The impact of regulatory pluralism and complexity on the governance of state-owned companies in South Africa

by | Jan 28, 2024 | SAMLJ, SAMLJ V35 I1

The impact of regulatory pluralism and complexity on the governance of state-owned companies in South Africa

Author: Tebello Thabane

ISSN: 1996-2185
Affiliations: Senior Lecturer, Commercial Law Department, University of Cape Town
Source: South African Mercantile Law Journal, Volume 35 Issue 1, 2023, p. 49 – 73
https://doi.org/10.47348/SAMLJ/v35/i1a3

Abstract

This article outlines and critiques the regulatory universe applicable to state-owned companies (SOCs) in South Africa. It argues that the governance of SOCs occurs within a plural regulatory universe characterised by an intricate system of norms, principles, and practices that are engendered, monitored, and enforced by state and non-state actors. The article further argues that the complexity of the regulatory universe is one of the main causes of weak governance in SOCs. This argument is premised on the realisation that a coherent, predictable, efficient, and accessible regulatory universe enables compliance and sound corporate governance. In evaluating the regulatory universe, this article follows two lines of inquiry: the first is a doctrinal and principled approach, and the second is an instrumental, policy orientated, and forward-looking analysis. The article concludes that the regulatory universe of SOCs is not only plural and complex but also incoherent and fragmented, resulting in onerous over-regulation, regulatory quandary, and uncertainty, which collectively negatively impact the quality of governance.

The unfortunate dearth of judicial precedent in transfer pricing continues

by | Jan 28, 2024 | SAMLJ, SAMLJ V35 I1

The unfortunate dearth of judicial precedent in transfer pricing continues

Author: Thabo Legwaila

ISSN: 1996-2185
Affiliations: Professor, School of Law, University of the Witwatersrand
Source: South African Mercantile Law Journal, Volume 35 Issue 1, 2023, p. 74 – 93
https://doi.org/10.47348/SAMLJ/v35/i1a4

Abstract

Despite what could be hailed as the first two transfer pricing cases in South Africa, the unfortunate dearth of judicial precedent in South Africa regrettably continues. Transfer pricing is one of the most complex areas of tax alongside provisions dealing with controlled foreign companies, foreign exchange gains and losses, currency conversions, financial instruments, and corporate reorganisations. In fact, as the list goes on, it is just more apposite to say ‘tax is complex’, period. With regard to transfer pricing in particular, the complexity is amplified by the fact that transfer pricing is not even tax per se. It is an economic allocation of contribution through the value chain. It is through transfer pricing that each contributor in the value chain gets an adequate return for their contribution in the value chain. Once that allocation is complete, the tax provisions are applied to the returns of each contributor according to the tax laws of the countries in which they are taxable. A transfer price is a price set by a taxpayer when selling to, buying from or sharing resources with a related person. A transfer price is contrasted with a market price, which is the price set in the marketplace for the transfer of goods and services between unrelated persons where each party strives to get the utmost possible benefit from the transaction (see Arnold & McIntyre, International Tax Primer (Kluwer Law International 2002) 55; Danzinger, International Income Tax (Butterworths 1991) 303–307). Transfer prices are not negotiated in a free open market and as such have the propensity to deviate from prices agreed upon by non-related trading partners in comparable transactions under the same circumstances (Oguttu, International Tax Law: Offshore Tax Avoidance in South Africa (Juta 2015) 213). Unless prevented from doing so, related persons engaged in cross-border transactions can avoid the income taxes of a country through a manipulation of prices, mainly by shifting profits to low tax countries and expenses to high tax countries. To combat this, tax authorities across the globe have the power to adjust, in appropriate cases, the transfer prices set by related persons (Arnold & McIntyre, (Kluwer 2002) 55. In what can be welcomed as the first transfer pricing case in the South African courts, the South Johannesburg High Court had an opportunity to decide on the applicability of s 31(7) of the Income Tax Act 58 of 1962 (‘the Act’; any reference to a section or subsection are to the Act, unless otherwise stated, or the context indicates otherwise) to a debt owed by a foreign company to a South African company. The applicable provision excludes debt instruments that contain core characteristics of debt instruments from the application of transfer pricing provisions. In the second case, the same court missed out on an opportunity to gauge the legitimacy of the revenue collector to use s 31(2) of the Act to adjust prices charged between a taxpayer and third parties that are not related to the taxpayer.

Do taxpayers have to pay tax when SARS has not complied with sections 92, 95 and 96 of the Tax Administration Act? Nondabula v Commissioner: SARS & another explained

by | Jan 28, 2024 | SAMLJ, SAMLJ V35 I1

Do taxpayers have to pay tax when SARS has not complied with sections 92, 95 and 96 of the Tax Administration Act? Nondabula v Commissioner: SARS & another explained

Author: Moseki Maleka

ISSN: 1996-2185
Affiliations: Senior Lecturer, Department of Mercantile Law, University of South Africa
Source: South African Mercantile Law Journal, Volume 35 Issue 1, 2023, p. 94 – 109
https://doi.org/10.47348/SAMLJ/v35/i1a5

Abstract

Section 3 of the South African Revenue Service Act 34 of 1997 (‘SARS Act’) provides that the South African Revenue Service (‘SARS’) is empowered to administer and collect taxes in South Africa. The Commissioner for SARS (‘the Commissioner’) is empowered to invoke the collection methods in terms of ss 164 and 179 of the Tax Administration Act 28 of 2011 (‘the TAA’).

Retraction of a ‘hot-headed resignation’ caused by depression: Lessons from Cairncross/Legal and Tax (Pty) Ltd 2019 (2) BALR 137 (CCMA)

by | Jan 28, 2024 | SAMLJ, SAMLJ V35 I1

Retraction of a ‘hot-headed resignation’ caused by depression: Lessons from Cairncross/Legal and Tax (Pty) Ltd 2019 (2) BALR 137 (CCMA)

Author: Mafanywa Jeffrey Mangammbi

ISSN: 1996-2185
Affiliations: Department of Mercantile & Labour Law, University of Limpopo
Source: South African Mercantile Law Journal, Volume 35 Issue 1, 2023, p. 110 – 122
https://doi.org/10.47348/SAMLJ/v35/i1a6

Abstract

Unlike its celebrated siblings, Metropolitan Health Risk Management v Majatladi 2015 (36) ILJ 958 (LAC) (‘Majatladi’), National Health Laboratory Service v Yona (2015) 36 ILJ 2259 (LAC) (‘Yona’) and HC Heat Exchangers (Pty) Ltd v Araujo 2020 (3) BLLR 280 (LC) (‘HC Heat Exchangers’), Cairncross/Legal and Tax (Pty) Ltd 2019 (2) BALR 137 (CCMA) (‘Cairncross’) is the black sheep of the constructive dismissal family. The arbitration award in Cairncross brings into sharp focus emotional distress in the context of constructive dismissal. Cairncross provides a platform to isolate some of the critical issues that have arisen in recent times concerning constructive dismissal. First, there is a troublesome jurisdictional puzzle: Has the employee resigned or was he or she dismissed? Secondly, the case deals with the vexed question of what would constitute intolerable circumstances to continue the employment relationship, and in particular, whether work-related stress could form the basis of a constructive dismissal claim. In the case under scrutiny, the employee had claimed that her depression was attributable to the unbearable working environment. The basis of her claim of intolerability of continued employment was that an employer has a common-law and statutory duty to provide a safe working environment, which it had failed to deliver. Lastly, Cairncross also brings to the fore a consideration of the effect of tendering a resignation and the aggrieved employee’s subsequent attempt to withdraw it. The question that is answered is whether an employer’s failure to accept the withdrawal of resignation by an employee suffering from work-related stress constitutes a type of constructive dismissal.

On making, reporting, and repeating defamatory statements

by | Jan 28, 2024 | SALJ, SALJ V141 I1 2024

On making, reporting, and repeating defamatory statements

Author: Anton Fagan

ISSN: 1996-2177
Affiliations: WP Schreiner Professor of Law, University of Cape Town
Source: South African Law Journal, Volume 141 Issue 1, p. 1-14
https://doi.org/10.47348/SALJ/v141/i1a1

Abstract

This note starts by distinguishing the making from the reporting of a defamatory statement, and both of these from the repetition of one. Thereafter, having introduced the general rule that a defendant who made or reported a defamatory statement about a plaintiff to a third party cannot avoid liability on the ground that she was merely repeating a statement made by a fourth party, the note goes on to discuss certain already-existing exceptions, and possible exceptions, to this rule. Finally, the note looks at whether our law should acknowledge a further exception, namely where a defendant repeated a defamatory statement by reporting it, while knowing it to be false, but did so only in order to refute it.