By Wendell Roelf and Mfuneko Toyana
CAPE TOWN, Oct 31 (Reuters) - South Africa is investigating
criminal syndicates operating in the scrap metal, fuel and gold
industries and responsible for value-added tax (VAT) and customs
fraud estimated at "tens of billions of rand" a year, the tax
commissioner said on Thursday.
Slowly rebuilding from years of turmoil that gutted its
capacity, the South African Revenue Service (SARS) is keen to
recoup lost taxes as it struggles to collect revenues that the
treasury expects to fall short of estimates.
Weak economic growth and household consumption, coupled with
high unemployment, have had a knock-on effect on revenue
collection, crimping VAT and company income tax receipts which
together account for almost half of all tax revenue collected.
"In terms of the total fraud our estimate is it runs into
tens of billions of rands, if you take the scrap metal, if you
take the oil majors, if you take the cigarette industries," SARS
commissioner Edward Kieswetter told Reuters.
Kieswetter did not mention any companies or intermediaries
involved, but said it affected the entire value chain.
In the oil industry, for example, Kieswetter said criminals
would put fuel in tankers and disclose a higher quality fuel to
authorities in order to claim a higher VAT refund. Another trick
entails the diversion of fuel, where fuel is declared as exports
but it never makes South Africa's borders.
"We are currently investigating 22 cases where fuel trucks
and tankers have been detained," he said.
In the scrap metal sector, a Port Elizabeth company recently
pleaded guilty after misrepresenting the contents in 36 shipping
containers, claiming it was sheet piling instead of scrap metal.
SHELF COMPANY OPERATORS
Besides fraudulent declarations of imports and exports,
another concern for SARS relates to so-called shelf company
operators who register companies, then claim VAT rebates before
closing down the firm after a several months.
"We are putting a big spotlight on those who operate as
shelf company suppliers and the people they sell to," said
Kieswetter.
These shelf company operators have fleeced the system in
excess of 8 billion rand over the last three years, he said.
"They create up to 400 companies a week and sell it, so
they're actually complicit in crime ... their business is VAT
fraud," Kieswetter said.
Kieswetter also said the revenue authority had recently
seized scores of containers at ports of entry for customs tax
contraventions, in areas such as textiles, footwear and sugar.
The tax commissioner said the agency was targeting 159
prominent individuals for possible prosecution stemming from
ongoing judicial inquiries into state and business corruption.
"We need to ensure that revenue that is due to the state is
collected," Kieswetter said.
(Reporting by Wendell Roelf and Mfuneko Toyana; Editing by Mark
Potter)
