Former Passenger Rail Agency of South Africa (Prasa) CEO Lucky Montana has conceded he owes money to the South African Revenue Service (Sars), but says the tax authority overstated his liability by R21m in its audit for 2009-2019.
Montana makes the argument in an affidavit before the Gauteng High Court in Pretoria, which was filed 18 months late.
He filed the papers last month, weeks before his resignation as an MK party MP took effect, in a final effort to defend himself in a sequestration application by Sars. The application seeks to grant Sars the authority to strip Montana of his assets to recover the outstanding tax debt and have him declared insolvent.
According to Sars, Montana failed to declare R36m in income over 10 years and more than R2m in capital gains.
When the sequestration application was initially made in 2024, the tax debt was about R44m, but it has ballooned to R55m with interest and penalties.
Montana disputes Sars’ methodology in calculating his debt — a stance which he has maintained since he was served with audit results in 2020.
“In 2020, the major finding [of the 2009-2019 audit] was undeclared income of approximately R23m during the 10 years under review, which was taxable,” Montana says in his papers.
“The amount payable to Sars would have been R9.89m if one were to apply [a rate of] 43%, which is the highest personal tax scale for the period I was employed,” Montana contends.
Montana’s objections
Before the matter reached the court, Montana said he raised objections to the findings based on several factors, including Sars’ characterisation and assessment methodology of various transactions — in particular the issue of the primary residence exclusion, property sales and the application of capital tax gains and the sale of motor vehicles.
“My calculations of these transactions indicated my tax liability was overstated by over R21m. It was on these bases that I disputed the amounts, and I argued I did not owe Sars a cent.”
Montana also challenged Sars’ methodology on the sale of his cars.
“Sars raised taxes for six vehicles sold, which I purchased during this period [2009-2019] through hire purchase. Mercedes-Benz Financial Services and Absa Asset Finance financed the vehicles.
“I later disposed of my vehicles through various car dealerships. The process is clear: submit the vehicle to the dealerships for valuation; the dealership obtains settlement figures from the financing institution and settles the outstanding amount. This is the general practice when bank-financed vehicles are settled before they can be sold.
“Sars claimed the ‘funds for the settlement of the vehicles did not originate from the account of the taxpayer’. That means the dealerships should have not settled the vehicles but needed to pay me, and in turn, I would settle the amounts directly with the financing institution. The total amount paid by dealerships to settle six vehicles was approximately R9.6m.”
Unavoidable delays
Montana also blames Sars for the delay in submitting his affidavit, which was initially due on April 26 2024, saying that he had asked Sars for documents but was not responded to on time. That, his lawyer’s illness in April and seeking tax experts’ advice were the reasons for the 18-month delay, he said.
“As counsel remained unwell, I was not able to meet the shortened deadline but was at all material times intent on opposing the application and was aware of my timelines via the advice of my representatives. I was aware of the serious sequestration application, and I am involved intensely with various parties to prepare full comprehensive response,” he says in his court papers.
“Much of my preparation and delays flow from my efforts to prove to the honourable court that [Sars] conducted an inadequate and improper audit yet swiftly pursued a sequestration application in court.”
Montana applied for condonation for the late filing and pleaded to defend himself.
He argues that his papers prove “the incorrectness of the amount claimed by the applicant. I submit that the applicant has incorrectly assessed my tax liability, which led to the above grossly inflated debt due to errors in the applicant’s treatment of various transactions and calculations. In defending the sequestration application, I will argue that a sequestration application would yield no dividend to Sars.”
He argues he intends to provide the full list of assets and liability to show insolvency, if needs be, to the court and offer a payment plan of proof of available funds.
If Sars were a valid creditor, he argues, the sequestration application was not in its best interest because it would “damage my financial position to a point that even Sars won’t benefit.”
Montana says he had personal loans amounting to almost R5m from multiple sources, but those were considered gross income in the audit.
“It’s crucial to clarify that these are indeed loans, with an obligation to pay them. Each transaction is accompanied by a loan agreement affirming the borrower’s responsibility to repay the money. Therefore, these funds cannot be construed as gross income.”
Montana also contends Sars failed to serve his wife, Sephora Letsoalo, and other creditors the court papers.
In its court papers, Sars says Montana is single.
The court has yet to decide on the sequestration application.
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