NOTE: Who was in charge with these tax avoidance schemes? Yes, Louis du Preez and Theodore de Klerk!
Sars penalises former Pepkor CEO Pieter Erasmus R300m for tax avoidance
Former CEO of Pepkor Holdings Ltd, Pieter Erasmus, was unsuccessful in his application to scrap a decision by the commissioner of the SA Revenue Service (Sars), that he was involved in alleged tax avoidance.
The matter, which was instead scrapped from the Western Cape High Court roll, detailed how Erasmus was party to an alleged impermissible tax avoidance arrangement, in terms of the Income Tax Act. He was found to be consequently liable for about R300 million.
Erasmus was a director and shareholder of Pepkor and numerous other companies. These included Treemo (Pty) Ltd, and a beneficiary of the Black River View Trust, and the Trust in turn was also a shareholder in Treemo.
According to the judgment, on March 25, 2015, Treemo’s directors approved a capital distribution to Erasmus of R167 696 542 and cash distributions of about R1.22 billion and R1.2m.
In addition, approval was granted for the payment of a cash distribution to the Trust of about R8.7m. These distributions were paid out two days later.
The judgment says: “Some four years later, on March 2019 20, Erasmus was requested to provide the commissioner with a detailed explanation and documentation pertaining to the various transactions that had taken place between Treemo, the Trust and himself.
“This was between the 2015 and 2018 tax years. In the response, which he provided on April 30 2019, Erasmus revealed that during December 2014 he had sold 5.5 million shares which he held in Pepkor with a market value of R510m.
At the same time, he had also sold redeemable preference shares which he held in Newshelf, which had a market value of R750m, to Treemo, in exchange for shares in it.”
According to the court judgment, Erasmus claimed that the distributions had not been disclosed because of an “oversight” by his accountants, but that no tax consequences flowed from this as they were exempt from tax.
Judge Mark Sher said: “In the circumstances this constituted an impermissible tax avoidance arrangement as contemplated in s 80A of the Act. It involved ‘round-trip financing’ between the various transacting parties which had no significant effect on their business risks or net cash flows and had no apparent commercial purpose other than to create a tax benefit for the applicant and the Trust, which they would not otherwise have obtained.”
Sars spokesperson, Anton Fisher, said: “Sars notes the judgment and will decide on a course of action later.” Enquiries to Erasmus’s attorneys were not answered by deadline on Tuesday.
www.iol.co.za/capetimes/news/...9-763f-4ae0-b994-a8d612564357
