Braai packs and bribes while companies owed SARS R500m in taxes

The information regarding Bosasa’s tax burden has come to light in an affidavit filed by SARS in the late afternoon of 4 December 2019 in the South Gauteng High Court. The revenue service has asked to be joined as a respondent in Bosasa’s urgent application to enter into business rescue.

Bosasa had attempted to derail the auction on 3 and 4 December of its remaining assets worth millions, by applying for five of its companies – African Global Operations Ltd, Bosasa Properties, Global Technology Systems, Bosasa Youth Development Centres and Black Rox Security Intelligence Services to be placed under business rescue.

On 4 December, Sarita Lubbe, of SARS Specialist Investigations, launched an urgent application, on behalf of the commissioner, declaring that the application for business rescue by Bosasa was “defective as SARS clearly has a right to participate in proceedings”.

On learning that Bosasa sought to urgently apply for business rescue with the court on 4 December, SARS directed a letter to Bosasa attorneys advising that SARS is a major creditor, in excess of R500-million.

Over and above the five named companies, SARS was also a creditor of one other further Bosasa company under business rescue.

SARS was a creditor of the six business rescue companies “in the ordinary terms of the word” for about R500 million in assessed income tax, VAT, employees tax, unemployment insurance fund and skills development levy, Lubbe said.

Over and above this, SARS had been investigating the tax affairs of the Bosasa group of companies since testimony given to the Zondo Commission and which “revealed a large-scale scheme of fraud, money laundering, racketeering and tax evasion perpetrated by the Bosasa entities and related individuals.”

As a result of this evidence to the Zondo Commission SARS had launched an application, under section 50 of the Tax Act, for the “designation of a presiding officer before whom a tax inquiry may be held”. This was granted by the Gauteng High Court on 29 March 2019.

Lubbe noted that the first session of the tax inquiry took place between 3 and 4 June and that further sessions had been held.

During this tax inquiry it was confirmed, “in all material respects that the companies within the Bosasa group, including the six business rescue application companies, failed to comply with their obligations in terms of the tax Acts, committed offences as envisaged in terms of the tax Acts, or disposed of, removed or concealed assets which may fully or partly satisfy an outstanding tax debt.”

Lubbe said that Cornelius Jansen Lourence Passano, Bosasa’s CFO, testified on 5 June 2019 that:

“Over the relevant period the Bosasa group of companies claimed expenses for income tax with a capital value of R400-million to which the group was not entitled.

“I reiterate that this is the capital amount. If the tax on this is calculated at a tax rate of 28% this means that just based on this, the companies are indebted to SARS to the amount of R112-million.

“If understatement penalties of up to 200 percent penalties and interest are applied to this, it adds up to more than R400-million worth of tax due by the group of companies to SARS.”

SARS was also in the process of analysing the testimony of “the numerous witnesses” who testified before the tax inquiry and was in the process of “compiling letters of findings in this regard”.

SARS had reached a finding that Bosasa Supply Chain Management understated taxable income by R461 708 211.

“Taking into account 200 percent USP, interest and penalties, the tax due on this amount will therefore equate to more or less the same amount,” said Lubbe.

“Ultimately, SARS is a creditor of the companies subject to the business rescue application in excess of R500-million.

“I point out this in regard that not only the six rescue companies form the subject of the business rescue application, as part of the alternative relief in the business rescue application, the applicants moved for a consolidation also of the other companies in the Bosasa group of companies.”

Lubbe said it had been accepted at all stages that “SARS was a significant creditor of the Bosasa group of companies.”

On Thursday, SARS argued that it should have been joined to Bosasa’s urgent application for business rescue. It argued Bosasa had failed to make a case for the “reasonable prospect of rescuing the company”.

“The applicants spent pages and pages setting out the history of the company, but do not address the crucial issue whether or not the company can be rescued.

“It is denied that the Bosasa group of companies can ever be revitalised. Due to all the negative publicity it is submitted that the group, particularly in view of tax debts which are envisaged... their tax status will not be able to be shown as compliant and it is therefore doubtful that they will ever be able to obtain a tax clearance certificate for purposes of obtaining tenders.”

SARS said that the business rescue application constituted “an abuse of the process and is aimed to delay and frustrate the winding-up of the Bosasa group of companies to the detriment of the creditors”. DM