SA Revenue Service Commissioner Oupa Magashula has fired his first shot in a battle against wealthy tax evaders, slapping a R200-million bill for back taxes on two companies owned by horseracing celebrity and Steinhoff CE Markus Jooste.
A dramatic court battle in recent weeks saw Jooste's companies lose their Cape High Court bid to prevent SARS forcing them to ''pay now, argue later" - a legal principle that has caused a headache for those who feel the taxman is claiming more than what is due.
Legal papers show that, through a complicated web of trusts, the Markus Jooste Kindertrust is the ultimate owner of Capstone 556, from which SARS wants R144-million, and Kluh Investments, from which SARS is claiming R63-million.
Magashula said this is the first step in a battle to track down and recover more than R20-billion identified as having been stashed away by 165 of South Africa's richest tycoons in "trusts and entities", including overseas.
"We're serious about making sure that those who make most of the wealth, yet who are ripping off the fiscus, are brought to book," says Magashula.
"Why should the smaller guys be diligently paying their taxes when those at the top end are going out of their way not to?"
Magashula's new bid to nail the rich comes as resentment continues to build between the trade unions and SA's wealthiest executives, the top 20 of whom have a combined personal fortune of R112.2-billion - a 58% increase over two years previously.
Jooste heads furniture multinational Steinhoff - a R37-billion company and the 28th largest on the JSE. Thanks to recent mega-deals, Steinhoff is now Europe's second-biggest furniture maker and owns 30% of JD Group, which owns Joshua Doore and Hi-Fi Corporation.
Jooste, who ironically worked as a deputy director at SARS in 1985, has used his fortune to invest in racehorses. Last month he was named the racing industry's owner of the year.
In its legal papers SARS claims the two companies ultimately controlled by Jooste's trust - Capstone and Kluh Investments - failed to file tax returns for years.
SARS is claiming R144-million from Capstone 556 because it was part of a consortium led by German investor Claas Daun, which bought 16.7% of JD Group in December 2003 for about R18 a share. Four months later, the consortium sold the shares for between R41.70 and R45 a share.
The taxman is arguing that because the shares were bought and sold so quickly the profits Capstone made should be taxed as revenue (about 35% of the value), not as capital gains (which would only be taxed at about 10%).
The case against Kluh Investments suggests Steinhoff's bosses made R147.8-million, at the expense of shareholders.
The court papers say Kluh Investments bought a forestry business and plantation from a company owned by Barloworld, called Thesan, for R11.9-million in 2001. Kluh appointed Steinhoff to manage the plantation and, in July 2004, Kluh sold the forest to Steinhoff's shareholders for R159.7-million - nearly 14 times what it paid just three years before.
"At the time, [Kluh] was ultimately controlled by Fihag Finanz-und Handels AG, a company in turn controlled by Bruno Steinhoff, who at the time was the executive chairman of Steinhoff," said SARS investigator Pretisha Khoosal in her affidavits.
"A portion of the [R159.7-million] was ultimately used to settle a portion of the loan due to Capstone, an associated company of Mayfair. Mayfair is ultimately controlled by Markus Jooste, through the Markus Jooste Kindertrust," she said.
She said Jooste's Mayfair Speculators later bought Kluh from Bruno Steinhoff.
However, if any directors stood to make a personal profit from this sale to Steinhoff shareholders, it should have been disclosed as a ''related party deal" to ensure the price was not inflated to the detriment of investors. Yet it was not.
Steinhoff director Stehan Grobler admitted that it would have been a serious problem if Bruno Steinhoff or Jooste sold an asset they owned personally to shareholders without declaring it as a related party - but he said this was not the case.
"They both said to us they weren't related parties, and we independently checked that. If they were involved, it definitely would have raised issues, but that's why we took steps to verify that they weren't," he said.
In an affidavit, Kluh director Stefanus Potgieter said he denied the SARS claims. And, he added, "all transactions between the various entities occurred on an arm's-length basis, and in accordance with recognised accounting principles".
Potgieter said that "it seems SARS seeks to embarrass the individuals referred to [Jooste and Steinhoff], and this forms part of their ulterior motive".
Jooste would not return calls.
Grobler also would not comment on the Capstone and Kluh cases, saying: "I'm not involved in Markus's tax affairs, so I can't express myself on that."
SARS and legal firm Werksmans, which acts for Kluh and Capstone, have fought a long legal battle over whether tax must be paid before the dispute is settled.
Potgieter said the SARS argument is "implausible" and "far-fetched" and a company should not have to pay "hotly-contested assessments" until it has appealed them in court.
But it is SARS that has prevailed in court.
On June 22, Judge Ashley Binns-Ward admitted that "the concept of pay now, argue later understandably does not rest easily with taxpayers who find themselves in dispute with revenue authorities". But he ruled that the rule was necessary to prevent taxpayers dragging the process out - so Kluh and Capstone must pay up.
Three weeks ago, Binns-Ward refused them leave to appeal against his ruling.
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