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24535041

Africa, Southern

It has recently been reported inside the press that SARS features lodged a claim pertaining to R183 mil in tax against the estate of the slain mining potente, Brett Kebble in respect of the R2 billion allegedly thieved by him from the mining companies which he was a director. It can be further reported that the Master of the Substantial Court features rejected the claim on the grounds that the amounts on which SARS sought to garnishment tax constituted money stolen by Kebble, and that stolen money can be not controlled by income tax. It is often reported that SARS is to take the Master? s decision in this regard in review.

Why the problem is being competitive on the basis of review, as specific from the normal process of assessment followed by objection and appeal, is not clear. A review is involved only while using regularity from the process in which a decision was reached, avoid the correctness of the decision itself. A moot stage of taxes law The Kebble case raises a fascinating and uncertain tax issue and, taking into consideration the large sum at stake, it can be a case that could go to the Supreme Court of Appeal and bring long-overdue certainty for the law.

The Income Tax Act No . 49 of 1962 (the Act) is of zero assistance in determining the problem. Section 23(o) states that payments that are illegal in terms of Chapter two of the Avoidance and Combating of Corrupt Activities Work No . 12 of 2004 or that constitute a fine or penalty for any illegal activity completed in the Republic (or in just about any other country if that activity will be unlawful in the event that carried out in the Republic) aren’t deductible to get income tax uses.

There is, yet , nothing inside the Act to state that the recipient of corrupt or perhaps illegal payments is (or is not) subject to income tax on this sort of amounts, which issue need to, therefore , always be resolved by application of common law, frankly, in terms of guidelines laid straight down by the courts. In CRIB v G [1981] (43 SATC 159) the Appellate Division of Mvuma, zimbabwe held that the person who steals money does not “receive” it in the sense considered in the meaning of “gross income” in the Act, because he would not acquire the cash “on his own part and for his own benefit”.

If this is appropriate, then the question of whether or perhaps not this kind of amount “is income” would not arise, mainly because it is only once an amount have been received or accrued which the issue occurs as to whether it is income or perhaps capital. Nevertheless , the correctness of this decision is believe. Certainly, through the thief? s i9000 perspective, exactly why he took the money was precisely to acquire it “for his individual benefit” and the interpretation which the judge approved this key phrase is, with respect, legalistic, artificial and unsupported by simply authority.

In ITC 1789 (67 SATC 205), where the taxpayer in question had solicited millions of flanke from a multitude of investors in a fraudulent and unlawful scheme, the courtroom held those moneys was “received” since contemplated inside the definition of? revenues?. If these two decisions are excellent law, it could mean that (as was held in ITC 1789) a person who methodically cheats other folks out pounds is controlled by income tax on his booty, but that (as was held in G sixth is v COT) a person who actually burglarizes money in a scientific way is definitely not taxable.

This, it really is submitted, is actually a preposterous and untenable distinction. The true concern was whether the amounts had been “income” It is submitted that both these cases ought to have been decided on the basis of whether, in the particular conditions, the quantities in question acquired the character of “income” inside the hands with the felon, rather than on the concern of whether or not the moneys have been “received” by simply him. Helpful receipt was surely self-evident in both equally cases.

It can hardly become seriously asserted that a thief or self confidence trickster does not intend to find the victim? s money for his very own benefit, and treat it since his individual. The issue of if money that has been stolen or is normally tainted with illegality is “income” in the hands with the recipient and is therefore susceptible to income tax, elevates many challenging issues, never to date totally addressed aside from resolved by simply our courts.

Some of the areas of the issue as to whether illegal statements are taxable as profits are? ¢Illegal receipts range from those that are tainted which has a mere technical illegality, including those created from trading with no licence, to morally reprehensible receipts like the proceeds of drug-dealing or maybe a fee paid out to a hit-man for carrying away an murder. In the tax context, do the same concepts apply to every single kind of illegal receipt? ¢If SARS would have been to take a piece of an illegal receipt, might this not really make the Condition complicit inside the illegality? If perhaps income tax may be imposed within the recipient of taken money, this may reduce the money available to pay off the rightful owner. It requires to be appreciated that, in law, control of the cash has passed for the thief, and everything that the owner has is known as a claim in personam resistant to the thief for repayment. In the event the thief offers spent the bucks and is struggling to repay this, the victim is merely a concurrent lender in the thief? s bankrott estate. SARS, by contrast, includes a preferential assert, in terms of the Insolvency Action, for any taxation due.

If income tax were payable within the stolen money, it is hence conceivable that SARS will recover any some of the duty, but the victim would not get his money back. This, it is posted, is an unpalatable result. Ought to SARS take part in at all? There is a strong debate that, exactly where illegal repayments are concerned? certainly in regard to thieved money? it would be preferable for tax rules to stand aloof, add no duty consequences for the receipt from the money, and let the whole subject be determined in terms of felony law. However , in view of the uncertainty in the law about this point, SARS can barely be faulted for saying a claim.

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Published: 12.13.19

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