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Important judgment on the constitutionality of retrospective legislation

Monday, 12 June 2017   (0 Comments)
Posted by: Authors: Jerome Brink and Emil Brincker
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Authors: Jerome Brink and Emil Brincker (CDH)

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” — Benjamin Franklin, in a letter to Jean-Baptiste Leroy, 1789.

The famous quote by Benjamin Franklin is important not only because of the inevitability of taxes but also due to the fact that taxes, and the laws which frame them, should maintain a level of certainty. In South African law, this is premised on among others, s1(c) of the Constitution of The Republic of South Africa, 1996 (Constitution) which states that South Africa is founded on the supremacy of the Constitution and the rule of law. Thus, the rule of law proposes that law should not be formulated in wide general terms but should be reasonably clear and precise; otherwise a decision by discretion is imported.

In a recent judgment in the High Court in Pienaar Brothers (Pty) Ltd v Commissioner for the South African Revenue and Another(GNP), unreported case no 87760/2014 of 29 May 2017 (Pienaar Bros), Fabricius J was presented with, among others, the question of whether the enactment of retrospective legislation, particularly fiscal legislation, which ex post facto deems the law at a particular time to be what it was not, offends against the principle of legality and the rule of law which lies at the heart of our constitutional dispensation. The judgment is important as it aims to provide guidance and jurisprudence in an area of South African tax law which has been beset with much debate and consternation. 

In the context of retrospectivity of legislation, the court pointed out that South African case law distinguishes between retrospectivity of legislation in the “weak” and “strong” sense. A statutory provision is retrospective in the weak sense if it prospectively effects, or changes the consequences for the future of pre-existing transactions and matters. An enactment is retrospective in the strong sense if the provision is deemed to have been in force from an earlier date than that on which it was in fact enacted. In this case the court had to consider retrospectivity in the latter instance, where the amendment was deemed to be effective from a date earlier than when the relevant amending Act was promulgated.

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