SARS sends a warning to taxpayers looking to use loopholes and ‘schemes’ to dodge taxes

 ·26 Jul 2023

The South African Revenue Service (SARS) says that it will resist any and all plans and elaborate schemes by crafty taxpayers to avoid paying their dues.

The group celebrated a significant victory this week when the Supreme Court of Appeal shot down two appeals against the taxman to collect money owed.

The SCA dismissed, with costs, two appeals against orders of the Gauteng and KwaZulu Natal divisions of the High Court, where a company tried to avoid paying taxes on the basis of winding down and business rescue proceedings.

SARS said that the issue before the courts was whether the move by the company’s trustees to launch the business rescue application was an abuse of court processes or not.

The court held that that application should not have been considered because of its use in a scheme of abuse, SARS said, adding that the court deemed the business rescue application as a stratagem, or deceptive scheme.

“Consequently, the business rescue application could not suspend the liquidation application because the former was tainted by abuse,” SARS said.

The trust involved with the scheme failed to make a case that the company involved could be rescued through the process.

“All its assets had been sold-off, and it had lost its substratum. The SCA further held that the liquidation order granted by the Pretoria High Court was unassailable. For these reasons, both appeals were dismissed with costs,” the revenue service said.

SARS said that business rescue is an effective mechanism to avoid the collapse of a viable trading company and is an important process in maintaining a healthy economy. In challenging economic times, business rescue becomes even more relevant, it said.

However, SARS commissioner Edward Kieswetter said it was unfortunate that “some taxpayers abuse the business rescue proceedings, to the detriment of creditors”.

“In most instances, the fiscus is the main victim. SARS will continue to act firmly and decisively when business rescue proceedings are abused to the detriment of the fiscus. We will, without any equivocation, oppose such abusive applications,” he said.

The revenue service also warned others that may be considering similar practices that it “will not stand idle when taxpayers abuse the mechanisms of the Companies Act by acting malignantly to deprive SARS what is due and payable to the fiscus”.

“Any elaborate and carefully calibrated plans to withhold taxes will be resisted emphatically,” it said.

“SARS will always work in the manner that supports the growth of the economy with concomitant job creation. Where, for whatever reason businesses do not perform optimally and they are unviable, every role player in the process is duty bound to act professionally and without fear, favour or prejudice against any creditors.”

Read: Big changes to SARS payments – what you need to know

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