In 1931 the notorious United States gangster Al Capone was sent to prison for 11 years after he was found guilty of tax evasion.
He was released after he spent seven years, six months and 15 days in the infamous prison on Alcatraz Island in San Francisco Bay and had paid all of his fines and back taxes.
Although Capone was allegedly behind criminal activities such as the St Valentine’s Day Massacre, where seven members or associates of the rival Bugs Moran mob were machine-gunned against a garage wall by Capone’s men posing as police, he was ultimately nailed not for murder but for unpaid taxes.
With South African prosecutors reeling under the weight of the state capture massacre of our fiscus, could the simple prosecution for the nonpayment of taxes be the quickest way of putting the perpetrators into orange overalls?
It was reported at the weekend that the South African Revenue Service (Sars) is investigating ANC big brass named in evidence to the Zondo commission by Bosasa insiders, such as Angelo Agrizzi.
The Sunday Times said a crack Sars team is investigating unpaid taxes of R250-million.
Among those named in the Zondo testimony are Environmental Affairs Minister Nomvula Mokonyane, ANC MP Vincent Smith, former SAA chairperson and current Jacob Zuma Foundation chairperson Dudu Myeni and former prisons boss Linda Mti.
The move gets the approval of Corruption Watch’s David Lewis: “Tax evasion is a principal way of finding out what money has been stolen — and sending the perpetrators to prison. It was made famous through the prosecution of Al Capone, who was guilty of many murders, but it was the surest and quickest way to get him off the streets,” said Lewis.
The Sunday Times said that the tax authority had “concluded preliminary investigations that are likely to result in individuals not only being served with hefty bills, but also charged for under-declaration of income, overstated expenses and misrepresentation to Sars”. It said 83 taxpayers were being probed.
Paul Hoffman, director of Accountability Now, an organisation devoted to ensuring that the law is upheld, said prosecutions for unpaid taxes could put numerous public officials behind bars.
“It is a healthy development that those who evade tax, by simply failing to declare their bribe or gift receipts — for example, [minerals minister] Gwede Mantashe’s security system, a loan for the education of Vincent Smith’s daughter, a R100 000 ‘gift’ a month for [former deputy national director of public prosecutions] Nomgcobo Jiba … all of that sort of thing can quite easily be proved if the evidence emerging at the Zondo commission is found to be credible,” said Hoffman.
“He [Capone] was eventually sent to jail for tax evasion because it was possible to nail him for unpaid taxes, whereas in his other criminal activities he managed to either cover up, kill witnesses, buy prosecutors or enjoy political protection.”
But those expecting that the officials who have both betrayed our trust and robbed us blind will be put away forever may be disappointed. Section 235 of the Tax Administration Act provides for sentences ranging from fines or imprisonment of up to five years.
Other sections of the Act, such as 172, allows for the confiscation of ill-gotten gains. This happened recently when Sars obtained a high court warrant of execution and raided cigarette manufacturer Adriano Mazzotti’s house and a warehouse in Johannesburg. The tax authority was aiming to recover R33-million of R71-million in unpaid taxes.
Hoffman said a jail sentence has other benefits: “It’s quite simple to get somebody out of circulation in politics in South Africa. They only have to have a one-year sentence without the option of a fine — which will be a light sentence for tax evasion — and they are disqualified from politics until five years after they have served their sentence, which is more than enough time for the country to recover from the ravages of state capture and grand corruption.”
Keith Engel, chief executive of the South African Institute of Tax Professionals, said: “The main issue is fraud and misappropriation of public funds. That said, the core criminal aspects of the case require proof of bad intent.”
But tax law is much simpler, he says. If a person receives or accrues funds for services allegedly rendered, tax applies and income is income — illegal or otherwise. So, all Sars needs to do is to watch the money flows to see who received what.
“As a matter of tax morality, a Sars campaign against corrupt tenderpreneurs should hit the sweet spot,” said Engel.
Asked by the Mail & Guardian to comment, Sars said it was “not in a position to divulge specific information and details on the affairs of taxpayers”.
University of the Witwatersrand lecturer and economist, Lumkile Mondi, says the strategy needs Sars to be sharp and well organised in order for it to work.
“Like in the movie The Untouchables the state, led by Eliot Ness, put Al Capone down. Sars is pursuing a similar strategy. If it’s sharp, effective and efficient, there will be no place to hide for the politicians unless they did not earn the income,” he said.
As for Capone, after his release in 1939 he did not return to Chicago. His mental state had deteriorated because he suffered from paresis, a mental-function disorder, caused by brain damage from untreated syphilis.
In 1946 his physician and psychiatrist concluded he had the mentality of a 12-year-old child. Capone died aged 48 of a stroke and pneumonia on January 25 1947 at Palm Island, in Miami, Florida, where he was living with his immediate family.
Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian