Commissioner SARS v Mark Krok (HC 1319/2013 NG)
25 February 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
The North Gauteng High Court delivered judgement to confirm a preservation order granted in favour of SARS, in terms of the provisions of section 163 of the Tax Administration Act, no 28 of 2011.
During January 2012, SARS received a request from the Australian Commissioner for assistance with tax collection and conservancy of the assets of the Respondent in South Africa, pending collection of the amount alleged to be due by the Respondent under the tax laws of Australia. The request was accompanied by a formal certificate from the Australian Commissioner stating that the respondent was liable to the Commissioner for taxes in a total amount of Australian $25,361, 875, 799,(which during April 2013( according to Applicant's heads of argument) was R235,705,169, 19.)
The tax liabilities arose as a result of the Australian Commissioner issuing a Notice of Assessment of Tax Penalties under the Australian Law. The respondent had lodged an objection to the Notices of Assessment of Tax and Penalties under the procedures provided for by the Australian Tax law. The objection was disallowed in full and a notice was sent to the taxpayer on 06 February 2012 on the premise that there is a risk of dissipation or concealment of the assets by the respondent. SARS agreed to lend assistance to the Australian Commissioner in terms of the Protocol in the collection of the said revenue claim with article 25A of the Agreement and successfully obtained a provisional preservation order and appointed a curator bonis to take control of the South African assets of the respondent, in terms of Section 163 of the Tax Administration Act on 18 February 2013. The order effectively secured all assets of Mr Krok to the value of R297 million (including a R40 million property purchased in Clifton) for the collection of the outstanding tax debt of R249 million owed to the ATO, whilst allowing some grace for the release of funds for living and legal expenses.
At the time when the initial request was received, there was no special provision in the South African Tax Acts which entitled SARS to apply for orders to preserve assets. SARS therefore was at that stage dependent on the provisions of the common law in that regard. The Tax Administration Act no. 28 of 2011 was subsequently assented to.
Counsel for the respondent submitted that three issues arose in this case for decision namely whether or not applicant had discharged the onus that rested on it in the context of the relevant legislation and the protocol, whether or not the facts would justify a reasonable apprehension of dissipation, and whether and whether the introduction of Article 25A into the DTA applied to taxes claimed by the ATO from the respondent for the income ending 30 June 2004 to 30 June 2009
Counsel for the respondents argued that Article 25A of the Protocol can only be invoked by the authorities if the taxes owing to the ATO arose during the income years commencing on 01 July 2009, and further, the second respondent is the beneficial owner of the assets that formed the subject matter of the application, and that those assets should therefore not form part of any provisional or final preservation order.
The Provisional Preservation Order made by the Court on 18 February 2013 was confirmed in respect of par .3 to 7 thereof;
The respondents were ordered to pay Applicant's costs jointly and severally , including the costs of two counsel.
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