Friday, September 14, 2007

Jacob Zuma's tax problem....

The Supreme Court of Appeal (SCA) yesterday ruled that the right to use loans interest-free is ‘gross income’ which ‘accrues’ to a taxpayer and that one must therefore pay tax on that benefit. This means, amongst other things, that people who receive bribes and then claim that those bribes were not bribes at all but merely interest free loans from friends, may have a tax evasion problem.


During the trial of Schabir Shaik much was made of the fact that the more than R1 million that Shaik gave to Zuma was a loan which Zuma was intending to pay back. But experts showed that if interest were to have been charged on these loans Zuma would have found it impossible to pay back the money. In any event the Court found that the "loan agreement" presented to it was fake and that the money was indeed given as a bribe.

If Zuma is charged again his legal team will have to think carefully about how they explain the fact that Zuma received this large amount of money from a convicted fraudster and why he has not paid any of it back - with or without interest accruing.

If they claim this was a loan to Zuma and they cannot show that the loan was serviced by the accused or that interest was being charged on the loan, they may convince a court that Mr. Zuma was not guilty of corruption, but they will then face a charge of tax evasion.

But if the money was not an interest bearing loan and it was not a non-interest bearing loan, it must have been a donation. Why would anyone donate more than one million Rand to a friend in a very influential position. Why would such a person accept such a donation? Surely it is difficult not to assume that the "donation" was given and the money taken because the arrangement was mutually beneficial to the two men.

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