Mark Shuttleworth – praag.org

Shuttleworth loses tax battle

Billionaire Mark Shuttleworth has lost his six year battle for a R250 million refund from the Reserve Bank.

The Constitutional Court has had the final say in the matter, finding that the 10% exit levy he was charged was not a tax.

Shuttleworth was made to pay the amount when he applied to move all his capital, some R2,5 billion out of the country. He emigrated to the Isle of Man.

In a majority decision, penned by Deputy Chief Justice Dikgang Moseneke, Shuttleworth will not get a refund.

“I have found that the dominant purpose of exit charge was not to raise revenue but rather to regulate conduct by discouraging the exit of capital and to protect the domestic economy,” says Moseneke.

The decision to impose the 10% exit charge on capital exceeding R750 000 was announced in a budget speech delivered in 2003 by the then Minister of Finance as a condition to the export of that capital.

Billionaire Shuttleworth loses SA exchange control case

Billionaire entrepreneur Mark Shuttleworth’s bid to have South Africa’s entire exchange control system declared unconstitutional has failed.

The High Court in Pretoria on Thursday dismissed Shuttleworth’s application to strike down the whole of Section 9 of the Currency and Exchange Act and all of the Exchange Control Regulations as unconstitutional.

Judge Francis Legodi dismissed Shuttleworth’s application to set aside the imposition of a R250 million levy he had to pay to get some of his assets out of the country in 2009 and for the Reserve Bank to return his money.

The court also dismissed his application to declare invalid the Reserve Bank’s policy of not dealing directly with members of the public but insisting that they should communicate through bank dealers.

The judge however granted an order declaring Section 9(3) of the Currency and Exchanges Act as well as certain portions of the Exchange Control Regulations unconstitutional.

Section 9(3) gives the President not only the power to amend or suspend any part of the Currency and Exchanges Act, but also the power to amend or suspend any other Act of Parliament.

Judge Legodi said this was an extraordinary wide power and effectively vested in the President the power to amend or suspend any Act of Parliament irrespective of whether that other piece of legislation dealt with currency, banking or exchange.

“This provision has the potential to unravel the healing wounds of the past when laws were changed at the stroke of a pen by one individual.

“This can never again happen in a constitutional and democratic South Africa.

“…Clearly no President in the living Supreme Law of the land (the Constitution) can ever wish to act as it is envisaged in Section 9(3).

“This does not even need a programme of liberalisation of the system of exchange controls as envisaged by the Minister of Finance,” he said.

Shuttleworth, who now lives on the Isle of Man, has blamed the existing system of exchange control in South Africa for “forcing” him to emigrate from South Africa in 2001.

He had assets worth over R4.27 billion in South Africa when he emigrated, but transferred the assets out of the country in 2008 and 2009, each time subject to the payment of a ten percent “exit charge”.

Government abandoned the levy a year after Shuttleworth moved the remainder of his assets out of the country.

Judge Legodi ruled that Shuttleworth had not proved that his constitutional right to lawful, reasonable and procedurally fair administrative action had been infringed or that the Reserve Bank’s so-called “closed door policy” was unfair.

He said the object of the 10 percent “exit charge” was to limit the adverse consequences of the outflow of funds on the external balance of payments necessary to maintain South Africa’s macro-economic health and to promote financial growth and stability.

“The idea of such discouragement cannot be said to be bad and an unconstitutional policy.

“…Imagine what will happen to this country if the wealthiest men and women … were allowed to take their wealth out of the country with impunity every time when the country is in economic grief or when there is a change of government or leaders in the government.

“It could have a devastating effect on the country as a whole,” he said.

He ruled that the decision to charge the levy had been made by the Minister of Finance and that the Reserve Bank had no discretion to exempt anyone from it.

Shuttleworth had chosen not to attack the Minister’s decision, and the court could therefore not make a final determination on the issue, he added.

Judge Legodi dismissed Shuttleworth’s contention that the exchange control process was unconstitutional because it lacked fixed guidelines, saying the system required a flexible, speedy and expert approach to ensure that proper financial governance prevailed.

He ruled that certain portions of the Exchange Control Regulations were unconstitutional, including the blanket prohibition on any transactions involving foreign currency, gold or other assets readily convertible into foreign currency, because it prohibited the right to free trade.

Regulation 3(1) C, which prohibits paying a person residing outside the Republic – making most modern-day internet transactions illegal – was also struck down, as was the section forcing one to disclose the nature of the goods one wished to purchase when one obtained permission.

The court gave government twelve months to amend certain sections of the regulations. – Sapa

Mark Shuttleworth’s court application could sink SA exchange control

Billionaire entrepreneur Mark Shuttleworth’s bid to have South Africa’s exchange control system declared unconstitutional could have a devastating effect on the country, the SA Reserve Bank (SARB) said on Tuesday.

Jeremy Gauntlett SC, for the SARB, argued that the order sought by Shuttleworth in the High Court in Pretoria was “the most radical court order imaginable”.

“He quite deliberately decided to attack the heart of the scheme and seeks to bring down the pillars of the temple,” said Gauntlett.

“If the applicant succeeds in striking down Section Nine of the Currency Act and declaring all orders and rules unconstitutional, there would be no inhibition on removing capital from this country at all.

“Section Nine is the heart of the exchange control system and he wants to knock [it] down.”

Gauntlett said Shuttleworth claimed it was in the interest of all South Africans to destroy the entirety of the exchange control system in the country.

“He couldn’t get his money out of the country. Now he wants to pull the whole system down. Why should this financial refugee, living on the Isle of Man, speak on behalf of the entirety of South African society?”

Apart from his constitutional challenge to the exchange control system, Shuttleworth wants the court to set aside the levy of more than R250 million he had to pay to get some of his assets out of the country in 2009, and to order the SARB to return the money.

He further seeks an order declaring that the SARB’s so-called “closed door policy” of insisting that members of the public communicate with it through the intermediation of authorised banks is unconstitutional and invalid.

Shuttleworth has blamed the existing system of exchange control in South Africa for “forcing” him to emigrate in 2001.

He had assets worth over R4.27 billion in South Africa when he emigrated, but he transferred the assets out of the country in 2008 and 2009, each time subject to the payment of a 10 percent “exit charge”.

The government abandoned the levy a year after Shuttleworth moved the remainder of his assets out of the country.

Gauntlett argued that Shuttleworth’s application on the levy should be dismissed because he had attacked the wrong decision-maker, as the SARB was only carrying out a decision announced by the finance minister during a speech in Parliament in 2003.

He said the minister’s decision was authorised by statute, and the primary reason for the levy was to dissuade capital flight out of the country and not to raise revenue.

He said the context was that foreign exchange reserves were vulnerable, and that few countries were able to look at a flight of capital comfortably. If a crisis developed overnight there would be the need for swift action.

“There are sophisticated economic forces at work, and there’s a need for fast action for the purpose of protecting the currency. There’s nothing wrong with such a legislative scheme.”

If you have to engage the public before you make a regulation, all regulations in the country could be struck, Gauntlett said.

“When you control foreign exchange, you cannot conceivably say: ‘Let’s put up a billboard somewhere and consult the public.’ You cannot do things that day because people will take their money and go.”

He said these were the realities of how legislatures worked.

“This argument is nonsense on stilts. It was decided it [the 10 percent exit levy] was no longer needed, but that may change,” Gauntlett said.

Judge Francis Legodi reserved judgment. – Sapa

SA billionaire wants his money back

Billionaire entrepreneur Mark Shuttleworth has taken the government to court to have the country’s exchange control system declared unconstitutional.

He further seeks an order declaring the bank’s so-called “closed door policy”, which insists that the public communicate with it through the intermediation of authorised banks, unconstitutional and invalid.

Shuttleworth blames South Africa’s existing system of exchange control for forcing him to emigrate in 2001.

He says in court papers that the system made it impossible to conduct his entrepreneurial and philanthropic ventures.

He had assets worth over R4.27-billion in South Africa when he emigrated. He only transferred them out of the country in 2008 and 2009, each time paying a 10% levy.

He currently lives on the Isle of Man and holds dual South African and UK citizenship.

His advocate, Gilbert Marcus SC, yesterday argued that South Africa’s exchange control system was governed not by laws but by the dictates of an organ of state that were not accessible to the public. He argued they did not follow any constitutionally required process of promulgation and violated many constitutional rights.

The application continues before Judge Francis Legodi today. – SAPA