Summary Law of Taxation Exam Notes

INTRODUCTION

1 INTRODUCTION AND DEFINITIONS
LEGISLATIVE DEFINITION
 Income Tax Act 58 of 1962 (ITA)
o Tax or penalty imposed in terms of this Act.
 Tax Administration Act 28 of 2011 (TAA)
o For purposes of administration under this Act, includes a tax, duty, levy,
royalty, fee, contribution, penalty, interest and any other moneys
imposed under a tax Act.

DEFINITION FROM ECONOMICS (BLACK, CALITZ & STEENKAMP):
 “Taxes are transfers of resources from persons or economic units to
government and are compulsory (or legally enforceable). There is not
necessarily a direct connection between the resources transferred to
government and the goods and services that it supplies.”

DAVIS TAX COMMITTEE
 Committee appointed by Min of Finance (Pravin Gordin at the time) in 2013 
they make recommendations (a few have been implemented and led to
changes in the law).
o “Taxes… are general obligations for which: payments are compulsory
and are enforced in terms of legislation; no direct benefits accrue to
taxpayers in exchange for payments made and benefits are returned to
groups of people, not identifiable individuals.”

COURTS
 Nyambirai v National Social Security Authority 1996
o “From these authorities the following features which designate a tax
may be said to emerge:
 It is compulsory and not an optional contribution.
 Imposed by the legislature or other competent authority.
 Upon the public as a whole or substantial sector thereof

,  The revenue from which is to be used for the public benefit and
to provide a service in the public interest.
 “A state cannot exist without taxes. Society receives benefits from them”
(Pienaar Bros v C:SARS 2017 (6) SA 435 (GP))
 “They are indispensable in an open and democratic society to enable the
State to discharge its obligations towards its citizens” (PWC v C:SARS 2021
(3) SA 213 (GP))
 “Taxes are what we pay for a civilized society” (Compania Generalde Tabacos
de Filipinas v Collector of Internal Revenue – 1927 US Supreme Court case)



2 CONSTITUTION
POWER TO LEVY TAXES
 Is the source that provides the power to the government to collect taxes, as
well as the source of rights for taxpayers.
o S55(1): in exercising its legislative power, the National Assembly may:
 Consider, pass, amend or reject any legislation before the
Assembly; and
 Initiate or prepare legislation, except money bills.
o S213(1): there is a National Revenue Fund into which all money
received by the national government must be paid, except money
reasonably excluded by an Act of parliament.
o S77(1): A bill is a money bill if it:
 Appropriates money.
 Imposes national taxes, levies, duties, or surcharges.
 Abolishes or reduces, or grants exemptions from, any national
taxes, levies, duties, or surcharges; or
 Authorises direct charges against the National Revenue Fund,
except a Bill envisaged in Section 214 authorising direct
charges.

,ANNUAL BUDGET MEETING AND MONEY BILLS:



 Public comments are received as drafts, responses are given to the public
comments, final version: money bill which is regulated inter alia by s77 of the
Constitution.
 S77(b): a bill is a money bill if it imposes national taxes, levies, duties, or
surcharges.
 Importance of determining whether a bill is a money bill: if it is a money bill,
certain other parts of the Constitution are applicable:
o Only the minister of finance is allowed to introduce a money bill to
the NA. (this is unique: any other minister may introduce any kind of
other bill to the NA)
o S77(2): A money bill may not deal with any other matter (except for any
aspects which are subordinate or incidental thereto)
 E.g. income tax act deals with penalties that can be imposed,
interests that can be levied against the late payment of taxes

When is a piece of legislation a money bill to which the constitutional
processes apply?
 SA Reserve Bank v Shuttleworth 2015 (CC)

, o Court formulated a test which says that you need to:
 a) look at the purpose of the statute (to earn revenue or
regulate conduct of people being disincentivised not be
moved out of South Africa)
 b) list of factors to determine the purpose.
o Para 48: “aside from mere labels, the seminal test is whether the
primary purpose of a statute is to raise revenue or to regulate
conduct. If regulation is the primary purpose of revenue raised
under the statute, it would be considered a fee or a charge rather
than a tax.
o The opposite is also true. If the dominant purpose is to raise revenue,
then the charge would ordinarily be a tax.
o In support of this basic distinguishing device, judicial authorities have
listed non-exhaustive factors that will tend to illustrate what the
primary purpose is.”

• Factors indicating primary or dominant purpose:
1. Money paid into general revenue fund for general purposes
2. No specific service in return for payment
3. Purpose to punish
4. Subject to general machineries of assessment and
collection
5. Words used (e.g. “fee”)
6. Not imposed on public as a whole or on a substantial part
7. Charge used to defray administrative costs (not for public
benefit)
8. Purpose to ensure constant stream of revenue for state




CONSTITUTIONAL RIGHTS
 Compliance with the BoR
o SARS and the imposition of taxes must conform with the rights of the
Constitution. The taxpayer is in an unequal relationship towards SARS.
The idea is that treating the taxpayer fairly will encourage compliance.