Pay back the money: SA Reserve Bank ordered to return R250m to Shuttleworth [update]

The South African Reserve Bank has been ordered to pay back R250-million to billionaire Mark Shuttleworth by the court of appeal following months of legal battles between the two parties. The R250-million, set to be paid back with interest, was the amount the bank levied Shuttleworth when he sought to repatriate his wealth to the Isle of Man in 2009.

At the time of his emigration, Shuttleworth had R4.27-billion in South Africa, but transferred the assets out of the country in 2008 and 2009, paying a 10% levy each time. Shuttleworth’s wealth is now split between the UK mainland and tax haven The Isle of Man.

When the renowned online businessman launched his challenge on the Reserve Bank, his lawyer Gilbert Marcus claimed that the institution was not run according to the dictates of the law, but the dictates of an organ of state which were not accessible to the public.

Shuttleworth meanwhile, pointed out that it had been cheaper for him to travel to space than to move from South Africa. The kind of levies he had to pay, the Ubuntu founder added, could be massively harmful to South African entrepreneurs looking to expand their businesses internationally.

In its ruling, the Supreme Court of Appeal says:

The SCA held that a founding principle of Parliamentary democracy is that there should be no taxation without representation and that the executive branch of government should not itself be entitled to raise revenue but should rather be dependent on the taxing power of Parliament. The Court stated that the levy raised revenue for the State in that it brought in ten per cent 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 SCA found therefore that the levy thus fell within the category of ‘taxes, levies or duties’ contemplated by sections 75 and 77 of the Constitution.

It further ruled that “The Reserve Bank is ordered to repay the applicant the amount of R250 474 893, 50 with interest at the prescribed rate from 13 April 2012 to date of payment.”

“By paying under protest, according to the SCA, Shuttleworth sought to convey that the payment was not a voluntary one and that he reserved the right to seek to reverse that payment. The Court accordingly set aside the decision of the Reserve Bank to impose the ten per cent levy.”

The court’s ruling overturns an earlier judgement by the Gauteng North High Court, which said that using levies as a means of discouraging the wealthy from taking their assets out of the country could not “be said to be bad and an unconstitutional policy”.

That case did however score Shuttleworth’s cause some political mileage as a number of regulations relating to exchange controls were declared unconstitutional.

Update: In a recent blog post, Shuttleworth announced that he will be donating the full R250-million to a trust that would seek to address the constitutional rights for African citizens at large where the state is the counterparty.