SA tax authority flexes muscle in high-profile battles

The South African Revenue Services (SARS) is taking on Switzerland-based Adidas International Trading and its SA unit for allegedly under paying taxes for eight years, until 2013. The matter, disputed by Adidas, is to be resolved by SA courts. A Business Day report, which touches on the resurrection of SARS after it was hollowed out in the state capture years under former President Jacob Zuma, notes the tax agency is also in a battle with Pepkor CEO Pieter Erasmus, from whom it is demanding more than $16m. The tax authority says Erasmus, who returned as Pepkor’s CEO in 2023 after five years, was party to an alleged ‘impermissible tax avoidance arrangement’ in terms of the Income Tax Act. The case involves an entity, Treemo, in which Erasmus and his family trust owned shares and which paid him $748m in a capital distribution and a cash distribution in 2015. SARS argued that the cash distributions from Treemo constituted dividend payments to Erasmus and his family trust, which were therefore subject to dividend tax. SARS furnished him with an assessment of $9.7m in dividends tax, an under-statement penalty of $7.3m, plus interest.

The agency has also not shied away from taking on politically connected entities and people, notes Business Day. United Manganese of Kalahari, a company owned partly by US-sanctioned Russian mogul Viktor Vekselberg and the ANC’s funding front, Chancellor House, is also at loggerheads with SARS over a tax bill of more than $18.7m. The company paid $1.6m into the ANC’s coffers in the past two years, including $802 000 towards its December elective national conference, according to declarations made to the Electoral Commission in line with the requirements of the Political Party Funding Act. The agency has also circled controversial business person Roux Shabangu who lived a lavish lifestyle.