High-flyers accused of tax evasion, such as billionaire Christo Wiese, can use legal avenues to drag the process out for years.
Wiese is the latest high net-worth individual involved in a tax spat with the South African Revenue Service (Sars), allegedly for an amount of R2-billion. This would put him in the same league as South Africa's biggest alleged tax evader, Dave King, who has been embroiled in a legal spat over a R2.8-billion tax bill for more than 10 years.
Sars has not denied the allegations against Wiese, but has repeatedly told the media it is unable to disclose information pertaining to any individual's tax affairs.
Wiese told the Mail & Guardian he was not prepared to discuss the matter, because he had said everything he wanted to say and could not be expected to respond to allegations by unnamed sources (in reports published by the Sunday Times and City Press last weekend).
The allegations have surfaced a few months after the tax collection entity launched its inaugural compliance programme, which plans to focus attention on areas that pose a signicantly higher risk of noncompliance.
A dispute between Wiese and Sars would probably deal with large business and transfer pricing, as identified in the Sars compliance plan that was made public in April.
Last weekend's media reports claimed that Wiese's company, Titan, was already fighting a R1-billion tax bill in the tax court and he was recently found liable for a further R1-billion. The investigation was prompted when Wiese was found with £600 000 (R7-million) in cash when stopped at London City Airport.
Wiese has an estimated net worth of $3.1-billion (more than R25-billion), according to Forbes magazine, and would be able to settle the outstanding amount if he wanted to.
But he told the M&G: "I still live in a world where you don't owe someone money just because they allege that you owe it. That's why there are procedures in place."
To go up against Sars is a risky business. Since April last year, it has successfully prosecuted more than 230 taxpayers for a range of tax-related offences, bribery and fraud, resulting in a total of 370 years of jail sentences and nearly R5-million in nes. A further 1 500 tax-related cases are awaiting action by the National Prosecuting Authority.
According to its annual report, Sars nalised 136 revenue and customs litigation cases during the year ended March 2011 and achieved a success rate of 65%. Of 105 revenue-appeal cases in the tax court, 10 were won, eight lost, 13 conceded, 54 settled in favour of Sars, one settled against it and 19 withdrawn.
Wiese would be able to drag a dispute on for some time. "If people have resources, as in the case of King, the various legal processes can take 10 years," said Sars spokesperson Adrian Lackay.
Right to object
Sars's tax dispute and resolution guide identifies numerous legal avenues to be used in a dispute with the tax collector. Following an assessment, the taxpayer has a right to object. An objection panel, an internal mechanism comprising legal and policy experts from Sars, then assesses the audit again. If dissatisfied, the taxpayer can appeal against the panel's decision.
Alternative procedures also allow for the resolution of tax disputes outside the litigation arena. It is intended to be less formal and expensive, as well as faster.
If alternative dispute resolution is not pursued or is unsuccessful, the taxpayer can appeal to the tax court. The court will hear all cases in which the tax involved exceeds R200 000 or important tax principles are involved, otherwise the tax board deals with it.
The tax court sits for specific periods during the year and the proceedings may not be made public. Thereafter, people can appeal in the high court and even the appeal court, at which stage it becomes a matter in the public domain.
Wiese told the M&G this was of no concern to him: "Then it is dealt with in a forum where people have to state their case – not these innuendos."
But Sars's preference is to collect tax owed to the state and so civil litigation is usually its preference.
"Our interest is to recover outstanding tax rather than to put people in jail," Lackay said.