SCA judgment against Christo Wiese highlights Sars’ powers

The decision by the Supreme Court of Appeal (SCA) to throw out the appeal by Christo Wiese and his associates in their R217m tax dispute with the SA Revenue Service (Sars) has affirmed the powers of the tax agency to use evidence gathered behind closed doors to pursue taxpayers with complex tax planning structures.

The decision by the country’s second-highest court on Friday marked a second victory for Sars in its multiyear battle with Wiese and his associates Isak Visagie, Gert Viljoen and Frederick Hofmeyr in its pursuit of monies it says are due to the fiscus.

One of the issues that the SCA had to adjudicate was whether the transcript of evidence presented by Wiese and his associates at an inquiry held in terms of section 50 of the Tax Administration Act during 2015 and 2016 was admissible in the trial proceedings and, if so, for what purpose.

Section 50 inquiries are established by order of a judge of the high court on application by Sars. In the application, Sars must demonstrate that there are reasonable grounds to believe that relevant material is likely to be revealed during the course of the inquiry which may provide proof of the action, omission or offence alleged.

An inquiry can be established when there are reasonable grounds to believe that a person has failed to comply with an obligation under a tax act, committed a tax offence or disposed of, removed or concealed assets which may fully or partly satisfy an outstanding tax debt.

The SCA found that the tax agency was well within its rights to use evidence given by Wiese and his associates behind closed doors against them in pursuit of the tax claim against them.

“In this instance, reading in of the words ‘tax proceedings’ is not necessary to realise the legislative intention, nor to make the Tax Administration Act workable. On the contrary, if Sars is constrained to only use information obtained during an inquiry in subsequent proceedings under the Tax Administration Act, the purpose of an inquiry would be frustrated. Such an interpretation would render these sections nugatory,” the SCA judgment says.

“In light of the text of the relevant sections of the Tax Administration Act and the approach to comparable provisions in the Companies Act and the Insolvency Act, the transcript of the evidence given at the section 50 inquiry is admissible in the litigation between the parties,” according to the judgment.

The dispute is centred on an entity called Energy Africa, which was ultimately owned by Titan Premier Investments, Wiese’s investment vehicle.

Sars’ case is that Wiese, Visagie, Viljoen and Hofmeyr played different but complementary roles in assisting Energy Africa “to dissipate its assets in order to obstruct the collection of a tax debt owed by it to Sars.”

The tax agency claims the alleged dissipation occurred by transferring a loan account claim Energy Africa held in Titan Share Dealers as a dividend to Elandspad Investments, its holding company.

The matter was first reported by investigative journalism unit amaBhungane in 2018 after Sars approached the courts, demanding the money due from the businesspeople.

The summons forms part of a wider R3.7bn claim by Sars.

Sars’ argument was that Wiese and Viljoen, a former executive at law firm ENSafrica, created a tax structure to help Irish oil firm Tullow shift assets valued at billions of rand out of the country, avoiding paying taxes in the process.

In court documents, Sars alleges that ENSafrica’s restructuring of Tullow was a “sham” and nothing more than “an elaborate scheme intentionally designed to facilitate the evasion of [tax]”.

khumalok@businesslive.co.za