The SA Revenue Service (Sars) has won a preservation order against Gold Leaf Tobacco, which has been accused of illegal cigarette smuggling, preventing it from selling assets to avoid paying tax.
Sars said in a statement on Friday it was clamping down on the illicit cigarette, gold and fuel economy.
A preservation order is given to Sars either to authorise the seizure of assets equal to that of any tax owed, or it may allow the tax authority to appoint a curator of the assets of the party who owes money. It may even allow Sars to sell assets to meet a tax debt. The order has not yet been made public.
The order is against Gold Leaf directors Simon Rudland and Ebrahim Adamjee.
Both these directors were linked to the failed buyout of a large stake in debt-laden sugar company Tongaat Hulett.
Rudland’s brother Hamish, along with Simon’s daughters owned the firm Magister Investments that made a failed bid to underwrite a rights offer for Tongaat Hulett. The offer would have given Magister more than a 35% stake in the sugar company. Adamjee bought 5% of Tongaat shares before the rights offer went through and was found to be a related party to Magister in a takeover regulation panel ruling that ultimately scuppered the deal.
The deal was initially supported by the Tongaat board and shareholders PSG and the Public Investment Corporation in a majority vote. But a group of activists took the deal on review to the takeover regulation panel, a division of the department of trade, industry and competition.
It was almost “unprecedented” to reverse a majority shareholder vote, said Chris Logan, who was involved in activism, led by a group called Artemis Investments. As Sars clamps down on Gold Leaf Tobacco, Logan says the activists feel “vindicated”.
Gold Leaf Tobacco, a Zimbabwean company, has long been accused of selling illegal cigarettes in SA much cheaper than legal cigarettes, which have high excise taxes. A legal box of 20 cigarettes has more than R22 in taxes added to the price.
Sars said in a statement it had been investigating and clamping down on the illicit economy over the past year, and this was one of the many enforcement steps it had executed.
“The conduct of noncompliant taxpayers is depriving [the] government of legitimate resources to the prejudice of both the state and the SA public. In aggressively addressing this scourge, Sars will continue to pursue its mandate without fear, favour or prejudice,” said Sars commissioner Edward Kieswetter.
Tax Justice SA (TJSA) founder Yusuf Abramjee, who has done work for tobacco industry funded lobby organisations such as the Tobacco Institute of Southern Africa, said the order was a “watershed moment” in the battle against organised crime groups who are looting SA on an unprecedented scale.
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