Shuttleworth court battle heats up

Mark Shuttleworth.

Mark Shuttleworth.

Published Jan 20, 2015

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Johannesburg - South Africa-born information technology billionaire Mark Shuttleworth and the government are set to face off at the Constitutional Court, as the challenge over the country’s current system of exchange control continues.

A showdown has been scheduled for March 3, according to the court roll, when the highest court in the land is due to hear the state’s appeal.

In October, the Supreme Court of Appeal (SCA) ordered that the SA Reserve Bank repay with interest the R250 million it had charged Shuttleworth when he wanted to export his assets overseas.

When the entrepreneur made an application for the transfer of funds in 2009, the Reserve Bank imposed a 10 percent levy known as exit charge into the blocked rand account as a condition for the transfer of his remaining assets out of South Africa.

Shuttleworth paid the levy “under protest” when he moved his R2.5 billion fortune.

The billionaire had indicated last year that despite his victory at the SCA, he would consider the continuation of the case in the Constitutional Court, to challenge exchange control on constitutional grounds.

According to the affidavits filed at the Constitutional Court, the first respondent is the central bank, Finance Minister Nhlanhla Nene is the second respondent followed by President Jacob Zuma, who is the third respondent. Shuttleworth emigrated to Isle of Man, located between Great Britain and Ireland in 2001.

SCA RULING

The SCA ruled that the 10 percent levy on the export of capital was a revenue-raising mechanism for the government, whereas it should have not been. The SCA ruled that: “The levy raised revenue for the state. It brought 10 percent of the value of any capital in excess of R750 000 exported out of the country into the National Revenue Fund. Whilst in force, it raised approximately R2.9 billion.

“The levy thus fell within the category of ‘taxes, levies or duties’ contemplated by sections 75 and 77 of the constitution. The reference in regulation 10(1)(c) to the power of Treasury to impose conditions on the export of capital from the Republic cannot be construed to include the power to impose a tax or levy on such export of capital.

“It must follow that the imposition of the 10 percent levy was inconsistent with sections 75 and 77 of the constitution and invalid and ultra vires regulation 10(1)(c).”

The Reserve Bank is challenging the SCA’s ruling that the imposition of the levy amounted to a “revenue-raising mechanism”. It is also appealing on the grounds that the 10 percent exit charge imposed on Shuttleworth was not an exercise of taxing power.

It argued that the SCA judgment raised a constitutional matter, and the scope of the minister’s powers.

The lengthy court battle has been going on since May 2010 when Shuttleworth launched his application to reclaim the money he had been charged. He also challenged the constitutionality of the country’s exchange control system.

The SCA set aside an earlier decision by the North Gauteng High Court that the central bank could impose a 10 percent levy.

Shuttleworth had earlier said he would commit the funds returned to him to a trust run by veteran and retired constitutional scholars, judges and lawyers, that would selectively fund cases on behalf of those unable to do so themselves, where the counterparty was the state. The mandate of this trust would extend beyond South African borders.

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