Page 505 - SAIT Compendium 2016 Volume2

IN 54 Income Tax acT: InTeRPReTaTIon noTes IN 54
1. De nitions. – In this Act, unless the context indicates otherwise—
‘grati cation’, includes—
(a) money, whether in cash or otherwise;
(b) any donation, gift, loan, fee, reward, valuable security, property or interest in property of any description, whether
movable or immovable, or any other similar advantage;
(c) the avoidance of a loss, liability, penalty, forfeiture, punishment or other disadvantage;
(d) any of ce, status, honour, employment, contract of employment or services, any agreement to give employment
or render services in any capacity and residential or holiday accommodation;
(e) any payment, release, discharge or liquidation of any loan, obligation or other liability, whether in whole or in
part;
(f) any forbearance to demand any money or money’s worth or valuable thing;
(g) any other service or favour or advantage of any description, including protection from any penalty or disability
incurred or apprehended or from any action or proceedings of a disciplinary, civil or criminal nature, whether or not already instituted, and includes the exercise or the forbearance from the exercise of any right or any of cial power or duty;
(h) any right or privilege;
(i) any real or pretended aid, vote, consent, in uence or abstention from voting; or
(j) any valuable consideration or bene t of any kind, including any discount, commission, rebate, bonus, deduction
or percentage;
The general offence of corruption is very widely de ned as is the concept of a grati cation. The inclusion of an extensive list of speci c offences serves to make it plain that the purpose of the PCCA Act (and its statutory predecessors) is to expand the already widely formulated common law offence of bribery. Bribery was an offence committed by and in respect of state of cials only, but the same moral considerations apply to the private commercial sector in its relationship with the state and between private persons and other entities. Broadly speaking, corruption under section 3 of the PCCA Act amounts to—
• an agreement to give, or an offer to give or the giving of a bene t that is not due
• to a person vested with a duty
• by virtue of his or her of ce, employment or status
• intending to in uence the receiver or offerree to do something or to refrain from doing something at variance with
his or her duty, or
• intending to reward the offerree or recipient for having done it or for having refrained from doing it.
The crime is highly dependent on moral considerations. Consider, for example, the following words and phrases in section 3 of the PCCA Act:
• Illegal, dishonest, unauthorised, incomplete, or biased
• Misuse
• Abuse
• Breach of trust
• Violation of a legal duty or a set of rules
• An unjusti ed result
• Any other unauthorised or improper inducement
Many of those considerations, especially those emphasised, depend on value judgements. Courts and prosecuting authorities are used to determining what does and does not accord with the legal convictions of the community. In addition, before any person can be convicted of an offence, proof must be provided of the elements of that offence and of the fact that it was committed, conscious of its unlawfulness or at the very least recklessly as to whether or not it was a crime. In other words, the strictures of criminal law and the law of evidence, as well as the experience and vigilance of the courts, serve to protect the citizen against the potentially unlimited reach of the PCCA Act. Importantly, however, section 23(o)(i) does not require that there must be a conviction for the section to apply. Any payment that constitutes an activity contemplated in Chapter 2 of the PCCA Act will be denied as a deduction for income tax purposes.
Not every form of promotional gift or free lunch comprises a criminal offence under section 3 of the PCCA Act. Gifts of no signi cant, lasting or commercial value will normally not fall within its ambit, but factors such as the taxpayer’s intention, the size and regularity of the gift, the position of the recipient, amongst others, will be considered. In the course of doing so the Commissioner will take account of the following dictum in Gates v Gates:*
‘It is true that in certain cases more especially in those in which charges of criminal or immoral conduct are made, it has repeatedly been said that such charges must be proved by the ‘clearest’ evidence or ‘clear and satisfactory’ evidence or ‘clear and convincing’ evidence, or some similar phrase. There is not, however, in truth any variation in the standard of proof required in such cases. The requirement is still proof suf cient to carry conviction to a reasonable mind, and the reasonable mind is not so easily convinced in such cases because there are moral and legal sanctions against immoral and criminal conduct and consequently probabilities against such conduct are stronger than they are against conduct which is not immoral or criminal.’
Despite section 23(o) denying a deduction to the payer, illegal contracts can in principle have scal consequences for the recipient. The only question as between the taxpayer and the scus is whether amounts received by or accruing to a taxpayer fall under the literal meaning of ‘gross income’.†
4.2 Fines and penalties
* 1939 AD 150 at 155.
† M P Finance Group CC v C: SARS 2007 (5) SA 521 (SCA), 69 SATC 141.
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