Shuttleworth’s R250m exit charge stays put for time being
THE CONSTITUTIONAL Court yesterday handed down judgment against South African billionaire entrepreneur Mark Shuttleworth over a R250 million exit levy against the SA Reserve Bank.
The Constitutional Court handed down judgment concerning the constitutional validity of an exit charge imposed on capital exported out of South Africa and of certain legislative provisions regulating South Africa’s exchange control system.
This was after the minister of finance in 2003 had imposed a 10 percent exit charge on capital exceeding R750 000, as a condition to the export of that capital, in his budget speech.
In the Constitutional Court, the Reserve Bank and the minister sought to appeal against an order made in March this year that they should refund the exit charge.
Shuttleworth sought to cross-appeal against the finding that the regulations, and certain provisions of the act, were constitutionally valid.
“In the majority judgment… the court granted leave to appeal in the main appeal, finding that even though the exit charge is no longer imposed, the matter is not moot because the state could be exposed to approximately R2.9 billion in potential claims if it is found that the imposition was unlawful,” the Constitutional Court found.
Dominant purpose
“The court further found that the exit charge was not inconsistent with the constitution. The dominant purpose of the exit charge was not to raise revenue but rather to regulate conduct by discouraging the export of capital to protect the domestic economy,” it found.
The court also granted leave to appeal in the cross-appeal but only in respect of the attack on the constitutional validity of the section of the act that enabled the making of regulations and the provision in the regulations, prohibiting the export of capital without authorisation under certain conditions.
The provisions were found to be constitutionally valid as the broad discretionary powers granted to the minister ensured a “speedy and flexible” approach to the exchange control system.
The main appeal was upheld and the cross-appeal dismissed and the court made no order as to costs.
In 2009, Shuttleworth applied to the Reserve Bank for permission to transfer capital of about R2.5bn out of South Africa. His request was granted on the condition that he paid the exit charge.
Shuttleworth
challenged the imposition of this charge in the North Gauteng High Court in Pretoria.
He argued that the exit charge, as well as various legislative and regulatory provisions underpinning the exchange control system, were constitutionally invalid.
The Reserve Bank is arguing that it should not repay Shuttleworth the R250m exit levy it charged him when he transferred his assets to the Isle of Man in 2009.
He paid the levy under protest and took the matter to court.