Shuttleworth’s exit levy a topic of contention
Reserve Bank challenges court ruling which found the 10% charge to be constitutionally invalid
THE R250 million exit levy imposed on IT tycoon Mark Shuttleworth when he shipped his billions out of the country was a topic of contention in the Constitutional Court yesterday.
Central to arguments were issues on whether the levy was an unlawful way of raising revenue for the fiscus as contended by Shuttleworth, or just a way of discouraging South Africans from exporting capital out of the country as argued by the SA Reserve Bank.
The Reserve Bank, along with the minister of finance and the president, was challenging last year’s ruling by the Supreme Court of Appeal (SCA), which found the imposition of a 10 percent exit levy on Shuttleworth to be constitutionally invalid.
But Shuttleworth brought his own cross appeal on aspects of the SCA ruling, saying the court erred and should have also found exchange control regulations to be inconsistent with the rule of law.
First, Constitutional Court judges heard arguments from the Reserve Bank counsel, advocate Jeremy Gauntlett SC, who argued that “the dominant purpose (of the levy)” was to “discourage people from taking money out of the country without a second thought… to control conduct”.
He said: “The question was how do we protect the country from certain outlaws? The objective was not to raise revenue for the State (but to) limit adverse consequences of the outflow of funds on the external balance of payments necessary to maintain South Africa’s macroeconomic health and the promotion of financial growth and stability.”
Arguing for the minister, Advocate Patrick Mtshaulana SC echoed the sentiment.
“The SCA erred in finding that the 10 percent exit charge was a revenue-raising mechanism. A distinction must be drawn between exit charge, which is regulatory, and a tax or levy within the meaning of fiscal legislation such as the Customs and Excise Act which is intended to raise revenue.”
From his arguments, rose questions on who was responsible for paying back Shuttleworth’s R250m as per directions of the SCA.
Justice Sisi Khampepe asked: “Is the minister responsible for conditions imposed when capital is exported?”
Mtshaulana’s response was “yes”.
Justice Khampepe asked again: “So, shouldn’t it follow that he should be the one paying back the money?”
Mtshaulana, who had earlier argued that “the decision to impose the condition on Mr Shuttleworth was taken by the Reserve Bank acting under delegated authority of the minister”, answered “yes”.
Shuttleworth’s counsel, advocate Matthew Chaskalson SC, agreed. “Mr Shuttleworth paid the money to the minister, so the minister must pay.”
He argued that the levy imposed on Shuttleworth was invalid and “violated Shuttleworth’s fundamental right to property protected by Section 25 of the constitution”.
In his cross appeal arguments, Shuttleworth challenged provisions of the Currency Exchanges Act and the exchange control regulations as constitutionally invalid.
His second counsel, Gilbert Marcus SC, said Shuttleworth was a “victim of these regulations” that violated his constitutional right to leave the country. He wants the Consti- tutional Court to dismiss the SCA ruling and uphold one by the High Court in Pretoria that found that the Currency Exchanges Act was unlawful as it gave the president overly broad powers, allowing him to suspend an act of Parliament.
Judgment was reserved.