Like all strategic movers, SARS has been biding its time in addressing corruption amidst South African SOEs, taking a few direct, or indirect shots here and there, and like a Grand Master, the Commissioner has made clear his end goal – the complete eradication of non-compliance.
Jashwin Baijoo
Partner and Head of Strategic Engagement and Compliance
Admitted Attorney, LLB, LLM (Tax)
This strong statement is borne credence in a recent legal showdown, in the Gauteng Local Division of the High Court. SARS’ intent can no longer be questioned with the surfacing of a high-profile tax dispute, embroiled with historic non-compliance, failed Compromise of Tax Debt requests, and at the heart of it all, blatant disregard for the law by both Eskom and Impulse International (Pty) Ltd.
The case cited as Pather v The Commissioner for the South African Revenue Service (52782/21) ZAGPJHC 87 (6 February 2024), sheds light on intricate financial webs interwoven by the ongoing scandals plaguing South Africa’s state-owned power utility, Eskom, and raises key questions about accountability and procedural fairness.
This case hinged on a number of contentious points, well in Ms. Pather’s mind at least; the Plaintiff sought relief that SARS be stopped in its tracks from imposing personal liability on here, to the tune of R21 500 000,00! It was further requested that SARS’ 3rd Party Appointment Notice be declared unlawful, set aside, and attached funds be repaid, with interest.
The average taxpayer like Ms Pather, would think alike, however, the law is clear that specific relief is envisaged as available to only the taxpayer in question, which Ms Pather was not. Instead, Ms Pather was merely a means to an end – the collection of tax debts due by Impulse, to SARS, in the grand total of over R300 million. When viewed against this backdrop, the funds received by Ms Pather, from her late husband / ex-husband, which she never questioned, are only a drop in the ocean.
Even though the Plaintiff questioned the legality of SARS’ actions, highlighting procedural irregularities and non-compliance with tax laws, SARS refuted these claims, emphasizing its constitutional duty to collect taxes owed to the state and alleging deliberate attempts to conceal assets by the main taxpayer, Impulse (and potentially related parties).
SARS further alleged that Ms. Pather knowingly assisted Impulse in dissipating assets to avoid tax obligations, citing her failure to disclose payments received and her relationship with Impulse during the relevant period, noting Impulse’s discreet relationship with Eskom top-brass along the way.
The case unravels a complex financial narrative intertwined within the broader Eskom saga. Allegations have surfaced regarding the role of advisors facilitating suspicious financial schemes, including the dissipation of assets to evade tax obligations on behalf of Eskom contractors. Taking it to Stage 12 load shedding is the then undisclosed relationships between Mr Koko (Interim Eskom CEO at the time), and Ms Choma, his step-daughter and shareholder in Impulse, the business in which Koko assisted in facilitating successful Eskom tender procurement.
The relations do not stop there, as after this familial interest came to light, Choma, being a Director and Shareholder in Impulse during the 2016 and 2017 years, resigned as such, and transferred her shareholding into Mokoni Trust. Nothing odd about that, unless of course Choma was the sole shareholder and beneficiary of the Trust!
Such revelations cast a shadow on the integrity, or lack thereof, of financial practices within Eskom and raise concerns about the accountability of those involved and corruption within the SOE.
Time waits for no man, not even Eskom. Non-compliance does not discriminate – no person, company, or entity is exempt. Eskom is soon to become acquainted with the commercial sin bin. The wheels, although turning slowly, have not stopped for a moment.
In its ruling, the court dismisses Ms. Pather’s challenge to the tax debt’s existence, affirming SARS’ authority to recover taxes owed. The decision underscores the importance of taxpayers fulfilling their obligations and cooperating with tax authorities. However, questions linger regarding the role of advisors and the transparency of financial dealings within Eskom.
Noteworthy, as stated by the Honourable Acting Judge, “the average South African citizen has long ago accepted that this is just another failed state-owned entity mired in a spiral of corruption and a lack of service delivery.”
It is easy to fall into the misconception that SARS only goes after the low hanging fruit. However, the above clearly shows that SARS is not afraid to go for the big fish too.
As South Africa grapples with the fallout from Eskom’s scandals, this tax dispute involving Ms. Pather and SARS serves as the Commissioner’s strong statement on the need for accountability and transparency in financial governance.
Where you find yourself on the wrong side of SARS, there is a first-mover advantage in seeking the appropriate tax advisory, and legal muscle, ensuring the necessary steps are taken to protect your interests. However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed.
As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a strong multi-faceted tax, legal, and financial team. This will not only serve to safeguard you against SARS implementing collection measures but also being specialists in their own right, unlike Impulse, and Ms Pather, you will be correctly advised on the most appropriate solution to ensure your tax compliance.
SARS Commissioner vs Tax Practitioners: “Do your due diligence”.