Atul Gupta. Picture: SUNDAY TIMES
Atul Gupta. Picture: SUNDAY TIMES

Evidence in the leaked Gupta e-mails points to a complex multibillion-rand tax avoidance scheme with family patriarch Atul Gupta at its centre.

Various tax experts said on Thursday that the transactions in the leaked e-mails pointed to evidence of a complex practice known as staggering or revolving loans. The Guptas appear to have used personal and inter-company loans to and from their group companies, many of which are located offshore.

The practice involves shifting finances and expenses from one company to another prior to the end of a business’s financial year. The loans are then reflected as assets and not as income, which is taxable. The Guptas failed to respond to questions on the allegations this week and the South African Revenue Service (SARS) failed to answer questions in detail.

An e-mail from Gupta lieutenant Ashu Chawla to Atul Gupta, dated December 18 2012, contains a spreadsheet with information on loans totalling more than R1.6bn to and from the family’s Sahara Computers.

Of this, Atul Gupta, who is a South African tax and exchange control resident and was a director of Sahara Computers, received personal loans totalling more than R144m.

The company’s financial records show he had only paid back R13m. Company loans to shareholders are partially taxable when interest-free.

Cash-flow analysis of Sahara Computers’ business accounts gives further insight into their finances and the alleged staggered loans.

The data show how between December 2012 and September 2015 Atul Gupta continued to owe the company about R140m, without allegedly repaying any of the money.

Based on these figures, without taking into consideration nonpayment penalties, Sahara Computers or Atul Gupta would owe SARS millions of rand in taxes for this loan. With penalties and interest for nonpayment, the bill would be substantially higher.

Sahara Computers’ bank statements from February 2013 to September 2015 also show how multiple loans were made between the family’s various other companies.

Business Day is in possession of bank statements covering 356 days, which account for nearly 40% of the company’s transactions for that period. The statements show that Sahara Computers had turnover of R1.8bn for this period.

Sources with knowledge of SARS’s auditing processes, but who are not authorised to speak to the media, said the fact that Atul Gupta continued to owe Sahara money made him an "ideal candidate" for a tax audit, particularly around his loans.

The Guptas were the subject of a SARS investigation in November 2013, which the family was eventually tipped off about, the e-mails showed. It is unknown whether the investigation was completed, but the family’s Oakbay company received a controversial R70m tax refund in June following SARS commissioner Tom Moyane’s intervention, City Press newspaper reported.

Werksmans Attorneys tax lawyer Ryan Killoran said Atul Gupta could only have received his loan tax-free if Sahara had paid dividends taxes on the loan. He said lifestyle audits by tax authorities of wealthy families such as the Guptas would typically address whether the taxable income supported their assets and their lifestyles. "The issue of delayed VAT [value-added tax] refunds generally is so serious the tax ombudsman is investigating. To receive the R70m refund in such a relatively short time meant they must
be a taxpayer in high standing with SARS.

"They must have a perfect tax-compliance record and senior connections to pressure the audit team to finalise the audit," Killoran said.

He said that based on what had been publicly reported about the refund it appeared Moyane might be favouring some taxpayers over others.

SARS spokesman Sandile Memela refused to answer questions put to him on the Guptas’ tax affairs.

These included whether the audit on the family and its companies had been completed, whether Atul Gupta had paid taxes in respect of his loan, if the Guptas would be taxed for gifting accommodation and air tickets to state officials as nonbusiness expenses and whether the SARS officials who had alerted the Gupta family to the 2013 investigation into them had been discovered and disciplined.

In December 2016, the Sunday Times rich list showed that Atul Gupta was worth R10.7bn, making him the seventh-richest South African.

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