Ina Opperman
Business Journalist
3 minute read
11 Oct 2021
4:26 pm

Sars goes after non-compliant PPE companies

Ina Opperman

Companies that did not register for VAT are part of the tax collector's process to recover unpaid taxes linked to PPE contracts.

Picture: iStock

The South African Revenue Service (Sars) is going for non-compliant companies that received contracts to the value of R1 billion for the supply of personal protective equipment (PPE) and other Covid-related services.

The tax collector has focused on 52 non-compliant companies recently and 11 of them have been convicted already, for issues such as not paying value-added tax (VAT).

Seven cases are currently on the court roll, while 29 cases are with the National Prosecution Authority (NPA) for drafting charge sheets and/or warrants of arrest, while the Hawks are processing another five case dockets, Sars said in a statement.

In the process, Sars recovered R170 million in unpaid taxes inked to PPE contracts, while R500 million in assets, including cash, are under preservation orders. Sars is also investigating 33 entities linked to politically exposed persons.

ALSO READ: Sars claims R19bn in taxes from alleged tobacco smuggler

PPE companies not registered for VAT

Sars said in a statement that several companies that received government tenders totalling R50 million for Covid-related services were also recently sentenced for not registering for VAT.

These companies got tenders from the Gauteng department of education to decontaminate and deep clean schools, while another company received a tender from the KwaZulu-Natal department of social development to provide hygiene equipment and consumables.

The companies were convicted and sentenced in the Durban District Court last week, with sentences ranging from five to 10-months imprisonment with the option of a fine. Similar convictions happened in Gauteng and the Free State.

“The organisation will not tire from pursuing those that abdicate their legal obligations by not registering for Value-Added Tax, which is essential for qualifying companies conducting business in both the private and public sectors.

“It is patently obvious that some companies are operating outside the law, seeking to profit from a devastating pandemic that is affecting the lives and livelihoods of millions of South Africans, especially the poor and vulnerable. Sadly, most of the looted funds are being used to finance lavish lifestyles.”

Sars has a keen interest in mismatched income and expenditure and incongruent cash flows and therefore vendors must ensure that their VAT affairs are in order, not only where returns are outstanding, but also that the income streams, especially payments from contracts, can be matched with the VAT due and payable.

ALSO READ: Two Gauteng firms feel Sars’ renewed bite over R57 million tax debt

Fusion Centre helps Sars find PPE companies not paying VAT

These investigations and convictions are results of the work of the Fusion Centre, established by government. The centre coordinates the law enforcement response to allegations of corruption, or related activities, including maladministration of funds for relief and containment interventions.

The collaboration between Sars and other agencies resulted in the seizure of R41 million in assets and cash linked to these entities. Edward Kieswetter, Sars commissioner, says Sars is committed to working with all enforcement agencies to ensure increasing tax and customs compliance.

“We will continue to detect and make it costly for those that engage in this form of non-compliance. Government relies on Sars to collect taxes to provide services, such as social relief to older people, vulnerable individuals and households. A tax crime is really a crime that robs the poor and vulnerable,” Kieswetter said.