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Cape Town - The effect of billionaire businessman Mark Shuttleworth's appeal victory against Sarb is not nearly as far-reaching as some had hoped, and South Africa’s exchange control system remains in place for now, according to patent attorney Ralph van Niekerk of Von Seidels.
In the culmination of a widely followed case, on October 1 2014 the Supreme Court of Appeal ordered the Sarb to repay Mark Shuttleworth over R250m plus interest.
The money had been levied against Shuttleworth when he applied to transfer his assets out of the country in 2009. He had emigrated from South Africa several years before that, and the prevailing practice at the time was to levy an exit penalty of 10% on any person who emigrated and wished to transfer more than R750 000 from South Africa.
This exit levy was dropped in 2010, but this was too late for Shuttleworth as he had already paid the R250m under protest.
In terms of South Africa’s system of exchange control, approval is required from the Sarb before capital can be exported from the country. Recent regulations by the Sarb have included intellectual property within the ambit of the term “capital”.
Shuttleworth’s initial case before the High Court sought to have the whole system of exchange control declared unlawful and set aside, which many had hoped would pave the way for freer transfer of tangible and intangible assets across South Africa’s borders.
However, the Supreme Court of Appeal took a much narrower view of the matter and only sought to decide the issue specific to the case – whether or not the 10% levy imposed on Shuttleworth’s assets was lawful.
READ: Shuttleworth wins R250m case against Sarb
"The court found it unnecessary to consider the other attacks by Shuttleworth on the exchange control system, as they had no impact on the outcome of his case. The court warned the lower courts not to engage in speculative and academic enquiries beyond the scope of the cases before them, as such findings may have an effect on future disputes that are yet to crystallise," explained Van Niekerk on Thursday.
"The court characterised the 10% levy as a tax, and because the Sarb had not followed the proper procedure required for implementing a policy or regulation that imposes a tax, namely tabling it before parliament, the levy was held to be unlawful."
The court referred to the well-known “no taxation without representation” principle as a founding principle of parliamentary democracy in which the executive branch of government should not itself be entitled to raise revenue, but should rather be dependent on the taxing power of parliament, which is democratically accountable to the country’s tax-paying citizens.
"No doubt this is far from the last word on the matter," said Van Niekerk.
