Com­ing out fight­ing

Finweek English Edition - - Cover - BRUCE WHIT­FIELD

BUSI­NESS­MAN DAVE KING is turn­ing up the heat in his eight-year tax bat­tle with the South African Rev­enue Ser­vice. At the time of writ­ing, King was plan­ning a 4 Novem­ber press con­fer­ence at which he promised to lay bare is­sues around his long-run­ning and ex­traor­di­nary tax bat­tle. While the out­spo­ken King has con­sis­tently been crit­i­cal of Rev­enue, its meth­ods and its com­mis­sioner – Pravin Gord­han – he’s also now dis­clos­ing de­tails of his deal­ings with the Scor­pi­ons.

But why is he com­ing out pub­licly now? Le­gal costs are prob­a­bly around a quar­ter of a bil­lion rand so far and climb­ing. King says he has spent R125m, while sources sug­gest Rev­enue has spent less than that, putting its bill so far at less than R100m.

“My point is that Gord­han isn’t the right per­son to keep lead­ing Rev­enue. He’s done a mar­vel­lous job of chang­ing the tax cul­ture. He’s made ev­ery­body fright­ened of Rev­enue. He’s been the en­forcer. But it’s time for change,” says King, who shows no sign of ton­ing down his vit­ri­olic crit­i­cism of Rev­enue, which he’s long ar­gued has abused its pow­ers.

“There have been par­al­lel deal­ings. In pri­vate with me they say one thing and their spin-doc­tors say an­other thing pub­licly. It’s time to put the facts on the ta­ble and let them speak for them­selves. I have doc­u­ments to prove SARS has used the South African courts for con­ve­nience and they have per­jured them­selves in in­ter­na­tional courts,” says King, who ar­gues he’s been re­strained in his re­sponses to re­ports with which he’s dis­agreed or which he re­gards as fla­grantly in­ac­cu­rate in re­cent years.

“They must know that from now on each time they say some­thing pub­licly – or a story is pub­lished with in­ac­cu­ra­cies – I will re­spond. The idea be­hind the press con­fer­ence is to pro­vide the me­dia with a data­base as a ref­er­ence point,” King says. He’s in­vited Rev­enue’s com­mis­sioner and the head of the Scor­pi­ons to at­tend the press con­fer­ence and has promised them an op­por­tu­nity to speak, of­fer­ing to re­lax se­crecy pro­vi­sions of the Tax Act should they choose to ac­cept his in­vi­ta­tion. At the time of writ­ing, it ap­peared un­likely that ei­ther body would at­tend.

King con­firmed last week he’s been in ne­go­ti­a­tions with Rev­enue over what he

owes. It claims he owes more than R3bn in taxes, fines and in­ter­est. He de­nies that quan­tum, but con­cedes he did fail to prop­erly dis­close the struc­ture of his af­fairs at the time he con­tro­ver­sially sold shares in Spe­cialised Out­sourc­ing for a tidy profit of around R1bn. The listed com­pany was a con­sid­er­ably prof­itable trea­sury out­sourc­ing ser­vices busi­ness that worked pri­mar­ily for KwaZulu-Natal util­ity Um­geni Wa­ter.

Fi­nan­cial in­sti­tu­tions fell over them­selves for stock, which King and his fel­low direc­tors were only too happy to pro­vide at a time when they were not legally obliged to dis­close direc­tors’ deal­ings on Sens. How­ever, af­ter a re­port by then In­vestec Se­cu­ri­ties’ an­a­lyst An­drew Cuffe that chal­lenged the Out­sourc­ing busi­ness model and pointed out it was mas­sively over­val­ued, the stock fell through the floor, hurt­ing in­sti­tu­tional and pri­vate in­vestors alike.

“Am I squeaky clean? I’m not,” says King, “I’ve al­ways ac­cepted I should have pro­vided bet­ter dis­clo­sure to Rev­enue and that I should have in­formed them of the off­shore trusts of which I was a ben­e­fi­ciary. It wouldn’t have changed my tax sta­tus but they would have had the in­for­ma­tion they re­quired.”

King clearly feels he has noth­ing to lose by go­ing pub­lic. He isn’t con­strained by the same se­crecy pro­vi­sions that Rev­enue op­er­ates un­der in terms of SA’s In­come Tax Act. Rev­enue is likely to crit­i­cise King’s ap­proach but the busi­ness­man is ready to be re­buked.

Says King: “Rev­enue has made school­boy er­rors in its as­sess­ments. There have been cases where it has dou­ble counted things like share trans­ac­tions – ba­sic stuff they’ve got wrong. They have the in­for­ma­tion but won’t change the as­sess­ments, as they are the ba­sis for the le­gal case against me.”

“bat­tle could take an­other 6 or 7 years.” Dave King

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