.

The denial of a proper oppor-tunity to cross-examine the cap-tain would, unless there were circumstances to indicate the reliability of his assessment, be severely prejudicial to the other side. Again, the evidence should fall within the hearsay fold.

That situations like these—and

February 2013


many others—were better ad-dressed if the definition put for-ward by me were employed was not lost on the South African Law Commission. Shortly after I sub-mitted my PhD thesis to them, they endorsed my recommenda-tions and proposed legislation overturning centuries of adher-ence to the English common law in this regard. The result was the Law of Evidence Amendment Act 45 of 1988.

Section 4 defines hearsay in the manner I had advocated.

But this was just the beginning of the reform process. The effect of s 4 was to bring in much more evidence within the hearsay fold than the old definition allowed.

That, by itself, would have been calamitous. At common law, hearsay is necessarily inadmissi-ble unless it falls within the four corners of an existing statutory or legislative exception. No discre-tion existed to receive hearsay, no matter how probative or reli-able, unless it fell within an ex-ception. And no power to create new exceptions was given to or assumed by the courts.

The challenge, then, was to create an entirely new regime for handling the hearsay problem. In the past, courts had gone out of their way to label evidence non-hearsay—even if the argument to the contrary was strong—so as to avoid having to lose valuable

evidence. Not all hearsay is objectionable

or unreliable. In many instances, circumstances exist pointing in the opposite direction. The chal-lenge was to create a new framework in which the labelling of an item of evidence as ‘hear-say’ would merely state the prob-lem of admissibility, not solve it.

And that was the second major thrust of my thesis. It, too, was put to the Law Commission, and it, too, became law under the Law of Evidence Amendment Act.

But that is a tale for next month.

t s h

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‘legislative chaos has rendered all tax law moot’ · 2020-05-05 · 119 tax shock, horror...

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