Director of Public Prosecutions, Western Cape v Parker (103/14) [2014] ZASCA 223 (12 December 2014)
14 January 2015
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Posted by: Author: Erich Bell
Author: Erich Bell (SAIT) Introduction This case is an appeal from the
Western Cape High Court and considers whether a vendor who has misappropriated
an amount of VAT which it became liable to pay to SARS can be charged with the
common law crime of theft. Facts The respondent is the sole
representative of Step-in-Time Supermarket CC, a registered VAT vendor charged
in the Belville regional court for a number of counts under the Income Tax Act
(No. 58 of 1962) and the Value-Added Tax Act (No. 89 of 1991) (hereinafter ‘VAT
Act’) together with sixteen counts of common law theft for the failure to pay
VAT to SARS between the period February 2001 to February 2006. The respondent was found guilty
to all charges and was sentenced to 5 years’ imprisonment in terms of sec
276(1)(i) of the Criminal Procedure Act (No. 51 of 1977) for the alleged ‘VAT
theft’. However, the trial court granted the respondent leave to appeal to the
Western Cape High Court against the sentence imposed in respect of the VAT theft.
The Western Cape High Court held that the respondent did not commit VAT theft
given the fact that the money in question belongs to the vendor and not SARS.
The court consequently set aside the conviction and sentence which resulted in the
state appealing the case to the Supreme Court of Appeal. The State’s appeal resolved
around the question as to whether a VAT vendor who has misappropriated an
amount of VAT which it has collected and became liable to pay to SARS can be
charged with the common law crime of theft. The motivation behind the State’s
appeal was that the sanction imposed on the failure to pay VAT in terms of sec
58(d) of the VAT Act is a fine or imprisonment not exceeding two years which is
too lenient and that a conviction of theft would lead to a sterner sanction. In opposing the Western Cape High
Court’s judgement, the State argued that the said court started out on the
wrong premise by asking whether SARS became the owner of that money. Based on
sec 7(1) of the VAT Act, paras 15 and 17 of Metcash
Trading Ltd v Commissioner, South African Revenue Service 2001 (1) SA 1109
(CC) and the decision in Estate Agency
Affairs Board v McLaggan 2005 (4) SA 531 (SCA) it was argued that the
vendor acts as an agent on behalf of SARS in a position of trust and that a
vendor who therefore uses VAT for purposes other than to pay the Commissioner,
misappropriates those funds and is therefore guilty of theft, despite the fact
that the vendor may be the owner of that money. This argument is set out in
para [7] of the judgement where the following was stated (emphasis mine): ‘Where X holds money in trust on Y’s behalf
or receives money from Y with instructions that it be used for a specific
purpose and X misappropriates that money by using it for a different purpose, X
commits theft of the money. In these types of cases the rule that one cannot
steal one’s own money is no bar to a conviction. Y, according to these
decisions, has a special interest or property in the money. However, unless
X is obliged to keep the money in a separate account, he does not commit theft
if, at the time he uses the money for a different purpose, he has at his
disposal a liquid fund large enough to enable him to repay it (see eg S v
Gathercole 1964 (1) SA 21 (A) at 25; S v Visagie 1991 (1) SA 177 (A) at
182-183; S v Boesak 2000 (1) SACR 633 (SCA) paras 96 and 99).’ Held By specifically referring to the
now repealed sec 40 of the VAT Act, which held that VAT due or payable is a
‘debit to the State’, the court held that sec 7(1) of the VAT Act creates a
debtor-creditor relationship between the vendor and SARS and does not,
expressly or impliedly create a relationship of trust. In this regard, Pillay
JA stated the following at paras [15] and [17]: ‘[15] It is clear that the Act is a scheme
with its own directives, processes and penalties. The relationship it creates
between SARS and the registered vendor is sui generis – one with its own
peculiar nature. The Act does not confer on the vendor the status of a trustee
or an agent of SARS. If it did, the vendor would either have to keep separate
books of account or alternatively, would have to be sufficiently liquid at any
given time in order to cover the outstanding VAT. The Act makes no provision
for this situation nor does it seek to compel a vendor to keep separate books
of account in respect of VAT. [16] To find that the Act creates a trust
relationship (in whatever form) would require an innovative approach. The Act,
in particular s 58, does not incorporate theft as an offence. If the State
wants the legislature to do so, or if the sentences provided for in s 58 are
found to be inadequate, the obvious solution is to approach the Legislature.
For the courts to extend the crime of theft to resolve the State’s
difficulties, would be contrary to the principle of nullum crimen, nulla poena
sine praevia lege poenali (without a law, no charge is possible).’ It was furthermore held that the
reference to para [15] and [17] of the Metcash case stating that ‘vendors are
entrusted with a number of important duties in relation to VAT’ and that
‘vendors are in a sense involuntary tax collectors’ was misconstrued by the State.
In this regard, the following was held at para [10]: ‘…What Kriegler J said in para 15, after
broadly discussing what the Act compels the registered vendor to do in
calculating and VAT, was that ‘In the result vendors are entrusted with a
number of important duties in relation to VAT’. In this sense ‘entrusted’ might
very well be replaced with ‘burdened with’. In other words the vendor is
expected to comply with various sections of the Act which serve to safeguard
the operation thereof and minimise the effects of its weaknesses. The learned
judge certainly did not suggest that a trust relationship or one resembling
that as between a trustee and a beneficiary of a trust, had been created.
Second, counsel for the appellant misconceives the import of the Metcash
decision in citing the judgment as authority for the proposition that VAT
vendors are involuntary tax-collectors on behalf of SARS, and are therefore in
a position of trust and would commit theft if they appropriate such collected
VAT for uses other than to submit it to SARS. What the learned judge in fact
said at para 17 is ‘that vendors are in a sense involuntary tax-collectors’.
The omission to consider the phrase ‘in a sense’ has far reaching consequences
which give a totally different meaning to what the learned judge intended. It
is clear that he did not classify VAT vendors as official tax-collectors but
explained that ‘in a sense’ they could be described in this way. All the
learned judge was conveying is that VAT is payable on every sale and that
details of the manner of calculation of VAT, the timetable for periodic payment
and the amount to be paid are statutorily controlled and it is left for the
vendor to ensure compliance therewith. This is quite different from imposing
the status of a formal tax-collector or a trustee of SARS on a registered
vendor.’ The court further held that the
reliance on the McLaggan case was incorrect given the fact that the element of
dishonesty was of importance on appeal not to determine whether or not he was
guilty of theft, but rather to determine whether McLaggan’s fidelity fund
certificate lapsed by reason of dishonesty.
The appeal was consequently
dismissed with costs, including the costs resulting from the employment of two
counsel. Please click here to access the judgement.
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