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Dave King settles with SARS – agrees to pay R706m for income tax liability
I can’t remember when last I published a Media Statement in full. But it’s not often you get one that cost more than R1m per word. Or that the company whose executive chairman is the central character becomes the JSE’s biggest mover on the day, jumping 27% in value. This is no ordinary release. It was issued jointly this afternoon by the SA Revenue Services and the serial entrepreneur and erstwhile tax fugitive Dave King. Given that the parties have been at each other’s throats for years, this is one statement that was surely revised dozens of times before finally being released into the public arena. My involvement began around the year 2000 when King offered me a no-holds-barred interview in his Sandton office. We published the full transcript of a couple hours of discussion on Moneyweb. It focused around a company called Specialised Outsoucing which King founded, listed on the JSE at 50c and sold out of at prices of up to R70. He made more than R1bn in offloading to asset managers at price multiples last seen in the dot com bubble. King maintained the profit his share sales generated were of a capital nature and as there was no capital gains tax back then, were tax free. SARS disagreed. Shortly after my interview, a SARS officials with the unlikely name of Mr Chipps asked me to visit him in his offices in downtown Johannesburg. He was convinced King was a crook and was determined to bring him to book. He got his teeth into the matter and spent years compiling a case against the entrepreneur. I heard that Mr Chipps passed on some time back, but his obsession didn’t. Much to the delight of an army of lawyers – and the disgust of anyone who hates trees being needlessly sacrificed -King and SARS went through one court action after another. For the most part, King spoke freely to me, always available to offer his perspectives. We had numerous interviews on the subject over the years. The tax authorities are precluded by law from discussing individual taxpayers, so its side only came to the fore after court actions. Given the history, it’s well worth reading the full Media Release. And considering yesterday’s 27% surge in the price of MicroMega, the company of which King is executive chairman, there are some betting that with the tax monkey finally off his back, King may well produce another stock like Specialised Outsourcing. – AH
JOINT MEDIA STATEMENT – SETTLEMENT BETWEEN THE STATE AND MR DC KING
PRETORIA, 29 August 2013 – The South African Revenue Service (SARS) confirms that a settlement agreement was reached between Mr Dave King and the State.
This settlement was achieved following submissions made to SARS by Mr King and entities associated with him. The governance and oversight committee in SARS found that the submissions that were made met the requirements of the applicable tax legislation. HSBC, which acts as trustee on behalf of Mr King and the associated entities, as well as Mr King in his personal capacity and members of his family, were all signatories to the settlement agreement. Other relevant state institutions were also parties to the overall settlement.
Mr King has conceded his tax debt and has agreed to a payment of R 706. 7 million to SARS in respect of his personal income tax and the tax liability of Ben Nevis, a King trust company managed out of Guernsey. The fraud charges against Mr King were not pursued by the State and Mr King accepted liability in respect of 41 lesser counts of contravening Section 75 of the Income Tax Act, including the failure to disclose information and the failure to provide correct information about incomes earned over a number of years.
Today Mr King appeared before the Palmridge Regional Court and entered into a plea and sentencing agreement to this effect with the NPA. Mr King has to pay a fine totalling R 3.208 million (R 80 000 per count) or 24 months imprisonment. In addition, he was ordered to pay an amount of R 8.75 million towards the Criminal Asset Recovery Asset Fund via the Asset Forfeiture Unit.
In response to the settlement agreement, Mr King stated: “When this tax dispute arose many years ago I took a conscious decision not to cooperate with the authorities. That was a mistake. I regret not engaging with the State sooner as I have found them to be extremely firm but fair in their dealings with me once I fully engaged with them. I accept the fact that I have been non-compliant in the past and will rectify this.”
SARS welcomes the finalisation of the matter and the settlement. The outcome demonstrates that SARS remains approachable to any taxpayer who wants to resolve a tax dispute in a bona fide manner, even when formal processes of litigation are before the courts, Mr Gene Ravele, the SARS Chief Officer for Tax and Customs Enforcement Investigations, said.
“SARS believes this settlement is in the interest of the fiscus and in the interest of justice. This brings to an end a period of protracted litigation. SARS appreciates that Mr King has accepted responsibility for his tax position and the message he has communicated to taxpayers who may find themselves in a similar position – to rather engage SARS and seek resolution to a tax dispute rather than resort to litigation. This matter demonstrates the level of commitment SARS has to executing its statutory duty, regardless of the time and cost that complex tax disputes may require to reach finality. Taxpayers and the public in general should expect no less of SARS,” said Mr Ravele.
Mr King further said: “Part of the agreement is that my family and I will be filing all outstanding tax returns to ensure that we become fully compliant. My experience should serve as an example to taxpayers who find themselves in a similar position with SARS – rather seek early resolution and cooperate with SARS when asked by them to explain your tax affairs. I am delighted to finally put this behind me and to be able to actively resume my business career.”
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