CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 322/22
In the matter between:
CASINO ASSOCIATION OF SOUTH AFRICA First Applicant
PEERMONT GLOBAL (NORTH WEST) (PTY) LIMITED Second Applicant
SUN INTERNATIONAL (SOUTH AFRICA) LIMITED Third Applicant
and
MEMBER OF THE EXECUTIVE COUNCIL FOR
ECONOMIC DEVELOPMENT, ENVIRONMENT,
CONSERVATION AND TOURISM First Respondent
MEMBER OF THE EXECUTIVE COUNCIL FOR
PROVINCIAL TREASURY Second Respondent
NORTH WEST GAMBLING BOARD Third Respondent
MINISTER OF FINANCE Fourth Respondent
Neutral citation: Casino Association of South Africa and Others v Member of the
Executive Council for Economic Development Environment
Conservation and Tourism and Others [2023] ZACC 39
Coram: Zondo CJ, Kollapen J, Madlanga J, Majiedt J, Makgoka AJ,
Potterill AJ, Rogers J, Theron J and Van Zyl AJ
Judgments: Makgoka AJ (unanimous)
Heard on: 11 May 2023
Decided on: 29 November 2023
Summary: Confirmation of the order of constitutional invalidity granted by
the High Court — North West Gambling Act 2 of 2001 — Sections
84(1)(e), 87(1)(a), and 87(3) of the North West Gambling Act —
Regulation 73(1) of the North West Gambling Regulations 2002
Section 228(1)(a) of the Constitution — Provincial Tax Regulation
Process Act 53 of 2001 — Imposition of tax and levies by Member
of the Executive Council — Application of the dominant purpose
test to determine whether a charge amounts to a tax or levy —
Sufficient nexus is required between the impugned charge and the
regulatory scheme of the statute to determ ine whether the charge
is a tax
ORDER
On application for confirmation of the order of constitutional invalidity granted by the
High Court of South Africa, North West Division, Mahikeng:
1. The declaration of constitutional invalidity made by the High Court of
South Africa, North West Division, Mahikeng , is confirmed in the terms
set out in paragraph 2 of this order.
2. Sections 84(1)(e), 87(1)(a), and 87(3) of the North West Gambling Act 2
of 2001 are declared invalid to the extent that they purport to authorise
the Member of the Executive Council for Economic Development,
Environment, Conservation and Tourism, to impose gambling levies as a
tax as contemplated in section 228(1)(a) of the Constitution.
3. The declaration of invalidity takes effect from 23 January 2020.
4. The first and second respondents, jointly and severally, are ordered to pay
the second and third applicants the difference between:
(a) the gambling levies that the second and third applicants have paid
pursuant to regulation 73(1) of the North West Gambling
3
Regulations 2002 , from 23 January 2020 to the date of this
judgment; and
(b) the gambling levies that would have been pay able during the
period mentioned above, had regulation 73(1) not been amended.
5. The first and second respondents, jointly and severally, are ordered to pay
interest on the amounts referred to in paragraph 4 above, as follows:
(a) in respect of the gambling levi es already paid by the second and
third applicants by the date on which the application in the
High Court was served, such interest to be at the prescribed rate
from the date of service of the application on the respondents to
the date of payment;
(b) in respect of the gambling levies not yet paid by the second and
third applicants by the date on which the application in the
High Court was served, such interest to be paid at the prescribed
rate from the date of each payment by the applicants.
6. The first, second and third respondents, jointly and severally, are ordered
to pay the first, second, and third applicants’ costs, including the costs of
two counsel.
JUDGMENT
MAKGOKA AJ (Zondo CJ, Kollapen J, Madlanga J, Majiedt J, Potterill AJ, Rogers J,
Theron J and Van Zyl AJ concurring):
MAKGOKA AJ
4
Introduction
[1] These are proceedings in terms of section 172(2)(d) of the Constitution 1 for
confirmation of an order of constitutional invalidity gra nted by the High Court of
South Africa, North West Division, Mahikeng (High Court). The High Court declared
certain empowering provisions in the North West Gambling Act2 (NW Gambling Act)
invalid and unconstitutional. The provisions concerned are sections 84(1)(e), 87(1)(a)
and 87(3), which empower the Member of the Executive Council for Economic
Development, Environment, Conservation and Tourism (MEC for Tourism) to make
regulations prescribing the gambling levies that licensed casino operators in North West
are required to pay. The o rder of the High Court followed an amendment
(impugned amendment) to regulation 73(1) of the North West Gambling Act 2 of 2001:
North West Gambling Regulations3 (Regulations) by the MEC for Tourism, relying on
the empowering provisions.
[2] As this matter relates to the confirmation of an order of constitutional invalidity
by the High Court, this Court’s jurisdiction i s engaged. In terms of section 167(5) of
the Constitution, this Court makes the final decision on whether a provincial Act is
constitutional and must confirm any order of constitutional invalidity made by either
the High Court or the Supreme Court of Appeal before that order has any force.
However, this Court must still conduct its own evaluation and satisfy itself that the
impugned provisions do not pass constitutional muster before confirming the order of
invalidity.4
1 Section 172(2)(d) of the Constitution provides:
“[a]ny person or organ of state with a sufficient interest may appeal, or apply, directly to
the Constitutional Court to confirm or vary an order of constitutional invalidity by a court in
terms of this subsection.”
2 2 of 2001.
3 North West Gambling Regulations, GN 353 Provincial Gazette 5823, 25 November 2002.
4 Phillips v Director of Public Prosecutions, Witwatersrand Local Division [2003] ZACC 1; 2003 (3) SA 345
(CC); 2003 (4) BCLR 357 (CC) at para 8.
MAKGOKA AJ
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[3] The first applicant, the Casino Association of South Africa (CASA), is a
voluntary association that represents various licensed casino operators across the
country. CASA’s members operate 36 of the 38 operational casinos in South Africa,
including all four of the casinos in the North West. Peermont Global (North West) (Pty)
Limited (Peermont), the second applicant, is a casino licensee which owns and operates
two casinos in Mmabatho, North West, namely, Palms Casino and Rio Casino.
The third applicant, Sun International (South Africa ) L imited (Sun International ), is
licensed to operate the Sun City Casino , North West, and was, until February 2022,
licensed to operate the Carousel Casino in Hammanskraal, Gauteng.
[4] The MEC for Tourism is the first respondent. The second respondent is the
Member of the Executive Council for Provincial Treasury (MEC for Treasury). The
third respondent is the North West Gambling Board (Board). The Board is established
in terms of section 3 of the NW Gambling Act and is responsible for, among others, the
oversight and control of gambling activities in North West, including the collection of
levies and fees imposed on gambling licensees in the Province. The fourth respondent
is the Minister of Finance. He is the only respondent who does not participate in these
proceedings.
The impugned amendment
[5] Regulation 73(1) of the Regulations prescribes the gaming levies payable by
casino licensees. Prior to its amendment, the regulation read as follows:
“A licensee shall pay a gaming levy in relation to each of its licensed casinos at the
following rates depending on the licensee’s gross gaming revenue.
Gross Gaming Revenue ( per month)
where the taxable revenue in the tax
period-
Rate of levy
Does not exceed R4 million
4% of each R1 of the taxable
Revenue
MAKGOKA AJ
6
Exceeds R4 million but does not
exceed R8 million
R160 000 plus 7% of the amount by
which the taxable
revenue exceeds R4 million
Exceeds R8 million but does not
exceed R12 million
R440 000 plus 8% of the
amount by which the taxable
revenue exceeds R8 million
Exceeds R12 million
R760 000 plus 10% of the
amount by which the taxable
revenue exceeds R12 million”
[6] Subsequent to its amendment, the regulation reads as follows:
“A licensee shall pay a gaming levy in relation to each of its licensed casinos of the
following rates, depending on the licensee’s gross gaming revenue.
Gross Gaming Revenue (per month)
where the taxable revenue in the tax
period-
Rate of levy
Does not exceed R6 million
6% taxable revenue
Exceeds R6 million, but less than
R10 million
R360 000 plus 8% of the
amount above R6 million
Exceeds R10 million, but less than R15
million
R680 000 plus 10% of the
amount above R10 million
Exceeds R15 million
R1 180 000 plus 12% of the
amount above R15 million”
[7] As can be seen from this comparison, the effect of the impugned amendment was
to substantially increase the gambling levies pay able by licenced casino operators,
including the applicants, in the North West Province. In terms of regulation 74(2) of
the Regulations, these gambling levies are payable on the seventh day of the month and
licensees who fail to pay a levy on or before t he prescribed date are liable to pay a
penalty. There is also no grace period for gambling levy payments and failure to pay
timeously may result in a suspension of licences and criminal charges. Regulation 74(2)
MAKGOKA AJ
7
also requires licensees to submit monthly returns to the Board, and simultaneously to
pay the Board any gaming levies that are due. Regulation 75(1) stipulates that if a
gaming levy is not paid in accordance with regulation 74, a penalty is payable at 1% per
day up to a maximum of 100%.
[8] Peermont and Sun International have , as a result of these provisions, paid the
levies under protest in accordance with the impugned amendment and subject to full
reservation of their rights, including the right to claim repayment of the difference
between the levi es that would have been payable had regulation 73(1) not been
amended.
[9] The impugned amendment was a culmination of a process that commenced in
November 2018, when the Board published for comment a proposed amendment to
regulation 73(1) in terms of which there would be a levy increase. CASA raised several
objections to the proposed amendment and made extensive representations to the Board.
On 15 February 2019 , the MEC for Tourism promulgated a second version of the
amendment to regulation 73(1) which merely corrected typographical errors in the draft
published in November 2018.
[10] There were various developments between February 2019 and January 2020, the
importance of which relate to the review proceedings. However, in view of the
conclusion I reach, it is unnecessary to detail these developments. Suffice it to say, on
23 and 24 January 2020, the MEC for Tourism relying on the empowering provisions,
promulgated the impugned amendment, which was, in all material respects, the same as
the first propos ed amendment published in November 2018. On 3 February 2020,
the Board notified casino licensees in the Province of the impugned amendment and
that they should pay the prescribed amended tariffs with effect from 1 February 2020.
Constitutional and statutory framework
[11] It is necessary to set out the constitutional and statutory framework within which
the application has to be considered. Section 228 of the Constitution reads as follows:
MAKGOKA AJ
8
“Provincial taxes
(1) A provincial legislature may impose—
(a) taxes, levies and duties other than income tax, value-added tax, general
sales tax, rates on property or customs duties; and
(b) flat-rate surcharges on any tax, levy or duty that is imposed by national
legislation, other than on corporate income tax, value-added tax, rates
on property or customs duties.
(2) The power of a provincial legislature to impose taxes, levies, duties and
surcharges—
(a) may not be exercised in a way that materially and unreasonably
prejudices national economic policies, economic activities across
provincial boundaries, or the national mobility of goods, services,
capital or labour; and
(b) must be regulated in terms of an Act of Parliament, which may be
enacted only after any recommendations of the Financial and Fiscal
Commission have been considered.”
[12] The Pro vincial Tax Regulation Process Act 5 (Process Act) is the legislation
envisaged in section 228(2)(b) of the Constitution to re gulate the powers of
Provincial Legislatures to impose taxes, levies and duties. In section 1, “provincial tax”
is defined as “a tax, levy or duty, or a flat -rate surcharge on the tax base of a tax, levy
or duty that is imposed by national legislation, which a P rovince may impose in terms
of section 228 of the Constitution”. The Process Act entails various intergovernmental
processes, which involve the Minister of Finance and other organs of state and
interested persons, including the Budget Council and the Financial and Fiscal
Commission, both of which are statutory bodies. In the First Certification judgment,
this Court held that section 228 includes gambling taxes in the Provinces’ general taxing
powers.6
5 53 of 2001.
6 Ex Parte Chairperson of the Constitutional Assembly: In re Certification of the Constitution of the Republic of
South Africa, 1996 [1996] ZACC 26; 1996 (4) SA 744 (CC); 1996 (10) BCLR 1253 (CC) at para 442.
MAKGOKA AJ
9
[13] Section 228 must be read with section 120 of the Constitution, which specifies
the manner in which taxes or levies may be imposed by a Provincial Legislature. In
terms of section 119, only a provincial MEC for Treasury may introduce a “money Bill”
in a Provincial Legislature. In terms of section 120(1), a Bi ll is a “money Bill” if it:
(a) appropriates money; (b) imposes provincial taxes, le vies, duties or surcharges;
(c) abolishes or reduces, or grants exemptions from, any provincial taxes, levies, duties
or surcharges; or (d) authorises direct charges against a Provincial Revenue Fund.7
[14] The upshot of the constitutional and statutory framework outlined above is that
an MEC may not introduce a provincial tax by way of regulation, and a provincial Act
may not purport to empower an MEC to do so. It is against this framework that the
empowering provisions of the NW Gambling Act have to be considered. They read as
follows:
Section 84(1)(e):
“The Responsible Member may, in consultation with the Board, by notice in the
Provincial Gazette make regulations regarding
. . .
(e) any matter pertaining to gambling levies and fees.”
Section 87(1)(a):
“A holder of a license shall be liable to, at such intervals as may be prescribed, pay a
gambling levy which shall be calculated on such basis and at such rate as may be
prescribed and be payable in the manner and before the date as prescribed: Provided
that different rates may be so prescribed in respect of different types of licenses.”
Section 87(3):
7 See section 120 of the Constitution.
MAKGOKA AJ
10
“The Responsible Member may, with the concurrence of the Member of the Executive
Council responsible for finance, by notice in the Provincial Gazette make regulations
prescribing the matters in respect of which gambling levies and fees shall be payable
and the tariffs relating thereto.”
[15] Section 3 of the NW Gambling Act provides for the establishment of the Board
as a juristic person. Section 4 sets out the powers and functions of the Bo ard, which,
among others, include: (a) overseeing gambling activities in the Province; (b) exercising
such powers and performing such functions and duties as may be assigned to the Board
in terms of th e Act or any other law; and (c) inviting applications f or licences and
considering such applications. The Board also has the power to make and enforce rules
for the conduct of its proceedings and hearings, and to consult with any person or
employ consultants regarding any matter relevant to the performance of its functions on
such terms and conditions as it may determine.
[16] Section 21 of the NW Gambling Act identifies three sources of funding for the
Board: (a) monies transferred from the Department of Economic Development ,
Environment, Conservation and Tourism (Department);8 (b) annual Board
administrative fees and investigation fees charged in respect of applications for licences
and registration; and (c) money accruing to the Board from any other service.
Litigation history
High Court
[17] In July 2020, the applicants launched an application in the High Court seeking
an order reviewing and setting aside the impugned amendment . In addition, “to the
extent necessary” the applicants sought an order declaring the empowering provisions
to be unconstitutional and invalid. The applicants contended that the decision to
promulgate the impugned amendment was unlawful and reviewable on the following
grounds.
8 This is the curre nt name of the Department which, in the NW Gambling Act, i s referred to as the
Department of Economic Development and Tourism.
MAKGOKA AJ
11
[18] First, the empowering provisions wer e unconstitutional as they: (a) delegate
legislative power to impose provin cial taxes or levies to the Provincial Executive, in
breach of section 228(1) of the Constitution and the principle of separation of power s
(section 228 challenge), and (b) assign “plenary legislative power” from the Legislature
to the Executive, without a dequate guidance to the Executive as to how the power
should be exercised (delegation of plenary power challenge) . Second, in the event it
was found that the empowering provisions do not authorise the imposition of provincial
taxes and levies and thus do not contravene section 228(1) of the Constitution, the
applicants asserted that the impugned amendment itself amounts to an unconstitutional
imposition of tax. Third, in breach of section 87(3) of the NW Gambling Act, the
MEC for Treasury did not co ncur in the impugned amendment (section 87(3)
challenge).
[19] In the alternative, the applicants challenged the amendment by way of a review
application. They complained about the lawfulness and fairness of the process by which
the amendment was promulgated (review challenge).
[20] In opposition, the respondents relied on a number of technical defences,
including: CASA’s lack of s tanding; lack of authority of CASA’s deponent to the
founding affidavit; and the alleged misjoinder of the Minister of Finance. On substance,
the respondents contended that a gaming levy as contemplated in regulation 73 is not a
provincial tax as contemplated in the definition of “provincial tax” in section 1 of the
Process Act, as it is not imposed by the national Gambling Act or any other
national legislation, but by the NW Gambling Act.
[21] In its judgment, t he High Court referred to sections 43(b) and 104(1) of the
Constitution as vesting legislative authority in the Provincial Legislature.9 The Court
also noted that sections 119 to 124 of the Constitution set out the process for the
9 Casino Association of South Africa v MEC for Economic Development, Environment, Conservation and Tourism
unreported judgment of the High Court, Case No: M374/2020 (7 October 2022) (High Court judgment) at para 7.
MAKGOKA AJ
12
introduction and passing of provincial legislation. The Court then alluded to the trite
principle that the Legislature (including a Provincial Legislature) is generally entitled
to delegate subordinate regulatory authority to other bodies, including the E xecutive,
subject to constitutional controls. The Court recited at length the relevant judgments of
this Court in this respect.10 The High Court went on to mention the applicants’ assertion
that the empowering provisions were at odds with the constitutional controls,11 that the
delegation implicated the applicants’ right to property, and recited this Court’s
jurisprudence on this topic.12
[22] The High Court concluded that the empowering provisions are unconstitutional
and invalid on the basis that they impermissibly delegated law -making power to the
MEC for Tourism. It accordingly directed the respondents to pay the second and third
applicants, together with interest, the difference between: (a) the gambling levies that
the second and third applicants had paid and would have paid in terms of the impugned
amendment, from the date of the amendment to the date of the Court’s judgment; and
(b) the gambling levies that would have been payable during this period had regulation
73(1) not been amended.13
[23] Having reached this conclusion, the High Court did not consider the other
grounds raised by the applicants, namely: (a) the section 228 challen ge and its
alternative challenge; (b) the section 87(3) challenge; or (c) the review challenge.
In this Court
Applicants’ submissions
[24] The applicants submit that the High Court’s order of invalidity should be
confirmed by this Court as the empowering provisions unconstitutionally delegate
10 Id at para 8.
11 Id at paras 9-10.
12 Id at paras 11-13.
13 Id at para 18.4.
MAKGOKA AJ
13
powers to the Provincial Executive to impose taxes and levies in contravention of
section 228 of the Constitution. In this regard, the applicants rely on this Court’s
decision in Shuttleworth14 where it was emphasised that “the dominant purpose” of a
statute must be considered to determine whether a charge amounts to a tax or levy.
[25] The applicants argue that various provisions of the NW Gambling Act illustrate
that the dominant purpose of the statute is to authorise the raising of revenue for the
provincial fiscus, rather than to regulate conduct. Consequently, the applicants contend
that the provisions are unconstitutional and must be declared invalid. The applicants
further submit that even if this Court were to find that the NW Gambling Act does not
unconstitutionally delegate taxing powers to the MEC for Tourism , the provisions
nevertheless constitut e an impermissible and unconstitutional delegation of plenary
law-making power to the Provincial Executive, as held by the High Court. This is
because, the applicants argue, it is unconstitutional to assign unfettered discretionary
and plenary legislative powers to the Executive, as done by the North West Legislature
in this instance in terms of the empowering provisions.
[26] Lastly, the applicants argue that the MEC for Tourism’s decisions, including her
regulation-making powers, are subject to administrativ e law prescripts. In particular,
the applicants submit that rule-making and regulation-making constitute administrative
action and are thus reviewable under the Promotion of Administrative Justice Act 15
(PAJA). To the extent that the impugned amendment is not subject to PAJA, the
applicants submit that it is nonetheless subject to the principle of legality. The
applicants, accordingly, complain about the lawfulness and fairness of the process by
which the amendment was promulgated and as a result argue th at the impugned
amendment should be reviewed and set aside.
14 South African Reserve Bank v Shuttleworth [2015] ZACC 17; 2015 (5) SA 146 (CC); 2015 (8) BCLR 959 (CC).
15 3 of 2000.
MAKGOKA AJ
14
Respondents’ submissions
[27] The first to third respondents oppose confirmation of the declaration of
constitutional invalidity. In the event of this Court confirm ing the constitutional
invalidity of the impugned provisions, the respondent s submit that the declaration of
invalidity should be suspended for 24 months to enable the Provincial Legislature to
remedy the defects.
[28] As a preliminary point, t he respondents argue that the applicants were
inordinately late in their challenge to the Regulations. The assertion is that the
Regulations were initially introduced in 2002. If the imposition of the gambling levies
in regulation 73(1) was impermissible, it was so from the outset. Thus, the respondents
submit that the review challenge , if brought under PAJA, should have been brought
within 180 days of their obtaining knowledge of regulation 73(1) as initially
promulgated.16 Thus, the 180-day limit imposed by section 7 of PAJA had long passed.
In the circumstances, the respondents submit that there was a delay in launching the
review application. Absent an application in terms of section 9(1) of PAJA for the
extension of the period, the High Court had no jurisdiction to hear the matter.
[29] With regard t o the substance of the applicants’ section 228 constitutional
challenge, the respondents’ contentions are these. It i s the design of the
NW Gambling Act, and the Legislature’s choice, to create a flexible regulatory scheme
that grants the MEC for Tourism wide regulation -making powers in respect of any
matter that may be necessary or expedient to prescribe in order to achieve the objectives
16 Section 7(1) of PAJA provides:
“(1) any proceedings for judicial review in terms of section 6(1) must be instituted without
unreasonable delay and not later than 180 days after the date—
(a) subject to subsection (2)(c), on which any proceedings instituted in terms of
internal remedies as contemplated in subsect ion (2)(a) have been concluded;
or
(b) where no such remedies exist, on which the person concerned was informed
of the administrative action, became aware of the action and the reasons for
it or might reasonably have been expected to have become aware of the action
and the reasons.”
MAKGOKA AJ
15
of the Act. The provisions of the NW Gambling Act and its purpose would be frustrated
were the MEC for Tourism not empowered to impose levies and fees. In particular, the
Province’s ability to generate revenue would be seriously compromised by the
curtailment of the MEC for Tourism’ s powers. The respondents also contend that
section 228(1) only applies to provincial ta xes imposed by national legislation. Thus,
argue the respondents, the empowering provisions do not constitute a tax, but a
regulatory measure.
[30] In answer to the delegation of plenary power challenge, the respondents submit
that the imposition of levies and fees by the MEC for Tourism is not plenary in nature
in that it is regulated by regulation 73 which is a subordinate piece of legislation
promulgated in terms of section 84. The regulation and any amendments to it do not
pass, amend or repeal the NW Gambling Act.
The judgment of the High Court
[31] As mentioned, the High Court declare d the empowering provisions
unconstitutional and invalid. The High Court arrived at the latter conclusion on a
misconceived basis. It erroneously thought that the respondents’ Counsel had conceded
during argument that the empowering provisions unconstitutionally delegated
law- making power to the MEC for Tourism. The Judge had misunderstood the nature
of the concession made by Counsel.
[32] The concession concerned a different “delegation”, namely, that the
MEC for Treasury was not entitled to delegate her concurrence powers to the Treasury
Head of Department in terms of section 87(3) of the NW Gambling Act. The
concession, therefore, had nothing to do with the delegation of ple nary powers to the
Executive. Other than this erroneous basis for its conclusion, the High Court’s
judgment does not proffer any reasoning for its conclusion that the empowering
provisions are unconstitutional and invalid.
MAKGOKA AJ
16
[33] There is another feature of the High Court’s judgment that warrants comment.
It is the failure by the Court to consider and determine all the constitutional grounds
before it – contrary to what has been cautioned in Jordaan17 and in Spilhaus.18 In
Jordaan, this Court held that where the constitutionality of a provision is challenged on
a number of grounds and the court upholds one such ground, it is desirable that it should
also express its opinion on the other challenges. This is necessary in the event of this
Court declining to con firm the ground upheld by the High Court. 19 And in Spilhaus,
this Court said “[l]itigants are entitled to a decision on all issues raised, especially where
they have an option of appealing further. The court to which an appeal lies also benefits
from the reasoning on all issues.”20
Issues
[34] The issues before this Court are whether:
(a) the applicants unduly delayed in their application;
(b) the empowering provisions and/or the impugned amendment authorise
the imposition of taxes or levies in contravention of section 228(1) of the
Constitution;
(c) the empowering provisions constitute an unconstitutional delegation of
plenary legislative power from the Legislature to the Executive, without
adequate guidance to the Executive as to how the power must be
exercised;
(d) the MEC for Tourism’s decision to amend regulation 73(1) is reviewable
under PAJA or the principle of legality; and
(e) the levies paid by the respondents pursuant to the impugned regulation
should be repaid.
17 S v Jordaan (Sex Workers Edu cation and Advocacy Task Force and o thers as amici curiae) [2002] ZACC 22;
2002 (6) SA 642; 2002 (11) BCLR 1117 (CC).
18 Spilhaus Property Holdings (Pty) Limited v MTN [2019] ZACC 16; 2019 (4) SA 406 (CC); 2019 (6) BCLR 772
(CC).
19 Jordaan above n 17 at para 21.
20 Spilhaus above n 18 at para 44.
MAKGOKA AJ
17
Respondents’ delay objection
[35] I dispose of the respondents’ preliminary PAJA delay objection. The applicants
do not challenge the gambling levies as they were before the amendment. The
respondents’ objection would have some force had the applicants sought to impugn the
pre-amendment regulation 73. The applicant s’ challenge is limited to the regulation
post-amendment. The impugned amendment was promulgated on 24 January 2020.
The application was launched on 17 July 2020, well within the 180 -day period
prescribed in section 7 of PAJA. There is therefore no merit in this objection.
Section 228 challenge
Is the NW Gambling Act, as a provincial Act, exempt from complying with the
Process Act?
[36] Before I consider whether the empowering provisions and/or the impugned
amendment authorise the imposition of taxes or levi es in contravention of
section 228(1), I consider an issue related to section 228. It is the respondents’
contention that a “provincial tax” is confined to a tax imposed by national legislation,
so that the NW Gambling Act, being a provincial Act, did not need to comply with the
Process Act. The definition of “provincial tax” in the Process Act is “a tax, levy or
duty, or a flat -rate surcharge on the tax base of a tax, levy or duty that is imposed by
national legislation, which a Province may impose in te rms of section 228 of the
Constitution”. Based on this definition, the respondents argue that a “provincial tax” is
confined to a tax imposed by national legislation, so that the NW Gambling Act, being
a provincial Act, did not need to comply with the Process Act.
[37] This contention is unsustainable. Section 228 of the Constitution envisages that
a Provincial Legislature may impose two forms of provincial taxes, namely (a) taxes,
levies and duties (other than income tax, value -added tax, etc.); and (b) flat -rate
surcharges on any tax, levy or duty that is imposed by national legislation. Therefore,
the reference to “national legislation” in section 228(1) refers to national legislation
MAKGOKA AJ
18
which imposes a tax, levy or duty and upon which a provincial flat -rate surcharge i s
imposed by a Province. In other words, section 228(1)(b) envisages the imposition of
a surcharge by a Provincial Legislature upon a national tax, levy or duty.
[38] The contention that the reference to “imposed by national legislation” in the
Process Act’s definition of “provincial tax” means that a provincial tax is confined to a
tax, levy or duty imposed by the national legislation has no merit. First, it would mean
that section 228(1) of the Constitution envisages the imposition of a provincial tax by a
Provincial Legislature but only where the tax is imposed by national legislation. That
cannot be, as a Provincial Legislature has no authority to enact national legislation.
[39] In addition, such an interpretation would permit Provinces to impose taxes and
levies without limitation, and in particular, without complying with the requirements in
section 228(2) of the Constitution or the Process Act, provided they do so by way of
provincial legislation. But the limitations on “the power of a provincial legislat ure” to
impose taxes, levies, duties and surcharges is expressly provided for in section 228(2),
pursuant to which the Process Act is enacted. What is more, such an interpretation
would render section 228(1)(a) nugatory.
[40] The definition of “provincial tax” in the Process Act is intended to give effect to
section 228(1) of the Constitution. Thus, although the definition of “provincial tax” is
not sub-categorised as (a) and (b), it should be read – in line with section 228(1) of the
Constitution – as follows: “(a) a tax levy or duty; or (b) a flat -rate surcharge on the tax
base of a tax, levy or duty that is imposed by national legislation”. Section 228(1)(b) of
the Constitution, like the second part of the definition of “provincial tax”, is a flat - rate
surcharge imposed by a Province on top of any tax, levy or duty imposed by national
legislation. The reference to national legislation does not apply to the type of taxes and
levies envisaged by section 228(1)(a) of the Constitution and in the first part of the
definition of “provincial tax”.
MAKGOKA AJ
19
[41] If the NW Gambling Act purports to empower the MEC for Tourism – a member
of the Provincial Executive – to impose a provincial tax or levy within the meaning of
section 228(1)(a) and within the meaning of the first part of the definition of
“provincial tax” in the Process Act, such provision would thus be in violation of the
Constitution and the Process Act. It is therefore necessary to consider whether
regulation 73(1) constitutes a provincial tax, and whether the NW G ambling Act
purports to authorise the imposition of a provincial tax, within the meaning of the
Constitution and the Process Act. It is to these questions I now turn.
Do the impugned provisions of the NW Gambling Act authorise the imposition
of a tax and does regulation 73(1) impose a tax?
[42] It is settled that the power of taxation and appropriation of government funds are
reserved for Legislatures, and that the Executive has no pow er to raise taxes itself.
This Court in Fedsure21 pointed out that when the Legislature exercises the power to
raise taxes or rates or determines appropriations to be made out of public funds, “it is
exercising a power that under our Constitution is a power peculiar to elected legislative
bodies. It is a power that is exercised by democratically elected representatives after
due deliberation”.22
[43] This Court in Shuttleworth affirmed the principle and expanded on its rationale:
“[T]he manner and the extent to which national taxes are raised and appropriated must
yield to the democr atic will as expressed in law. It is the people, through their duly
elected representatives, who decide on the taxes that residents must bear. An executive
government may not impose a tax burden or appropriate public money without due and
express consent of elected public representatives. That authority, and indeed duty, is
solely within the remit of the Legislature. This accords with this Court’s decision in
Fedsure, as well as the Canadian Supreme Court decision in Eurig Estate. Both cases
hold that the primary object of the limits on how to raise national taxes or appropriate
21 Fedsure Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan Council [1998] ZACC 17; 1999
(1) SA 374 (CC); 1998 (12) BCLR 1458 (CC).
22 Id at para 45.
MAKGOKA AJ
20
revenue, as our Constitution does in relation to a money Bill, is to ensure that there is
“no taxation without representation”. It is plain that in our jurisdiction a decision or
law that purports to impose a tax will be invalid to the extent of its inconsistency with
the limits imposed by the Constitution or other law.”23 (Footnotes omitted.)
[44] Much as the power of taxation by the national government is constitutionally
regulated, so it is in respect of the provincial sphere of government. Section 226(1) of
the Constitution establishes, for each Province, a Provincial Revenue Fund into which
all revenues raised or received by the provincial government in question must be paid.
In terms of section 226(2), money may be withdrawn from a Provincial Revenue Fund
only: (a) in terms of an appropriation by a provincial Act; or (b) as a direct charge
against the Provincial Revenue Fund, when it is provided for in the Constitution or a
provincial Act.
[45] An evaluation of our jurisprudence on whether a charge is a tax as contemplated
by the Constitution or merely a regulatory charge reveals that this is never an easy task.
In Shuttleworth this Court grappled with that question . The issue there was whether a
particular amount charged by the Reserve Bank as an exit charge upon a resident
transferring capital out of this country was a tax or a regulatory charge. After an
excursus of local and foreign authorities, writing for the majority, Moseneke DCJ
formulated the test as follows:
“So, aside from mere labels, the seminal test is whether the primary or dominant
purpose of a statute is to raise revenue or to regulate conduct. If regulation is the
primary purpose of the revenue raised unde r the statute, it would be considered a fee
or a charge rather than a tax. The opposite is also true. If the dominant purpose is to
raise revenue then the charge would ordinarily be a tax. There are no bright lines
between the two. Of course, all regulatory charges raise revenue. Similarly, ‘every tax
is in some measure regulatory’ . That explains the need to consider carefully the
dominant purpose of a statute imposing a fee or a charge or a tax. In support of this
23 Shuttleworth above n 14 at para 42.
MAKGOKA AJ
21
basic distinguishing device, judicial authorities have listed non-exhaustive factors that
will tend to illustrate what the primary purpose is.”24
[46] The Deputy Chief Justice went on to consider a number of cases, which he said
give “open-ended but helpful guidelines” on determining the dominan t purpose of a
particular piece of legislation. Those guidelines must be weighed carefully on a
case- by-case basis to arrive at a correct decision. 25 Those cases included
Permanent Estate,26 Israelsohn,27 I L Back,28 Maize Board,29 and Gaertner.30
[47] In Permanent Estate, a tax was said to be identifiable by the fact that money is
paid into a general revenue fund for general purposes and no specific service is given
in return for payment. 31 In Israelsohn, the Appellate Division held that the charge in
question was a tax because it was subject to the general machineries of tax assessment
and collection.32 In I L Back, there was a fee rather than a tax, because its purpose was
to empower the Minister to impose a fee for services and facilities he had to provide. 33
In Maize Board, the measure was found not to be a tax because it was “not imposed on
the public as a whole or on a substantial sector thereof” and its proceeds were not used
for public benefit, but largely to cover administrative costs. 34 In Gaertner, this Court
considered the primary and secondary functions of customs and excise duties and held
24 Shuttleworth above n 14 at para 48.
25 Id at para 52.
26 Permanent Estate and Finance Co Ltd v Johannesburg City Council 1952 (4) SA 249 (W).
27 Israelsohn v Commissioner for Inland Revenue 1952 (3) SA 529 (A).
28 The Master v I L Back 1983 (1) SA 986 (A).
29 Maize Board v Epol (Pty) Ltd [2008] ZAKZHC 99; 2009 (3) SA 110 (D).
30 Gaertner v Minister of Finance [2013] ZACC 38; 2014 (1) SA 442 (CC); 2014 (1) BCLR 38 (CC).
31 Permanent Estate above n 26 at 259.
32 Israelsohn above n 27 at 539F-G.
33 I L Back above n 28 at 1002-1003.
34 Maize Board above n 29 at para 27.
MAKGOKA AJ
22
that, although the regulatory aspect of the duties served an important public function,
the statute in question was “essentially fiscal”.35
[48] More recently, the Supreme Court of Appeal had occasion to consider the issue
in Randburg Management District.36 It held that the dominant purpose of a municipal
levy payable by landowners to the municipality’s general revenue fund for general
public use and to enable provision of municipal services, was in the nature of a tax or
levy. This was because the levy had as its dominant purpose the raising of revenue to
fund the provision of services by the municipality. 37 In Pioneer Foods,38 the Western
Cape Division of the High Court held that a tariff on wheat imports payable under the
Customs and Excise Act 39 had as its main function the imposition of taxes paid into a
general revenue fund.40
[49] In Shuttleworth, although the Deputy Chief Justice refers to the
“dominant purpose of a statute”, a careful consideration of the judgment reveals that, in
coming to the conclusion that the exit charge imposed pursuant to the impugned
exchange control legislation was not a tax, the dominant purpose of the exit charge itself
was determinative.41
[50] This is consistent with the position in Canada, where a “sufficient nexus” is
required between a governmental levy with the characteristics of a tax, and a regulatory
scheme of a statute, to determine whether a charge is regulatory, as opposed to a tax.42
35 Gaertner above n 30 at paras 54-5.
36 Randburg Management District v West Dunes Properties [2015] ZASCA 135; 2016 (2) SA 293 (SCA).
37 Id at para 29.
38 Pioneer Foods (Pty) Ltd v Minister of Finance [2017] ZAWCHC 110; 2019 (1) SA 273 (WCC).
39 91 of 1964.
40 Id at para 21.
41 Shuttleworth above n 14 at paras 48, 53, 56, 57 and 60.
42 In Reference re Greenhouse Gas Pollution Pricing Act 2021 SCC 11 (Greenhouse Gas) at para 213. See also
Westbank First Nation v British Columbia Hydro and Power Authority [1999] 3 SCR 134 (Westbank) at para 44
and 620 Connaught Ltd v Canada (Attorney General) 2008 SCC 7; [2008] 1 SCR 131 at para 24.
MAKGOKA AJ
23
In Greenhouse Gas, the Canadian Supreme Court reiterated the “two-step approach for
determining whether a governmental levy is connected to a regulatory scheme”43 as set
out in its judgment in Westbank:44
“The first step is to identify the existence of a relevant regulatory scheme. If such a
scheme is found to exist, the second step is to establish a relationship between the
charge and the scheme itself.”45
[51] As also pointed out in Greenhouse Gas, in every case, the court must scrutinise
the scheme in order to identify the primary purpose of the levy on the basis of the
Westbank test.46
[52] The upshot of the above is this. The fact that the dominant purpose of a statute
is regulatory is not determinative of the enquiry. It must further be determined whether
the impugned charge has a sufficient nexus with the regulatory scheme of the statute in
question. This analysis might reveal that, even though the dominant purpose of the
statute as a whole is regulatory, the dominant purpose of the impugned provision is not
part of that regulatory scheme but is instead the imposition of a tax. With this in mind,
I turn to the NW Gambling Act.
Does the NW Gambling Act provide for a regulatory scheme?
[53] The NW Gambling Act’s long title says that it is enacted “to provide for the
regulation of gambling activities in the Province”. Chapter II makes provision for the
establishment of the Board, with its powers and functions mainly aimed at regulating
gambling in the Province. Chapter III deals with licensing in general, and Chapter IV
regulates hearings, investigations and enquiries relating to gambling. Chapter V sets
out miscellaneous provisions pertaining to licensing in general, including the power of
43 Greenhouse Gas Id at para 213.
44 Westbank above n 42 at para 43.
45 Id at para 44.
46 Greenhouse Gas above n 42 at para 218.
MAKGOKA AJ
24
the Board to suspend and revoke licences of licensees that have overdue levies.
Chapter XI makes provision for the appointment of inspectors, as well as setting out
their powers and functions.
[54] These are strong indicators that the dominant purpose of the NW Gambling A ct
as a whole is regulatory. It authorises the Board to regulate gambling in the Province.
I therefore conclude that the primary or dominant purpose of the NW Gambling Act is
regulatory in nature.
Is there a sufficient nexus between the gambling levies and the regulatory scheme
of the NW Gambling Act?
[55] In Westbank, it was said that the required nexus with the scheme will exist
“where the charges themselves have a regulatory purpose”. 47 I consider six aspects in
respect of the gambling levies.
[56] First, the preamble of the NW Gambling Act says that “gambling provides a
significant source of public revenue for the Province” and that “the levying of such
taxes has to be dealt with in terms of the Provincial Legislation” . This clearly shows
that the purpose of imposing the gambling levies is more than the regulation of
gambling by funding the Board.
[57] Second, section 21 provides that the Board is funded by monies transferred from
the Department headed by the MEC for Tourism. Thus, the Board is not directly funded
by gambling levies. The Department therefore has a discretion to decide upon the
amount of funds to allocate to the Board from time to time.
[58] Third, section 87(1)(f) provides that levies “shall be paid to the Board for the
benefit of the Provincial Reve nue Fund”, while section 87(2) provides that gambling
levies “shall be a debt due to the Provincial Administration”. It is worth reiterating here
47 Westbank above n 42 at para 44.
MAKGOKA AJ
25
that section 226(1) of the Constitution establishes a Provincial Revenue Fund for each
Province into which al l revenues raised or received by the provincial government in
question must be paid.
[59] Fourth, section 89(1) describes the gambling levies as a tax, by empowering the
MEC for Tourism to enter into agreements with the provincial government to regulate
and coordinate the levying and collection of “gambling levy or any similar tax”.
[60] Fifth, the gambling levies are imposed upon the casino licence holders and are
paid into a general revenue fund – the Provincial Revenue Fund – for general purposes
of benefitting the population in the Province as a whole.48 The revenue generated from
the gambling levies is clearly meant to support the provincial government’s activities
in general.
[61] Sixth, there is no dispute that the gambling levies generate significant revenue
for the Province. The levies received by the Board from licensees, and paid across to
the Provincial Revenue Fund, far exceed the grants received by the Board from the
Provincial Government, and a sizeable portion of the revenue generated by means of
gambling levies and taxes is thus used for purposes other than funding the operations
of the Board. To illustrate the point, in the 2016 and 2017 financial years, the amount
collected by the Board and paid over to the Provincial Revenue Fund exceeded the
amounts paid by the Department to the Board by more than R70 million and R40 million
respectively.
[62] In my judgment, the above serve as ample evidence that the dominant purpose
of the impugned provisions of the NW Gambling Act – sections 84(1)(d), 87(1)(a) and
87(3) – and of regulation 73(1) has nothing to do with regulating gambling in the
Province. It is well -established that influencing behaviour is a valid purpose for a
regulatory charge. The gambling levies imposed by regulation 73(1) are not aimed at,
48 Section 87(1)(f) of the NW Gambling Act.
MAKGOKA AJ
26
or co nnected to, influencing or altering any behaviour . Rather, they are
revenue- generating charges, whose purpose is to raise funds for the Province. This is
not connected to the regulatory scheme of the NW Gambling Act, and thus, the
gambling levies cannot be characterised as regulatory in nature. Despite the dominant
purpose of the statute being regulatory, the impugned provisions stand out with strong
characteristics of a tax. According to Christians et al:49
“Existing Canadian jurisprudence does not indicate whether there is a restriction on
surplus net revenues when the role of a fee is to advance a regulatory purpose . . . .
However, significant revenue could be ‘a strong indication that the levy was in pith and
substance a tax’. In that case, a co urt would likely consider whether the fee was in
substance a colourable device for raising revenue for general purposes.” 50
(Footnotes omitted.)
[63] In the present case, there is indubitably significant revenue to the Province
generated by the gambling levies imposed by regulation 73(1). It is common cause on
the papers that the gambling levies are raised as general revenue for the Province’s
general service delivery obligations. For example, the Board’s Annual Report for the
year 2016/2017 shows that the taxes and levies collected by the Board for the 2016 and
2017 financial years totalled R120 784 869 and R138 619 580, respectively. The report
also shows that similar amounts, i.e. R119 799 149 and R139 001 688, respectively,
were transferred from the Board to the Provincial Revenue Fund for those financial
years. This is also evident in the Board’s Annual Reports for the 2014/2015; 2015/2016
and 2018/2019 financial years.
[64] For these reasons, I conclude that there is no sufficient nexus between (a) the
gambling levies authorised by the impugned provisions of the NW Gambling Act and
imposed by regulation 73(1) on the one hand and (b) the regulatory scheme of the
49 Christians, Hewson and Jarda “The Pan-Canadian Carbon Tax: A Constitutional Perspective ” in Salassa Boix
Aspectos Constitucionales Controvertidos De La Tributación Ambiental / Controversial Constitutional Aspects
of Environmental Taxation (2018), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3099588.
50 Id at 26.
MAKGOKA AJ
27
NW Gambling Act on the other hand. It follows that the gambling levies are
constitutionally invalid.
[65] The order of the High Court declaring the empowering provisions
unconstitutional and invalid must therefore be confirmed. Having reached this
conclusion, it is not necessary to consider the review challenge, or whether the
empowering provisions const itute an impermissible delegation of plenary powers, as
found by the High Court.
Remedy
[66] What remains is to consider the remedy, in parti cular, whether Peermont and
Sun International are entitled to the repayment of the gambling levies unlawfully
imposed and paid pursuant to the impugned amendment. It is common cause that the
second and third applicants paid the gambling levies under protest. Once the declaration
of unconstitutionality and invalidity of the empowering provisions is confirmed, the
impugned amendment must be deemed as if it was never promulgated. It must be set
aside as a natural consequence. Peermont and Sun International thus paid more in
respect of the gambling levies than was legally required.
[67] Accordingly, they claim repayment of the difference between the levies paid
pursuant to the impugned amendment and the levies that would have been paid had the
impugned amendment not been promulgated. Their claim is based on the condictio
indebiti (an action in terms of which a plaintiff may reco ver what she or he has paid a
defendant by mistake). In First National Industrial Bank, 51 the Appellate Division
recognised that the condictio indebiti is not confined to the recovery of monies paid
involuntarily because of a mistake, but that it is “also available when the payment (or
indeed any performance), although deliberate, perhaps even advised, was nevertheless
51 Commissioner for Inland Revenue v First National Industrial Bank Ltd [1990] ZASCA 49; 1990 (3) SA 641
(A).
MAKGOKA AJ
28
involuntary because it was effected under pressure and protest”. 52 In the present case,
it is common cause that Peermont and Sun Internation al paid the unlawful gambling
levies expressly under protest, and only because of the severe consequences attached to
non-payment of the levies, including the revocation of a license.53
[68] In addition to the condictio indebiti as a basis for repayment, Peermo nt and
Sun International also invoke the power of this Court to order a just and equitable
remedy under section 172(1)(b) of the Constitution. They are correct. Just and
equitable relief should generally be aimed at correcting or reversing the consequenc es
of unconstitutional action. In Allpay (No 2),54 this Court articulated what it referred to
as the “corrective principle” as follows:
“Logic, general legal principle, the Constitution, and the binding authority of this Court
all point to a default position that requires the consequences of invalidity to be corrected
or reversed.”55
[69] Applying that principle to the present case, the consequences of invalidity can
only be corrected if the gambling levies paid pursuant to the unlawful amended
regulation 73(1) are repaid to Peermont and Sun International. Repayment is a just and
equitable order under section 172(1)(b) of the Constitution. However, in the context of
this case, not all the taxes and levies im posed and paid in terms of the R egulations are
repayable. The reason is that Peermont and Sun International did not seek to impugn
the taxes and levies imposed in terms of the empowering provision other than those
imposed pursuant to the January 2020 amendment. Accordingly, it is only with effect
from that date that gambling levies paid by them should be reckoned. In other words,
52 Id at 647C-D.
53 Section 88 provides for penalties and interest for the failure to pay gambling levies or fees when due. It makes
any licence holder who fails to pay levies or fees as prescribed liable for a penalty of 1% per day up to a maximum
of 100%, plus interest at the prescribed rate. It also empowers the Board to revoke or suspend the licence of any
licensee whose unpaid levies or fees have been overdue for a period of 45 d ays.
54 Allpay (No 2) Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer o f the South African
Social Security Agency (No 2) [2014] ZACC 12; 2014 (4) SA 179 (CC); 2014 (6) BCLR 641 (CC).
55 Id at para 30.
MAKGOKA AJ
29
the declaration of invalidity does not affect the regulations as they existed before the
promulgation of the impugned amendment.
Costs
[70] The applicants have succeeded in having the High Court’s order of invalidity
confirmed. It is the norm to award costs in favour of a successful applicant for
confirmation.56 There is no reason in these proceedings why the respondents should
not be ordered to pay the applicants’ costs.
Order
[71] In the result, the following order is made:
1. The declaration of constitutional invalidity made by the High Court of
South Africa, North West Division, Mahikeng, is confirmed in the terms
set out in paragraph 2 of this order.
2. Sections 84(1)(e), 87(1)(a), and 87(3) of the North West Gambling Act 2
of 2001 are declared invalid to the extent that they purport to authorise
the Member of the Executive Council for Econo mic Development,
Environment, Conservation and Tourism, to impose gambling levies as a
tax as contemplated in section 228(1)(a) of the Constitution.
3. The declaration of invalidity takes effect from 23 January 2020.
4. The first and second respondents, jointly and severally, are ordered to pay
the second and third applicants the difference between:
(a) the gambling levies that the second and third applicants have paid
pursuant to regulation 73(1) of the North West Gambling
Regulations 2002 , from 23 January 2020 to t he date of this
judgment; and
56 Gaertner above n 30 at para 87.
MAKGOKA AJ
30
(b) the gambling levies that would have been payable during the
period mentioned above, had regulation 73(1) not been amended.
5. The first and second respondents, jointly and severally, are ordered to pay
interest on the amounts referred to in paragraph 4 above, as follows:
(a) in respect of the gambling levies already paid by the second and
third applicants by the date on which the application in the
High Court was served, such interest to be at the prescribed rate
from the date of service of the applica tion on the respondents to
the date of payment;
(b) in respect of the gambling levies not yet paid by the second and
third applicants by the date on which the application in the
High Court was served, such interest to be paid at the prescribed
rate from the date of each payment by the applicants.
6. The first, second and third respondents, jointly and severally, are ordered
to pay the first, second, and third applicants’ costs, including the costs of
two counsel.
For the Applicants:
For the First to Third Respondents:
F Snyckers SC and M Mbikiwa
instructed by Webber Wentzel
Attorneys
L Montsho-Moloisane SC, K T Bokaba
and Z Mahamba instructed by State
Attorney