MP Finance Group CC (in liquidation) v Commissioner for the South African Revenue Service

Marietjie Prinsloo operated an illegal and fraudulent pyramid investment scheme from about 1998, using a number of entities to solicit deposits from the public by promising unsustainable returns. The scheme was knowingly insolvent and fraudulent during the relevant tax years (2000–2002). By High Court order in 2003, the various entities were consolidated for liquidation purposes into MP Finance Group CC (in liquidation). The Commissioner for the South African Revenue Service assessed the CC for income tax on the amounts received from investors, treating those deposits as part of its gross income. The liquidators objected, arguing that the deposits were not ‘received’ for purposes of the Income Tax Act because they were obtained illegally and were immediately repayable to investors.

The appeal was dismissed with costs, including the costs of two counsel. The tax assessments raised by the Commissioner were upheld.

The case confirms that proceeds of illegal activities, including fraudulent pyramid schemes, may constitute taxable income in South African law. It clarifies that the concept of ‘receipt’ in the Income Tax Act focuses on factual control and intention to appropriate, not on legal entitlement as against third parties. The judgment reinforces the principle that illegality does not shield a taxpayer from tax liability.