POLITICS

Nkandla: Zuma must pay R 63.9m in fringe benefits tax – Mmusi Maimane

DA says President liable for income tax on the full value of the improvements made to his personal residence

Nkandla: Zuma must personally pay R 63.9 million in fringe benefits tax and release tax records

7 July 2016

Today, the Democratic Alliance (DA) initiates the next chapter in ensuring President Jacob Zuma pays the full tax due by him on the fringe benefits that he accrued in the Nkandla scandal. 

The fundamental principle we seek to uphold here is that no person – whether President or not – is above the law. Equal treatment under the law is an essential part of a functioning democracy, and in the specific case before us it is no different. President Jacob Zuma, in the eyes of the law, is an ordinary man, and must be treated as so. 

As stated by the Minister of Finance – “all South Africans pay tax on their income and fringe benefits, be the person the President or an ordinary worker”. Therefore, Jacob Zuma is liable by law to pay any tax benefits personally amassed in relation to the luxurious updates at his Nkandla homestead. 

Nkandla is without doubt one of the most spoken about and ventilated act of corruption in democratic South Africa. From its first revelation in the print media in 2009, to three whitewashed Parliamentary Ad Hoc Committees, to its crescendo at the Constitutional Court – which ruled that Jacob Zuma had violated his Oath of Office as well as the Constitution, and found that President Zuma must pay back the cost of some of the non-security upgrades at Nkandla.

Parliament, the Public Protector as well as the people of South Africa were actively and deliberately undermined, in the 7 year fight, between 2009 and now, by the ANC who stood against the Rule of Law, the Constitution and clean governance. This all while the DA maintained that Jacob Zuma was liable for his role in the construction of a palace of corruption to close himself off from the South African reality of poverty, inequality and critically high levels unemployment.

While National Treasury has determined, in line with the Constitutional Court's ruling, that R7.8 million is an amount of the costs to be personally paid by Zuma for the over-inflated R246 million project of corruption, this is not the only amount that Zuma should pay to the people of South Africa.

For President Zuma and his compromised ANC, it must have seemed like this chapter was now officially closed, and for a mere R 7.8-million rand Zuma could laugh his way to enjoying a luxurious homestead that cost the public in excess of R 246-million.

For Zuma and the ANC, all the years of evading accountability, undermining the Public Protector via the farcical Nkandla Ad Hoc Committee, blocking impeachment proceedings and Motions of No Confidence, and spending millions of rands of public funds defending Zuma in every court at every level seemed to have paid off.

Unfortunately for them, that is not the case. This is not the end of the road for Jacob Zuma and his corrupt cronies; it has only just begun.

Today we set out another avenue the DA will pursue in order to ensure any undue benefits accrued by President Zuma in relation to Nkandla are paid - personally. That is, the issue of tax on fringe benefits.

Fringe Benefits

In terms of the Seventh Schedule of the Income Tax Act, Act 58 of 1962 (‘the Act’), Zuma owes money to SARS and by extension the people of South Africa for the benefits he derived from the upgrade to Nkandla. 

The Act defines a fringe benefit as: 

Taxable benefit means a taxable benefit contemplated in paragraph 2, whether the grant of such benefit is voluntary or otherwise.

The emphasis here is on “voluntary or otherwise”, because if we recall, Zuma once firmly stated that “They did this without telling me - why should I pay for something I did not ask for?” This was later proved to be false, since Zuma had personally discussed the details of the upgrade with his architect, had instructed that his personal architect take the lead on the project, and had received correspondence relating to Nkandla. 

It is clear from this part of the Act that Jacob Zuma still owes tax monies for benefits he derived from the act of swindling the people of South Africa.

This sentiment was conveyed by Finance Minister Pravin Gordhan, on 25 February 2014, when he said that:

All South Africans pay tax on their income and fringe benefits, be the person the President or an ordinary worker. South Africa is one of the few democracies where we are all equal when it comes to taxation, in that we are all taxed, with the exact amount determined by our income and fringe benefits, minus any allowed exemptions and deductions.

Both the legislation and the Finance Minister’s utterances are clear and equivocal. Jacob Zuma is not above the law – he must pay fringe benefits tax just like every other South African.

How much does Zuma owe?

Legal precedent set by Income Tax Case 1346 44 SATC 31, established that even if, in a subsequent year, an employee repays an amount that was determined to be taxable income in a prior year it may not be offset against the taxable income of the year in which it is repaid nor may it be offset against the taxable income of the year in which the taxable amount was received.

Therefore, in President Zuma’s case, even if he repays the R 7.8-million as determined by the National Treasury, in line with the Constitutional Court’s ruling, this amount may not be used to reduce the value of the taxable fringe benefit received in a prior year. 

Thus Zuma is liable for income tax on the full value of the improvements made to his Nkandla home.

It is our strong opinion, based on a thorough analysis of the law and supporting documentation that Zuma’s tax liability as a result of taxable fringe benefits accrued to him through the Nkandla upgrades amounts to R 63.9 million, which includes a 10% charge for late payment penalties as a result of his failure to declare and pay the tax on the taxable fringe benefits in the years that they accrued to him. 

On studying and evaluating the full list of upgrades, we found that the total taxable Fringe Benefit amounted to R 145,185,235, which taxed at the applicable marginal rate of 40% would amount to R 58,074,094. When this is added to 10% penalty for late payment, of R 5,807,409, we arrive at the total payable figure of R 63,881,503

 Taxable Fringe Benefit

 R 145,185,235

 Taxation due at a rate of 40%

 R 58,074,094

 Penalty for late payment - 10%

 R 5,807,409

 Total of Tax and Penalty

 R 63,881,503

But that’s not the end of it. In addition to this amount there would be interest payable from the date that the tax became due and payable.

President Zuma must at once pay the tax that is due, and pay it personally. South Africans cannot continue to suffer while Jacob Zuma has lined his pockets with public money destined for the advancement of our country.

In addition to this I call on Jacob Zuma to give SARS written consent to make public the information regarding his tax matters in relation to the Nkandla Project, specifically the information regarding the issue of fringe benefit taxes that he is liable for.

SARS investigation

While the SARS Commissioner, Tom Moyane, is seen to be a Zuma deployee, and an asset in his programme of state capture, it’s worth noting that there is no provision for the Commissioner of SARS to use his discretion as to whether to collect tax on fringe benefits. 

There is however an obligation on the commissioner to collect all taxes that are due without fear or favour.

Tom Moyane must therefore do his job, rather than using state machinery and resources to fight factional battles in the ANC.

We will therefore be writing to the SARS Commissioner in order to determine whether SARS have conducted a forensic audit to determine the tax liability of President Zuma, in relation to the public funds spent on upgrades at his private homestead in Nkandla and whether they have received any monies from the President in this regard. 

SARS must investigate this issue, as a matter of urgency. While Tom Moyane has launched an investigation into Julius Malema’s tax affairs – also an ordinary man – he ought to afford Jacob Zuma the same treatment and ensure his tax records in relation to Nkandla are duly investigated. 

We will also be enquiring as to whether the correct forms were submitted to SARS by Parliament, as the representative of the President’s employer, the Republic of South Africa.

While we understand that the tax affairs of all South African’s are private, we believe that given the important public interest and given the amount of public money spent on this upgrade, SARS has a duty to disclose – if Jacob Zuma accedes to this call – as to whether they have instituted an investigation into this matter, whether they have assessed the tax due on the fringe and whether Jacob Zuma has paid these taxes.

Conclusion

I wish to reiterate that this has nothing to do with the R7.8 million which the Constitutional Court found Jacob Zuma owed for the non-security upgrades at Nkandla. This is about how much tax he owes for the upgrades at Nkandla, for which is personally liable.

This war against corruption is far from over.

If you recall, in 2014 I laid eight charges (CAS 123/03/2014), in terms of the Prevention and Combating of Corrupt Activities Act, against Zuma. We have continued to ask written parliamentary questions to both the Minister of Justice and Constitutional Development and Minister of Police. To date we have received vague and contradictory replies.

When Parliament reconvenes after the Local Government Elections we will be ramping up our insistence to get an update, this is in the interest of accountability and the war against corruption. 

Finally, I want to send a clear message to those both in the public and private sector that corruption eats away at the opportunities, especially for the poor and marginalised. Those found to be corrupt must face the full might of the State and its institutions tasked with putting a stranglehold on corruption.

Only a DA government can stop corruption and ensure that jobs are created and quality services delivered to our people. 

In order to prevent another Nkandla from ever happening, the people South Africa must vote DA on 03 August.

Statement issued by DA leader, Mmusi Maimane, 7 July 2016