On 8 December 2020, the Pretoria High Court ordered that SARS refund Ferrari Logistics more than R1 million, including interest, it collected without cause from the company’s bank account in October and November 2020.

Jean-Louis Nel of Tax Consulting SA, says the case illustrates the importance of engaging an expert in tax law, court proceedings and SARS legal processes.

“While tax advisors are typically competent to service their clients’ general tax needs, both the taxpayer and the advisor should ensure their tax compliance regime includes a strong tax legal partner,” he says.

This guarantees similar unwarranted actions are met with the immediate legal response required and expected by the court when considering if the matter should be heard on an urgent basis.

The matter
Tax Consulting SA was approached by Legal Professional Accounting Consultants, the tax advisor to Ferrari Logistics (Pty) Ltd, to provide legal assistance to the large multinational organisation.

In October 2020, SARS appointed Ferrari Logistics’ bank, FNB, as a third-party agent to collect a substantial sum SARS deemed to be due from the company’s account. SARS has the right to make such appointments in terms of Section 179 of the Tax Administration Act. However, when applied improperly, it is imperative that the affected taxpayer understands their legal rights and responds proactively.

Ferrari Logistics had not received a letter of demand from SARS as prescribed by the Act and was in fact tax compliant with no outstanding tax debt due to SARS.

Tax Consulting SA promptly gave notice to SARS that if it did not refund the amount, the taxpayer would approach the High Court for relief.

Despite this, SARS collected further funds, nearly draining Ferrari Logistics’ bank account. This had a significant impact on the business’s cash flow and its ability to pay employee salaries.

The taxpayer had no alternative but to launch an urgent application against SARS in the Pretoria High Court to set aside the third-party appointment and to claim a refund of the full amount together with interest and costs. Ultimately, the court granted an order in favour of the taxpayer.

“Without specialised legal guidance, Ferrari Logistics could have waited over eight months for the case to be heard, and even longer under COVID-19 constraints,” says Nel. He commends Legal Professional Accounting Consultants for promptly seeking professional council for their client.

According to Nel, this was the fourth matter of its nature being heard by the Pretoria High Court alone this year.

Rapid response team
Taxpayers who delay taking decisive action risk undermining the merits of their own urgent application before the High Court.

Tax Consulting SA advises organisations and their tax advisors to work in a cooperative manner with SARS when dealing with regular tax affairs. However, when matters arise that infringe on the taxpayer’s rights, they should engage legal professionals without delay.

Nel says the best approach is to have a rapid response team on call that comprises the taxpayer’s internal tax function, the tax advisor and a solid legal partner.

“Don’t overlook the legal component,” he advises. “Immediate direction on the best and fastest route through complex tax laws, court proceedings and SARS legal processes is critical in ensuring a taxpayer recovers quickly from any similar tax crisis.”

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.

For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook:Tax Consulting South Africa

Authored by: Jean du Toit, Attorney and Head of Tax Technical at Tax Consulting South Africa 
 
The Pretoria High Court has granted SARS’ application to preserve more than R4bn in state capture loot. SARS’ victory in these urgent court proceedings reveals the importance of the taxman’s involvement in recovering proceeds of state capture and bringing the beneficiaries to book.
 
With little to show from the State Capture Inquiry thus far, SARS’ intervention reminds us how powerful tax legislation can be in dealing with complex crimes. Lest we forget, it was the taxman who tripped up some of the most notorious and organised criminals of the twentieth century.
 
State of the Inquiry
The cost of the State Capture Inquiry is currently hovering at around R800m. This is not the only judicial investigation funded by the public in recent times, but it is by far the most expensive and the end is not yet in sight. But, even with some damning testimony by several witnesses, South Africans have not yet seen any bang for their buck.
 
The truth is, we are light years away from seeing any convictions on criminal charges such as corruption, bribery or fraud. The state’s onerous burden of proof, the complexity of these crimes and the resources required to investigate them are but a few factors that mean that it can take the National Prosecuting Authority (NPA) years to build a robust case. Even then, a conviction is by no means guaranteed.
 
Tax law v criminal law
There is a reason why federal prosecutors turned to tax law to get a conviction against individuals such as Al Capone. Tax evasion is not a crime that concerns itself with the legality of the receipt, the purpose thereof, by whom it was paid or what it was used for. The taxman simply needs to establish if the loot was in fact disclosed and disclosed correctly.
 
For this reason, tax evasion is a far more attainable conviction because proving the elements of the crime is plain sailing when compared with for example corruption or fraud. This case is no different; SARS’ application to preserve the funds is based on the fact that the funds were incorrectly claimed as a tax-deductible expense.
 
The testimony at the State Capture Inquiry has provided the smoking gun and if SARS deploys some of its finest investigative auditors, it will make life very difficult for those who shared in the loot.   
 
SARS holds the key
The Tax Administration Act bestows upon SARS wide powers to act swiftly and decisively, as demonstrated in this case. If the proceeds of state capture are to be recovered through the criminal justice system, chances are we may never see those funds again.
 
SARS on the other hand has a powerful arsenal to collect the money if it determines that it was not taxed as it should have been.
 
The NPA should team up with SARS, follow the money and obtain early convictions for tax evasion. That is not to say that the NPA should not eventually pursue other, perhaps more serious, charges. In fact, this will give the NPA time to build an unassailable case on other charges in the meantime.
 
This strategy ensures for a slam-dunk upfront and it is quite possible that it may lead others to join the likes of Angelo Agrizzi to come forward, to strike a deal that may lead to the bigger fish ending up behind bars.
 
ENDS
 
MEDIA CONTACT: Rosa-Mari le Roux , 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za
 
ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.
 
For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook: Tax Consulting South Africa