Sars sues Sasfin for R4.9bn over unpaid taxes by former bank clients

27 February 2024 - 15:02
By Tannur Anders
Sasfin CEO Michael Sassoon says it is unjust for banks to be held liable to Sars for taxes their clients failed to pay. File photo.
Image: Thapelo Morebudi Sasfin CEO Michael Sassoon says it is unjust for banks to be held liable to Sars for taxes their clients failed to pay. File photo.

Financial services firm Sasfin Holdings on Tuesday said its banking arm had received a civil summons for a total amount of R4.9bn plus interest and costs from the SA Revenue Service (Sars).

It said the summons, in the form of a damages claim, was issued by the revenue service for Sasfin’s inability to collect income tax, VAT and penalties from former clients of the firm’s banking arm or circumventing foreign exchange and anti money laundering regulations, a charge it vehemently denies.

“This summons relates to Sars’ purported inability to collect income tax, VAT and penalties allegedly owed by former foreign exchange clients of the bank,” Sasfin said in an announcement on the JSE news service SENS.

It said former foreign exchange clients of Sasfin operated as a syndicate that ran an unlawful scheme to facilitate the expatriation of money out of South Africa and colluded with former employees of the bank who it said operated outside the scope of their employment.

According to the company, its bank took decisive action when it became aware of this unlawful scheme and instituted an expanded investigation led by an independent forensic consultancy.

“This resulted in the termination of relationships with the implicated clients and employees and the opening of criminal cases against them.” 

Sasfin added that it had since obtained legal opinion which supports its assertion that the SARS claim is “outside the recognised parameters of applicable law and has a very remote likelihood of success”.

The claim dates to expatriation of money from 2014.

“We are confident the Sars claim has no merit. We have filed a notice of intention to defend the matter, which we will do rigorously. It is unjust for banks to be held liable to Sars for taxes their clients have failed to pay,” said Sasfin CEO Michael Sassoon.

“Of importance is that this is not a tax claim, but a claim for damages and has nothing to do with Sasfin’s own tax affairs. The claim, which we emphatically reject, will involve a protracted trial action, and the matter is only likely to conclude in several years’ time,” Sassoon said.

Sars has confirmed it instituted legal proceedings against the bank.

“Sars conducted a thorough investigation into South African taxpayers who had not made true and accurate tax disclosures to Sars. The investigation revealed the taxpayers had colluded to expatriate funds offshore in a manner that obscured tracing the expatriated payments and jeopardises the recovery of tax in South Africa,” Sars said.

It said commissioner Edward Kieswetter held the position “that it is inappropriate to comment on the question of liability and compensation for the fiscus’ loss as these are legal issues now before the South African judicial system”.

Earlier on Tuesday, President Cyril Ramaphosa extended the term of office of the Sars commissioner for another two years.

The Presidency announced Kieswetter would stay on for two more years after an agreement between himself and Ramaphosa “to enable an orderly leadership transition in the organisation”.

Kieswetter was appointed in March 2019 for a five-year term which started in May 2019.

“Mr Kieswetter will continue leading the execution of the strategic direction of the revenue service while ensuring a smooth leadership transition,” the Presidency said.

The commissioner has been credited with rescuing the institution after it was hollowed out during the state capture years under Tom Moyane.

Consulting firm Bain & Company ended up repaying revenue for its botched restructuring of the tax agency, with interest amounting to R217m, according to a final report of the Sars Commission of Inquiry chaired by retired judge Robert Nugent.

It is understood Kieswetter had quietly expressed his desire to leave Sars, but Ramaphosa moved to keep him in the role for longer.