11 noncompliant PPE companies convicted as Sars clamps down on crime

South African Revenue Service (Sars) commissioner Edward Kieswetter has stayed true to his commitment to convict and sentence tax criminals.

This year has seen a steadily increasing rate of convictions, mainly in offences committed under customs and excise, value-added tax (VAT) and pay as you earn (PAYE) tax.

Customs officers, in particular, have notched up impressive busts involving illicit cigarettes and imports of rhino horn and drugs.

Sars’ investigating team cooperated with the National Prosecuting Authority (NPA) to secure the conviction and sentencing of former Oakbay director DP Naik for cigarette smuggling.

According to Sars, 52 noncompliant companies received R1 billion in contracts for the supply of personal protective equipment and Covid related services:

• Eleven companies have been convicted;
• Seven cases are currently on the court roll;
• Twenty-nine are with the NPA;
• Five case dockets are being processed by the Directorate for Priority Crime Investigation;
• A total of R170 million in unpaid taxes has been recovered;
• A total of R500 million in assets (including cash) is under preservation orders; and
• Thirty-three entities are linked to politically exposed persons.

Several companies (not named) that received government tenders totalling R50 million for Covidrelated services (decontamination and deep cleansing of schools) were sentenced (no details given) for not registering for VAT.

The companies were awarded tenders by the Gauteng department of education.

Another company was awarded a tender by the KwaZulu-Natal department of social development for provision of hygiene equipment and consumables.

According to Sars: “The companies were convicted and sentenced in the Durban District Court… The sentences range from five months’ to 10 months’ imprisonment (with the option of a fine).”

A total of R41 million in assets and cash was seized.

“Sars has a keen interest in mismatched income and expenditure and incongruent cash flows.”

Sars has not named the individuals or companies. In July, Sars announcing that it had joined forces with the American Internal Revenue Service (IRS) criminal investigation unit to fight international crimes.

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The US agency delivered an offshore tax evasion training webinar to approximately 40 Sars enforcement officers that incorporated “transnational financial crimes specific to offshore banking schemes, tax evasion and conspiracy”.

Moneyweb asked Sars to provide an update on this collaboration and whether it has resulted in any convictions. Sars has not responded.

Sars and the National Directorate for Public Prosecution issued a joint statement that they will collaborate and “deal with key challenges of tax crime and noncompliance, eroding the tax revenue base and the integrity of the tax system”.

The immediate focus will be employers not paying over PAYE, not filing returns, “as well as other general corrupt activities”.