Bravura in the firing line

The South African Revenue Service (Sars) has taken out one of its most powerful weapons against tax avoidance and tax evasion – the Section 50 inquiry in terms of the Tax Administration Act.

It has approached the Johannesburg High Court for an order to conduct an inquiry into the tax affairs of Bravura Equity Services, Bravura’s director Ian Matthews, Bravura Treasury and 126 others. The court has granted the order.

In terms of the act, a judge may grant an inquiry order on grounds to believe that relevant material is likely to be revealed which may prove non-compliance.

During such an inquiry, taxpayers are questioned under oath.

Sars claimed Bravura had been designing, marketing, selling, and implementing tax avoidance schemes.

The Sars investigation showed Bravura created special purpose vehicles to facilitate the flow of income, or to house offsetting assets and liabilities.

It has identified simulated transactions, “round-tripping” and cross-border arrangements involving convertible capital loans.

Bravura “vehemently denied” these claims. They said the business provides corporate advisory services to clients in relation to “corporate finance, mining and property-related transactions, mergers and acquisitions and BEE requirements”.

Sars argued that despite the threat of penalties, none of the Bravura entities involved in the investigated structures complied with their reporting obligations.

Sars says there are certain structures entered into by Bravura of which it only has code names such as Project Fox, Project Feather and Project M-Power.

Bravura has asked the court to dismiss the application describing it “far-reaching, open-ended and invasive”.

It indicated that it would be similar to an “interrogation involving coercion”.

Bravura has argued Sars rely on broad, vague, general and unsubstantiated allegations – and that Sars draws “factual bereft” conclusions of its case.

The court found otherwise, authorising Sars to conduct an inquiry into whether Bravura entities have failed to submit tax returns and to pay income tax in respect of the fees charged by them, whether they have failed to pay secondary tax on companies and VAT and whether they have “dishonestly evaded tax”.