Cough up, SARS tells BAT-SA

THE South African Revenue Service (SARS) has accused the local arm of British American Tobacco (BAT) of tax evasion and fraud and says it owes R143 million.
A letter to BAT-SA from SARS in October last year said the violations were revealed in an audit.
“You have contravened several provisions of the Act,” the letter said.
But the company argues that the audit team drew “wrong conclusions” and that in fact SARS owes BAT-SA R30 million, which it is “erroneously withholding.”
BAT-SA is embroiled in a separate battle with SARS over R2,1 billion that the tax agency says the company owes it in taxes and interest.
SARS is pursuing the local operation of global cigarette giant, claiming R143 million for alleged tax fraud and evading tax duties.
The alleged contraventions, which BAT-SA vehemently denies, saw the company allegedly receiving undue rebates from SARS.
Instead, BAT-SA claims SARS still owe it R30 million in rebates.
According to a letter from SARS to BAT-SA that Business Times has seen, the rebates were received after BAT-SA applied to SARS to reprocess millions of cigarettes, including the Princeton brand, because of apparent manufacturing defects.
Sars found BAT-SA allegedly lied about the reasons for reprocessing the cigarettes, and in some cases merely changed the packaging to reflect a “limited edition” cover.
Sars gave BAT-SA a way out: pay a R5 million fine, R102 million in excise duties and forfeitures and R36 million in interest, in place of facing prosecution.
BAT-SA sponsors the Tobacco Institute of SA (TISA) #TakeBack-TheTax campaign.
In 2013 and 2014 SARS warned TISA that its members were involved in tax dodging.
BAT-SA is embroiled in a separate battle with SARS over allegations of failing to pay R2 billion in taxes and interest. In its 2018 annual report BAT said it was involved in several international audits of VAT and excise, sales, corporate taxes and withholding taxes.
It said SARS was challenging it over assessments worth R2,1 billion from 2006 to 2010.
SARS declined to comment, citing taxpayer confidentiality.
The leaked letter says the alleged contraventions were discovered after a SARS audit found discrepancies in information BAT-SA provided from its own internal audit.
The SARS audit began on February 21, 2014 and looked into BAT-SA’s operations between January 2012 and January 2014.
Acting SARS commissioner Mark Kingon brought the illicit-economy unit and the large-business unit and the large-business unit back to life after former commissioner Tom Moyane shut them down in 2014.
In October 2014 Moyane also shut down an enforcement unit responsible for combating the illicit tobacco trade. Moyane was suspended in March 2018 and fired in November. — Sunday Times

… as firm denies tax cheating claims

Allegations that the SA division of British American Tobacco SA (BAT-SA) owes the South African Revenue Service (SARS) R143 million due to “fraud and tax evasion” are “totally inaccurate”, Francois van der Merwe, chair of industry body the Tobacco Institute of Southern Africa (TISA), told Fin24 on Sunday.
He was responding to an article in the Sunday Times, which stated that the tax agency wrote a letter to BAT-SA, dated October last year, which “alleged contraventions were discovered after a SARS audit”.
BAT-SA also denied the claims in a separate statement.
“We don’t owe any money for underpaying tax. We are, in fact, owed money for overpaying. That is why we are due this R30 million rebate,” said BAT-SA in a statement issued on Sunday afternoon.
According to the Sunday Times, the revenue collection agency is of the view that BAT-SA received undue rebates from SARS when it reprocessed millions of cigarettes.
BAT-SA is one of 10 members of the TISA.
“BAT is a legitimate company, paying all its taxes, the biggest excise contributor in the tobacco industry and an accredited member of TISA, which represents the legal (tobacco) industry,” Van der Merwe told Fin24.
He questioned the source of the allegations — a leaked document — adding the aim may be to cast doubt over legal companies and “distract the attention from the real problem, which is the illicit trade in the market, robbing SA of at least R8 billion in taxes this year”.
TISA commissioned research into the market and, according to Van der Merwe, the results revealed that local illicit manufacturers are defrauding SARS of R8 billion by not declaring all their production.
It further revealed that one such company, is responsible for 73 percent of the total illicit trade.
“This is the real story and not the attempt to paint a bad picture of BAT, which does not form part of any illegal conduct,” said Van der Merwe.
BAT-SA announced in a statement issued on Sunday afternoon that it will commit all of a R30 million SARS rebate, which it claims it is owed by the revenue agency, to the #TakeBackTheTax initiative, fighting the illegal trade in cigarettes in SA.
According to BAT-SA, it collected and paid more than R9,1 billion in taxes in South Africa last year and expects to receive the rebate from SARS for overpaid taxes “shortly”.
SARS did not immediately reply to a request for comment on Sunday. — Fin24