Commissioner, South African Revenue Service v Van Kets

• Jurisdiction: South Africa
• Judge: Davis J
• Judgment Date: 22 November 2011
• Citation: 2012 (3) SA 399 (WCC)
• Docket Number: 13446/2011
• Hearing Date: 22 August 2011
• Counsel: A Sholto-Douglas SC (with N Bawa) for the applicant. TS Emslie SC for the respondent.
• Court: Western Cape High Court, Cape Town

Davis J: G

Introduction

[1] Applicant seeks orders declaring that ss 74A and 74B of the Income Tax Act 58 of 1962 (the Act) may be invoked by applicant for the H purpose of obtaining information from respondent, and any other person in the Republic of South Africa, in order to comply with its obligations under a double taxation agreement or treaty which has been concluded, and which contains a provision for the exchange of information.

[2] Applicant received a letter on 16 March 2009 which contained a I request from the Australian Tax Office (ATO) for information in terms of the double tax treaty (DTA) between South Africa and Australia. This request and subsequent requests were made by the ATO pursuant to art 25 of the applicable DTA.

[3] The request related to an investigation of the income tax affairs of J one Mr Duncan Paul Saville, in particular his possible offshore wealth

Davis J

and his involvement with a Labuan, Malaysia, entity known as A Republic Life Common Fund (L) Limited (RLCF) which transferred approximately AU$62 million into Australia during the period 2004 – 2007. There appears to be no dispute with regard to these facts and the subsequent request which had been made by the ATO. The information which was provided to applicant by the ATO indicated that the respondent resided in South Africa and was a director of RLCF, a fact which has B been confirmed by respondent.

[4] It also does not appear to be disputed that respondent possesses information which ATO has requested from applicant and that such information cannot be obtained, in that respondent has refused to C disclose this information on the basis that it is confidential, that he was not so authorised, nor has he permission to so disclose.

[5] The crisp issue for determination is whether the words 'any taxpayer' which are employed in ss 74A and 74B of the Act can be interpreted to include a person who is not a taxpayer as defined in s 1, but who, in D terms of the DTA, has been identified as the person who can provide the information pursuant to the request which, in this case, has been initiated by the ATO.

The applicable legislation

[6] Sections 74A and 74B, to the extent that they are relevant to this E dispute, provide as follows:

'74A Furnishing of information, documents or things by any person

The Commissioner . . . may, for the purposes of the administration of this Act in relation to any taxpayer, require such taxpayer or any F other person to furnish such information (whether orally or in writing) documents or things as the Commissioner . . . may require.

74B Obtaining of information, documents or things by any person

(1) The Commissioner . . . may, for the purposes of the administration of this Act in relation to any taxpayer, require such taxpayer or any G other person, with reasonable prior notice, to furnish, produce or make available any such information, documents or things as the Commissioner . . . may require to inspect, audit, examine or obtain.'

[7] The definition of taxpayer in s 1 is as follows —

''taxpayer" means any person chargeable with any tax leviable under H this Act and includes every person required by this Act to furnish any return;. . . '.

[8] The respondent has adopted the attitude that there is nothing in the context of either s 74A or s 74B which suggests that the word 'taxpayer' in the phrase 'any taxpayer' as employed in these two sections should be I given a meaning other than the defined meaning, that is, a person who pays taxes. In other words, respondent's case is that the words 'any taxpayer', as employed in these two sections, refer to persons who are liable for South African income tax or other taxes levied in terms of the Act, or are required to furnish any return relating to South African income tax or other taxes levied in terms of the Act. J

Davis J

A [9] By contrast, applicant's case is that ss 74A and 74B are the means by which applicant invokes the power to obtain information requested by foreign tax authorities, pursuant to agreements that South Africa has concluded, and in terms of which it is obliged to provide this information. In many cases information would not relate to a South African B taxpayer. Thus, on the approach adopted by respondent, applicant contends that it would then have no legislative mechanism at its disposal to obtain the necessary information within its own jurisdiction to meet the request from foreign authorities, even though the information is found in South Africa, notwithstanding that it relates to foreign taxpayers. In short, applicant contends that ss 74A and 74B can be invoked for C the purpose of the administration of the Act and, to that end, they include the power to obtain information for the purposes of meeting South Africa's obligation under the applicable DTA.

[10] Expressed differently, respondent's case is that s 74A and s 74B D only apply to information which is possessed by a taxpayer as defined in terms of s 1. On this basis applicant would have no legal means at its disposal to provide any information to foreign authorities, pursuant to a request made for information, so long as it does not relate to a South African taxpayer. To answer this dispute, it is necessary to examine the E law relating to the DTA.

The significance of the double tax agreement with Australia

[11] Section 108(1) of the Act provides that the national executive may enter into an agreement with the government of any other country, whereby arrangements are made with such government, with the view to F the prevention, mitigation or discontinuance of the levying, under the laws of South Africa and of such other country, of tax in respect of the same income, profits or gains, or tax imposed in respect of the same donation, or to the rendering of reciprocal assistance in the administration and the collection of taxes under the laws of South Africa and of G such other country.

[12] Section 108(2) of the Act provides that, after the approval by parliament of any such...