South Africa: Taxman Opposes Urgent Court Bid to Halt Bosasa Liquidation and Auction, Says Company Owes More Than R500 Million in Taxes

The South African Revenue Service (SARS) has filed court papers opposing an urgent bid by Jared Watson to halt the auction of corruption accused company Bosasa's assets.

In court papers seen by News24, SARS also indicates it will oppose Watson's main application to have six Bosasa companies placed under business rescue, filed on Tuesday.

Watson, the late Bosasa CEO Gavin Watson's nephew, is attempting to halt the auction and take six Bosasa companies out of liquidation. He is seeking a court order to have the companies placed under business rescue instead.

The auction got under way on Wednesday, and is expected to continue on Thursday and Friday.

SARS stated in its papers that as a result of the tax inquiry into Bosasa's affairs that got sat for the first time in June this year, it had determined that Bosasa owed SARS more than R500 million in taxes, which includes penalties and interest on various amounts.

This makes SARS the largest creditor and as such, it has bemoaned Watson's failure to join SARS as a party to the litigation, asking the court to dismiss the application on this ground alone.

Watson launched the urgent application for an interdict on Wednesday afternoon after filing an application to place the companies under business rescue on Tuesday.

The urgent interdict application was postponed to Thursday to give the respondents and SARS time to file papers.

SARS will oppose the urgent application and the main application to have the companies placed under business rescue on several grounds, including that the application is not urgent, saying Jared Watson had known about the auction since at least mid-November.

"Their predicament is entirely of their own making," SARS official Sarita Lubbe's affidavit filed in support of SARS' application to intervene reads.

"SARS is a creditor of the six business rescue companies... in the total amount of R511m for assessed income tax, Value Added Tax, employee's tax, unemployment insurance fund and skills development levy," Lubbe adds.

During the tax inquiry, Lubbe's affidavit reveals, that "SARS' reasonable belief that companies within the Bosasa group failed to comply with their obligations in terms of the tax Acts, committed offences as envisaged in the tax acts, or disposed of, removed or concealed assets which may fully or partly satisfy an outstanding tax debt were confirmed in all material aspects".

Lubbe said that during the tax inquiry, Bosasa chief financial officer Louis Passano testified that Bosasa had claimed expenses for income tax with a capital value of R400 million to which the Bosasa group was not entitled.

"If the tax on this is calculated at a tax rate of 28% this means that just based on this the companies are indebted to SARS in the amount of R112m. If understatement penalties of up to 200%, penalties and interest are applied, it adds up to more than R400m worth of tax due by the group of companies."

SARS was, however, still analysing the testimonies of numerous witnesses before the tax inquiry, Lubbe added, and the tax man was in the process of finalising letters of finding to the various Bosasa companies in this regard.

Bosasa Supply Chain Management, one of the companies currently under liquidation that Jared Watson wants placed under business rescue, understated its taxable income by R461-million. Taking into account penalties and interest, the tax bill will likely come to the same amount.

The various liquidators, led by Cloete Murray who was appointed through SARS' requisition, are also expected to oppose the urgent application and the main application for business rescue.

Auction continues

Clive Lazarus of Park Village Auctions told News24 on Thursday morning that he would abide by the decision of the court, but would continue with the auction in the meantime.

Thursday would be the second day of the three day auction that got under way with around 140 vehicles owned by the various Bosasa companies going under the hammer on day one.

Three large properties, including the 8 hectare head office in Luipaardsvlei, a property containing a copper smelting plant and the 26 hectare property that houses the Lindela Repatriation Centre are expected to be auctioned on day two.

In his founding affidavit, Jared Watson revealed that despite earlier not being able to obtain bank accounts, the group was now able to do so - putting paid to the main reason behind the companies being placed under voluntary liquidation in February.

In January 2019, two major banks communicated to Bosasa they would be closing the company's various accounts due to the reputational risk associated with having it as a client following nine days of bombshell testimony by former Bosasa chief operations officer Angelo Agrizzi.

"A fire sale of the individual movable and immovable properties will achieve nothing but a dismantling and destruction of assets and the inevitable loss of capability to create and sustain employment," Watson's affidavit read.

AGO, Bosasa Properties, Global Technology Systems, Leading Prospect Trading 111, Bosasa Youth Development Centres, Blackrox Security Intelligence Services, Bosasa Supply Chain Management, Bosasa IT, Rodcor, Watson Corporate Academy, On-It-1 are the 11 companies that were placed under voluntary liquidation.

SARS, however, disagrees with Watson's assertions that Bosasa can still be rescued.

"It is denied that the Bosasa group of companies can ever be revitalised. Due to all the negative publicity, it is submitted that the group, particularly in view of the tax debts which are envisaged, their tax status will not be able to be shown as compliant and it is therefore doubtful that they ever will be able to obtain a tax clearance certificate for purposes of obtaining tenders," Lubbe's affidavit reads.

Source: News24

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