A recent decision in the Federal Court of Canada in the matter of Minister of National Revenue v BP Canada Energy Company 2015 FC 714 dealt with the Canadian law concerning the right of the Canadian Revenue Authority (‘CRA’) to demand information from taxpayers. In the preparation of its annual financial statements, BP Canada Energy Company (‘BP’) prepared workings in which it analysed tax positions that it had taken in which there might have been a difference between its interpretation of the law and the interpretation of the CRA. These working papers supported a reserve for tax contingencies. They also listed issues on which the interpretation was uncertain (‘issues list’).
Category: Court Cases
The Mark Lifman judgment: the High Court refuses to interdict the enforcement by SARS of a judgment taken against the taxpayer
Mark Lifman has recently been the subject of many lurid newspaper stories, with City Press describing him as ‘one of South Africa’s biggest underworld bosses and one of Cape Town’s richest and most feared underworld figures’. It has been reported that he owes SARS some R388 million in tax. Not for the first time in history has a powerful underworld figure met his Waterloo when engaging with the tax authorities. A judgment of the Cape Town High Court delivered on 17 June 2015 (but not yet reported) recorded that Lifman and various close corporations of which he was the sole member owed an undisputed tax debt to SARS of over R13 million (some R3 million of which was owed by Lifman personally) that had accumulated over some ten years. Further tax debts (see para [6]) were still in issue.
Ex parte preservation orders: Krok v CSARS
This case was an appeal from the Gauteng Division of the High Court to the Supreme Court of Appeal (“SCA”) pertaining to the correctness of the granting of an ex parte preservation order applicationthat was brought against Mr Krok by the Commissioner of the South African Revenue Service (“SARS”) in terms of sections 163 and 185 of the Tax Administration Act No. 28 of 2011 (the “TAA”). The Court had to determine the question having regard to the application of the Double Taxation Agreement (“DTA” – as amended by a protocol) between South Africa and Australia.The DTA provided for the mutual assistance between the two jurisdictions for the collection of taxes.
Supreme Court of Appeal unconvinced by van der Merwe story
The Supreme Court of Appeal was approached to set aside a preservation order that had been granted in the Cape High Court. The appellant’s conduct in prosecuting the appeal was dilatory and the Court showed its displeasure. Non-compliance with legal processes and time limits in an appeal came to the fore in the recent litigation between SARS and Ms Candice-Jean van der Merwe. The latest judgment in this litigious saga involved an application by Ms van der Merwe to the Supreme Court of Appeal for condonation (a pardoning by the court) of her failure to timeously proceed with her appeal against a preservation order that had earlier been granted in favour of SARS by the Cape High Court in respect of certain of her assets.
New High Court ruling – SARS vs Taxpayer (taxpayer found not guilty of various tax acts)
Author: Oddette Boshoff (Unikone) In a recent (as yet unreported) High Court case, the Court overturned the previously guilty ruling of the Regional Court and ruled in favour of a taxpayer against SARS. The taxpayer was initially charged and found guilty in the Regional Court on fraud as well as several transgressions of various tax acts.
Constitutional Court judgment on the in duplum rule – does it limit interest payable on a tax debt?
The recent Constitutional Court judgment of Paulsen and Another v Slip Knot Investments 777 (Pty) Limited 2015 centered on the common law in duplum rule. The in duplum rule operates to protect debtors from becoming over-indebted to creditors by only allowing arrear interest to accumulate up to the capital amount loaned to a debtor. Interest ceases to run once the accumulated arrear interest equals the capital amount. In this case, the Constitutional Court held that the operation of the in duplum rule is no longer suspended for the duration of litigation.
Shuttleworth’s exit charge was valid and did not constitute a tax
In an about-turn the Constitutional Court handed down judgment in the Shuttleworth matter on 18 June 2015. Not only was it found that Shuttleworth’s exit charge constituted a regulatory charge as opposed to a tax, but it was also found that the Exchange Control Regulations were not unconstitutional. Should one consider the history of the matter, Shuttleworth made application to the South African Reserve Bank (Reserve Bank) to transfer approximately R2,5 billion out of South Africa. This approval was granted subject to an exit charge of 10% being imposed on the capital that was exported. The payment of this exit charge was challenged by Shuttleworth:
Notice of judgment in terms of the Tax Administration Act
Judgment was handed down in the matter between Lifman and others v The Commissioner for the South African Revenue Service and others (case no 5961/15, as yet unreported) on 17 June 2015 in the Western Cape Division of the High Court. The applicants were Mark Lifman and a number of close corporations of which he was the sole member. During an enquiry in terms of s50 of the Tax Administration Act, No 28 of 2011 (TAA), conducted by the South African Revenue Service (SARS) into the affairs of the applicants, it came to light that the applicants owed SARS tax of approximately R13 million.
Exchange Control Appeal Won Against Shuttleworth
Author: By Ferdie Schneider, Head of Tax, BDO The Constitutional Court delivered judgement on 18 June 2015 against Mark Shuttleworth in favour of the South African Reserve Bank (SARB) and the Minister of Finance. Mark Shuttleworth emigrated to the Isle of Man in 2001 to invest outside South Africa and applied to SARB to transfer approximately R2.5 billion. SARB imposed an exit charge of 10% on the capital and Shuttleworth paid approximately R250 million although he challenged the constitutionality of imposition.
Interpretation of written agreements
Shakawa Hunting & Game Lodge (Pty) Ltd v Askari Adventures CC (44/2014) [2015] ZASCA 62 (17 April 2015) is a recent judgment by the Supreme Court of Appeal concerning the interpretation of a written agreement. The court (per Mpati P) said that what the parties and their witnesses ex post facto think or believe regarding the meaning to be attached to the clauses of the agreement, and thus what their intention was, is of no assistance in the exercise. The court referred to its earlier judgment in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593; [2012] ZASCA 13 (SCA) where Wallis JA said the following with regard to the construction of a document: