Commissioner, South African Revenue Service v Van Kets

• Jurisdiction: South Africa

Commissioner, South African Revenue Service v Van Kets
2012 (3) SA 399 (WCC)

2012 (3) SA p399

Citation	2012 (3) SA 399 (WCC)
Case No	13446/2011
Court	Western Cape High Court, Cape Town
Judge	Davis J
Heard	August 22, 2011
Judgment	November 22, 2011
Counsel	A Sholto-Douglas SC (with N Bawa) for the applicant.; TS Emslie SC for the respondent.

Flynote : Sleutelwoorde E

Revenue — Income tax — Request for information by commissioner — Ambit of commissioner's powers — Whether commissioner may request South African taxpayer to furnish information regarding taxpayer of foreign country with which South Africa has double tax agreement (DTA) — DTA and Income F Tax Act to be read as coherent whole — Relevant provisions of Income Tax Act applying to all taxpayers falling within scope of DTA, including residents of foreign country — SA taxpayer ordered to supply requested information — Income Tax Act 58 of 1962, ss 74A and 74B.

Headnote : Kopnota

The Commissioner for the South African Revenue Service sought orders G declaring that ss 74A and 74B of the Income Tax Act 58 of 1962 (the Act) could be invoked by the commissioner for the purpose of obtaining information from the respondent, and any other person in South Africa, in order to comply with its obligations under a double tax agreement (DTA) or treaty which had been concluded with Australia, and which contained a provision for the exchange of information. The issue for determination was H whether the words 'any taxpayer' which were employed in ss 74A and 74B of the Act could be interpreted to include a person who was not a taxpayer as defined in s 1, but who, in terms of the DTA, had been identified as the person who could provide the information pursuant to the request.

Held, as to whether art 25 of the DTA could be enforced in terms of South I African law (ie whether the provisions of the DTA in general and art 25 in particular broadened the scope of ss 74A and 74B beyond the strict meaning of the definition of taxpayer in s 1), that provisions of the DTA must rank at least equal with domestic law, including the Act. If the DTA was interpreted as part of domestic tax legislation, then ss 74A and 74B had to be interpreted so as to render them compatible with the provisions of the DTA. (Paragraphs [25] – [26] at 406F – I.) J

2012 (3) SA p400

A Held, further, as to whether the respondent could be compelled to provide the information pursuant to the exercise by the commissioner of its powers in terms of ss 74A and 74B of the Act, that, once the DTA was read together with the Act, the reading would imply that the word 'taxpayer' should include those taxpayers who did not fall within the scope of the Act but fell within the scope of the DTA, which would thus include Australian residents. B Once the Australian resident was considered to be a taxpayer, then the respondent would manifestly fall within this section because he would be classified as 'any other person' who would be able to furnish information regarding a taxpayer. (Paragraph [29] at 407E – G.)

Held, accordingly, that the commissioner was entitled to act in terms of ss 74A and 74B and to require the respondent to furnish the relevant information C in respect of the particular Australian taxpayer. (Paragraph [30] at 407H – I.)

Cases Considered

Annotations:

Reported cases

Glenister v President of the Republic of South Africa and Others 2011 (3) SA 347 (CC) (2011 (7) BCLR 651): D dictum in para [181] considered.

Statutes Considered

Statutes

The Constitution of the Republic of South Africa, 1996, s 231: see Juta's Statutes of South Africa 2010/11 vol 5 at 1-61 E

The Income Tax Act 58 of 1962, ss 74A and 74B: see Juta's Statutes of South Africa 2010/11 vol 3 at 1-532.

Case Information

Application for an order declaring that the word 'taxpayer' in ss 74A and 74B of Income Tax Act 58 of 1962 could be interpreted to include persons falling within scope of double tax agreement.

A Sholto-Douglas SC (with N Bawa) for the applicant.

TS Emslie SC for the respondent. F

Cur adv vult.

Postea (November 22).

Judgment

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

2012 (3) SA p401

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'...