2020 volume 2 p 369

• Date: 14 April 2020
• Published date: 14 April 2020

IN DEFENCE OF CUSTOM I N STATUTORY INTERPRE TATION 369

[ISSN 0257 – 7747] TSAR 2020 . 2

IN DEFENCE OF CUSTOM IN STATUTORY INTERPRETATION

Marshall NO v Commissioner, South Africa n Revenue Servi ce 2019 6 SA 246 (CC)

1 Introduction

In Marshall NO v Commi ssioner, South African Revenue Service (2019 6 SA 246

(CC)) the constitutional court heard a n application for leave to appeal against the

decision of the supreme court of appeal i n Commissioner, South African Revenue

Service v Marshall NO (2017 1 SA 114 (SCA)) on the proper interpretation of

sections 8(5) and 11(2)(n) of the Value-Added Tax Act 89 of 1991. The interpretation

of these provisions is of seminal impor tance in deciding the question if the South

African Red Cross Ai r Mercy Service Trust is exempt from paying value-added

tax on payments it receives for actual services it renders to provincial health

department s. Section 8(5) as amended reads as follows:

“For the purpo ses of this Act a designated entit y shall be deemed to supply ser vices to any public

authority or mu nicipality to the ext ent of any payment made by the publ ic authority or municip ality

concerned t o or on behalf of that des ignated entit y in the cours e or furth erance of an ente rprise

carried on by t hat designated entit y.”

Section 11(2)(n) reads as follows:

“Where, but for th is section, a supply of services, ot her than services contem plated in sectio n 11

(2) (k) that are electronic s ervices, would be charge d with tax at the rate refer red to in section 7 (1),

such supply of serv ices shall, subject to complian ce with subsection (3) of this section , be charged

with tax at the r ate of zero per cent where – … the ser vices comprise the car rying on by a welfare

organisation of the activities referred to in the denition of ‘welf are organisation’ i n section 1 and

to the extent th at any payment in respect of those se rvices is made in term s of section 8 (5) those

services sh all be deemed to be supplied by t hat organisation to a public a uthority or municipal ity.”

Section 8(5) was substituted by section 166(1)(b) of Act 45 of 2003 and section 11(2)(n)

was substituted by section 169(1)(f) thereof. To assist in the interpretation of

these provisions, the South African Revenue Service on 8 Februa ry 2013 issued

Interpretat ion Note 39. The note sets out the value-added tax treatment of public

authorities prior to and af ter April 2005. It explains the rationale behind the cur rent

wording and application of sections of Act 89 of 1991. The note states (pa r 4.6 at 21):

“Part of the unc ertainty in rega rd to the application of section 8(5) was tha t some vendors adopted

the view that as long a s the payment came from a public o r local authority, the receipt was su bject

to VAT at the zero rate. This view wa s contrar y to the meani ng of a ‘transfer pay ment’ being

unrequit ed nancial support to cover the capital and ope rational expenses of certai n businesses that

make taxable sup plies which government reg arded as worthy of this s upport, or which was re quired

by government sub sidy programmes. It was never inte nded as a way of extending the zero-r ating

provisions of section 11.”

It should be noted from the outset that Act 89 of 1991 has been amended on at least

eight occasions after the issuing of the interpret ation note by the revenue service

without the legislature deeming it necessary to amend sections 8(5) and 11(2)(n)

of the act in response to the issuing of the interpret ation note. This fact, which

was wholly ignored by the court, is seminally impor tant and, it will be a rgued,

should have been considered from the outse t. The question before the constitutional

court was therefore if a cou rt may consider or defer to an administrative body’s

interpretat ion of legislation in a court’s own construction of the statutory provision

2020 TSAR 369

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