The revenue collector is pursuing Dubai-based Gupta lieutenant Salim Essa for R2.7-billion after finding that he had under-declared his income over seven years between 2012 and 2019.
The South African Revenue Service (Sars) audit of Essa’s tax compliance status, dated December 21 last year, returned with proposed adjustments Sars intended to make in order to determine taxable income for the relevant tax periods.
While records initially showed that Essa had no outstanding tax returns for income tax and provisional tax, Sars found the assessment misleading.
“This is not an accurate reflection of his compliance, as an analysis of information during the audit revealed that the taxpayer under-declared his income and was therefore non-compliant,” according to investigation manager Tidimalo Mahlangu.
The proposed adjustments to Essa’s tax bill range from R1.5-million in 2012 to R1.5-billion in 2016. Records show that Sars started communicating with Essa on July 13, 2018, when he was issued a notification of personal income tax audit letter for the 2014 to 2016 tax periods.
A month later, the revenue collector issued its letter of audit findings for the personal income tax audit conducted for the 2014–2016 tax periods and allowed
Essa to consider Sars’ findings and submit further information and/or documentation.
Essa, on September 20, 2019, requested an extension of 21 days to respond to the 2019 letter of audit findings, citing that he was overseas. He bought himself time until November 3.
Between May 15, 2020, and February 3, 2023, the tax man notified Essa that the audit scope had been extended to include the 2012, 2013, 2017, 2018, and 2019 tax periods.
“Sars also records that, despite the contents of the taxpayer’s response to the 2019 letter of audit findings, Sars was not dissuaded from its findings for the reasons set out in this letter.”
According to Essa’s response to the 2019 letter of audit findings, read with his bank statements, he claimed to have received consulting fees from different entities, disbursed and/or received funds in the form of loans, and sold or acquired motor vehicles.
“Sars, however, disputes that this is an accurate portrayal of the nature of the income received by the taxpayer,” Mahlangu found, adding that evidence at their disposal showed that Essa and associate Kubentheran Moodley were instrumental in facilitating a business relationship between state capture accused firm Regiments Capital and its subsidiaries and multinational company McKinsey & Co.
“At that time, McKinsey had contracts with state-owned entities (SOEs), particularly Transnet SOC Ltd (“Transnet”) and Eskom SOC Ltd (Eskom)”.
“Other companies linked to him were Trillian Holdings, Fortime Consultants, Birsaa Projects, Medjoul, Homix, Tequesta Group Limited, and Regiments Asia Limited.
Mahlangu noted that Sars had considered, inter alia, the findings of the Judicial Commission of Inquiry into allegations of State Capture, Corruption, and Fraud in the Public Sector, including Organs of State, better known as the Zondo commission or state capture commission,” and the numerous allegations of unlawful and fraudulent conduct referred to in court proceedings.
“Based on this information and Sars’ independent investigations, the taxpayer, including his business associates commonly known as the Gupta brothers, used the veil of corporate entities, both internationally and domestically, to channel funds originating from illegal tenders awarded by SOEs, particularly Transnet, Denel SOC Ltd, and Eskom, into accounts for their own benefit.”
Mahlangu continued: “As a result of the taxpayer’s involvement in illegal tenders awarded by SOEs, the United States of America Treasury Department and the United Kingdom have imposed sanctions against the taxpayer and others.”
Sars said although it considered the above-mentioned information to gain an understanding of the nature of the taxpayer’s business operations, these did not form the basis of the findings contained herein.
“Sars has performed its own independent investigations to arrive at the findings set out in this letter, having regard to the documents and information at its disposal and which are referred to in this letter of findings,” according to Mahlangu, adding that Sars discovered a total of 15 companies that Essa allegedly used to divert income or disguise its true source to avoid paying accurate taxes.
Mahlangu determined that Essa’s conduct was that of an “obstructive case”, slapped him with an understatement penalty of 200%, and gave him 21 days from the date of the letter, being close of business on February 13, 2024, to make representations.
“Failure to respond to Sars findings and to provide the relevant material supporting your response within 21 business days will result in Sars proceeding to raise assessments as discussed in this letter without further notification.”
