CSARS v Shabangu and Another (121282/2023; 121275/2023) [2024] ZAGPPHC 1014 (15 October 2024)

SARS argued that despite preservation orders having been granted to the respondents for outstanding taxes, Mr Shabangu failed to deal with the SARS’ allegations, entering into further business transactions, thereby disregarding the preservation orders granted in terms of section 163 of the Tax Administration Act No. 28 (2011”) (“TAA”).

 This case is an example of how SARS is utilising its powers within the TAA to pursue persons who exploit financial circumstances and legal proceedings to avoid paying taxes.

 Section 163 of the TAA states that :

“A senior SARS official may, in order to prevent any realisable assets from being disposed of or removed which may frustrate the collection of the full amount of tax that is due or payable or the official on reasonable grounds is satisfied may be due or payable, authorise an ex parte application to the High Court for an order for the preservation of any assets of a taxpayer or other person prohibiting any person, subject to the conditions and exceptions as may be specified in the preservation order, from dealing in any manner with the assets to which the order relates.”

 Background

As a result of previous judgements against Mr Shabangu and his various business operations in South Africa, Mr Shabangu owed outstanding taxes to SARS for previous years of assessment. Due to the lack of payment, SARS issued certain preservation orders to Mr Shabangu and the Roux Shabangu Family Trust in order to recover the amounts due to SARS.

Following various other legal actions, Mr Shabangu continued living his lavish lifestyle and entering into business deals. whereby his assets were sold and transferred by the trust. This included the disposal of 50% shares held by the trust, where the assets were subject to the preservation order.

The courts held that there was blatant disregard of the preservation orders, and that SARS payment of the outstanding taxes should be enforced.

 Key takeaway comments

 SARS holds significant authority to recover unpaid taxes, including the freezing of assets and sequestration.

The sequestration of high-profile individuals like Shabangu reinforces SARS’ commitment to uphold tax compliance and ensure that those benefitting from the economy will contribute fairly. SARS will not tolerate taxpayers who live beyond the means of their proven income sources and fail to meet their tax obligations.

High-net-worth individuals who have relied on complex financial and trust structures to hide the true extent of their wealth are a primary target for SARS.

In commenting on the above judgement, the SARS Commissioner, Edward Kieswetter stated that :

“The results of the above applications serve as examples of Sars’s resolve to pierce through the corporate veil in its efforts to fulfil its legislative mandate to collect all money due to the country’s fiscus.  Significantly, the sequestration order granted against the Trust is of particular importance as it highlights SARS ongoing efforts to enforce tax compliancy against discretionary Trusts which have been commonly utilised as a vehicle to evade taxes. SARS will not waiver from its path to pursue all without fear, favour or prejudice. I hope this application will deter all who intend to follow this route.”

Read the full court case here.