Is Mark Shuttleworth’s Bid Justified?
Billionaire Mark Shuttleworth recently dragged the South African government to court in a bid to change the money exchange rules and regulations of the country. Shuttleworth, who is one of the richest men in the country, was compelled to leave South Africa in 2001 because of the existing system of exchange control. He also had to pay over R250m as tax when he transferred his funds to the Isle of Man, where he now resides.
Shuttleworth, who is an entrepreneur, venture capitalist and philanthropist, has asked the Supreme Court to declare the exchange control system of South Africa ‘unconstitutional’. The lawmakers however are seeing red over this and insist that if the system is declared unconstitutional, it would spell doom for the country’s economy. An experts said, “Section Nine is the heart of the exchange control system and he wants to knock it down.”
Shuttleworth’s lawyer, Gilbert Marcus SC, said that the system was not controlled by any law but was controlled solely by a part of the state. The public, at most times, remained uninformed about the system. None of the constitutionally required processes were adhered to and it was a direct violation to the constitutional rights of the people.
In his appeal, the billionaire has also objected to the South African Reserve Bank’s closed door policy where no one can communicate unless it is through an intermediation of an authorized bank. This, he says, makes it very difficult for people to put their thoughts across and like him, many people end up paying huge amounts in tax when they try to access their own money. Shuttleworth himself had assets amounting to almost R4.27bn in SA at the time of his migration, but had to take the assets out of the country in two installments, in 2008 and 2009 respectively. For each transaction, he was forced to pay 10% tax. He is also fighting the system now to get the money he paid in taxes, back.
Shuttleworth’s counsel argued that the South African system of collecting tax on the assets being transferred out of the country is nothing but a ploy through which the government looks to increase its own finances. This is an unfair policy as it is both unconstitutional as well as harsh on the people who want to take nothing but their own hard earned money to a location of their choice. Marcus said, “One of the founding principles of a parliamentary democracy is that there should be no taxation without representation and that the executive branch of government should not itself be entitled to raise revenue for its operation, but should rather be dependent on the taxing power of Parliament which is democratically accountable to the tax-paying public.”
The Reserve Bank however claims that the policy is in place not as a fund-generating mechanism, but as a means to curb the free-flow of capital out of South Africa. The authorities also claimed that since this rule applies to a very small percentage of the people of the country, it cannot qualify as tax.
Advocate Jeremy Gauntlett, representing the Reserve Bank, said that the country was only protecting its finances and that no nation would happily agree to capital leaving its shores. He also said that at the time of an emergency, the authorities need to act swiftly to protect the finances of the country. If the public was involved in the process, it would take a lot of time to arrive at any decision and that could cause a lot of harm to the financial health of South Africa.
Shuttleworth’s case has garnered considerable attention among the people of South Africa as many expats have their money stuck in the country. There is widespread support for him as the laws indeed seem unfair and anarchic.
As a company, dedicated to helping people get back their own money, we support Shuttleworth and see no reason as to why the existing laws cannot be changed. The constitution and the laws were written ages ago and in fact the Currency and Exchange Act was written 81 years ago and it is time that some changes are made. A lot of South Africans are forced to leave their country due to alarmingly high crime rates, political instability and a shrinking labor market. At such a time, it is unfair to hold back the assets of the people and make them pay taxes to make transfers.
Mark Shuttleworth has undertaken a brave initiative and we salute him.