South Africa’s Scorpions have arrested four people, three of whom work for cigarette producer Mastermind Tobacco SA, for allegedly being involved in a R48-million VAT fraud scheme in which cigarettes meant for export were instead sold in South Africa. Arrest warrants for other senior officials at Mastermind have also been issued, the South African Revenue Service (Sars) announced on Wednesday.
According to a Sars statement, Wednesday’s arrests arose from a complaint by Sars to the South African Police Service and subsequent collaboration with the Directorate for Special Operations (DSO). Products manufactured in South Africa destined for export are zero-rated for VAT purposes, meaning no VAT is payable to Sars. Those sold in the country do attract VAT, and the manufacturer is obliged to present Sars with documentary proof that the products are exported.
Mastermind Tobacco, based in East London, manufactures cigarette brands such as Yes and Forum. Sars said that, following a joint investigation by itself and the DSO, it had been established that documents presented by Mastermind to the customs office in East London since October 2003, supposedly proving that the cigarettes were exported, were actually false.
The company itself, together with the arrested employees, is accused of having allegedly defrauded Sars of at least R48-million. Whereas the criminal charges at this stage are limited to R48-million, Sars said it was investigating the possibility that Mastermind’s alleged false declarations were significantly larger.
Warrants for the arrest of other, more senior officials of the tobacco company had also been issued, Sars added.
Sars had also been informed by the Asset Forfeiture Unit that forfeiture proceedings against the company and individuals involved would be instituted shortly.
Sars noted that evading VAT and excise duties on the manufacture and import of cigarettes is a multi-billion rand scam affecting customs and revenue agencies worldwide.-I-Net Bridge