South African billionaire nailed by SARS

The South African Revenue Service (SARS) is targeting wealthy South Africans, with billionaire Christo Wiese being dealt a massive blow in court.

Wiese and three other defendants have lost a legal fight at the Supreme Court of Appeal, and the taxman could potentially receive R216 million after additional litigation.

Wiese is one of South Africa’s six billionaires, with a net worth of $1.4 billion (R25 billion). His wealth is mainly tied to a significant shareholding in Shoprite.

SARS previously approached the High Court for an order declaring four defendants are jointly and severally liable to pay SARS R216 million by section 183 of the Tax Administration Act, No. 28 of 2011 (TAA):

“Liability of person assisting in dissipation of assets.—If a person knowingly assists in dissipating a taxpayer’s assets in order to obstruct the collection of a tax debt of the taxpayer, the person is jointly and severally liable with the taxpayer for the tax debt to the extent that the person’s assistance reduces the assets available to pay the taxpayer’s tax debt.”

The court order was sought by SARS on the basis that the defendants knowingly assisted a taxpayer, Energy Africa (Pty) Ltd, in dissipating its sole asset (a loan claim) on 19 April 2013 to its holding company.

According to Tax Consulting SA, the dissipation of the sole asset on 19 April 2013 occurred after the taxpayer and its tax advisors were informed by SARS on 16 November 2012 that it would be issuing assessments for the 2007 tax period to recover taxes that were not paid.

“On 21 August 2013, SARS issued the promised additional assessments to include the tax debt, which consists of capital gains tax totalling R453,126,518 (CGT debt) and secondary tax on companies totalling R487,205,316 (STC) plus interest and penalties,” the group said.

However, the taxpayer told SARS that it had no funds to pay the tax debt.

In May 2014, SARS was told there would be no further dispute by way of appeal, meaning the assessment was accepted as correct. In April 2016, the taxpayer was liquidated and no longer existed.

The High Court ruled that for purposes of section 183 of the TAA, the phrase “tax debt” means the amount of tax due or payable.

Although the defendants argued that a “tax debt” is only due when SARS issues an assessment setting out the amount of tax due, the court said that the CGT and STC debts should have been paid during the 2007 tax period, meaning that a tax debt already existed.

Moreover, the SCA said that an assessment does not establish a tax liability as the tax liability exists by operation of law, regardless of whether or not it has been assessed by way of an assessment.

“Further, the purpose of section 183 is to impose liability on a third party who deliberately obstructs SARS from collecting a tax debt,” said Tax Consulting SA.

“As this judgment only sheds light on the meaning of ‘tax debt’, a court must still rule on whether the defendants knowingly and deliberately assisted the taxpayer in the dissipation of assets to obstruct the collection of a tax debt.”

“If this is the case, section 183 will apply, and the defendants will jointly pay the tax debt to SARS.”

High Wealth Individuals (HWIs) in the firing line

The tax case with Wiese comes amid a heightened push from SARS to target wealthy individuals.

SARS has created a specific HWI unit to better deal with rich South Africans, which the service has characterised as having complex tax affairs.

HWIs can often accrue wealth through complex, multi-layered investment structures, both locally and offshore.

Although this can result in intricate regulations and calculations to ensure regular compliance for wealthy taxpayers, SARS is counteracting this by using advanced technology to streamline audits and bolster efficiency.

This includes making “relevant material” requests on provisional tax filings previously associated with audits or verifications.

The HWI Unit takes it one step further, requesting detailed computations for returns submitted and income and deduction forecasts for the next six months.

SARS is thus using technology to boost its activities and cast the net as wide as possible, with a focus on future taxes.

In the 2023/24 financial year, the taxman successfully collected an additional R12.5 billion in taxes from the HWI group.

Read: Tax season is officially open – how to file a tax return, and what’s changed for 2024