Sars scores victory against delinquent taxpayer PFC Properties

The Supreme Court of Appeal (SCA) has ruled in favour of the South African Revenue Service (Sars) and dismissed with costs PFC Properties’ two attempts to avoid settling a tax bill, one of which involved launching a business rescue application.

The judgement handed down on Friday, 21 July, was officially welcomed by the Sars Commissioner Edward Kieswetter on Tuesday, with the taxman reiterating its commitment to collecting all its dues.

According to the SCA, PFC owed Sars about R52 million in Vat and another R5 million in income tax. However, PFC’s failure to pay led to the revenue collector launching wind-up proceedings at the Pretoria High Court.

Read: Company liquidations on the decline

Delay tactics

However, to avoid the liquidation attempt, the trustees of the De Robillard Family Trust – the insolvency trustees – successfully applied to intervene in Sars’ winding-up proceedings, later launching a business rescue application at the Pietermaritzburg High Court.

However, despite Sars and the insolvency trustees filing answering papers in the business rescue application, PFC failed to file a replying affidavit, instead opting to seek postponement of the business rescue application just a few days before the hearing of the winding-up application, the SCA noted.

The SCA dismissed the appeals against orders of the Pretoria High Court and the Pietermaritzburg High Court, with the SCA finding that PFC’s use of rescue processes in the latter court to prevent paying Sars “constituted an abuse of court proceedings”.

“The SCA held that that application should not have been considered by reason of its use in a scheme of abuse. The business rescue application was a stratagem,” the SCA said in a statement.

The appeals court further held the view that the business rescue application had been launched by the appellant parties to advance a technical argument that would effectively delay Sars’ winding-up application, any inquiry into the stewardship of PFC by the trustees and the settling of tax debts.

“Consequently, the business rescue application could not suspend the liquidation application because the former was tainted by abuse,” the SCA said.

Further weakening the PFC’s business rescue case was the entity’s inability to adequately argue a case for PFC’s rescue, especially since all the entity’s assets had been sold.

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The fiscus suffers

Kieswetter condemned the abuse of the business rescue proceedings to evade tax, adding that the devious tactic ultimately ends up weakening the fiscus.

“It was unfortunate that some taxpayers abuse the business rescue proceedings, to the detriment of creditors.”

“In most instances, the fiscus is the main victim. Sars will continue to act firmly and decisively when business rescue proceedings are abused to the detriment of the fiscus. We will, without any equivocation, oppose such abusive applications,” he added.

The revenue service further noted that the abuse of the Companies Act will not be tolerated, and any evasive tactics by taxpayers will be resisted.

“Sars will always work in a manner that supports the growth of the economy with concomitant job creation. Where, for whatever reason, businesses do not perform optimally and they are unviable, every role player in the process is duty bound to act professionally and without fear, favour or prejudice against any creditors,” Sars added.

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