Pieter Erasmus, CEO of retailer Pepkor, has been unsuccessful in his attempt to have a R320 million tax bill dismissed.
- The South African Revenue Service (SARS) audited Erasmus and found him liable for R183 million in back taxes and R137 million in understatement penalties.
- SARS claims that the back taxes are related to a R1.4 billion distribution received by Erasmus and his family trust in 2015 from a company called Treemo. The distribution consisted of R167 million via a capital distribution and R1.22 billion via a cash distribution.
- Erasmus and his family trust were shareholders in Treemo, and SARS alleges that he attempted to avoid paying taxes on the distribution through an impermissible tax avoidance arrangement.
- Erasmus argues that the distributions he received were fully exempt from tax. He claims that the R167 million capital payout was tax-free as it constituted a return of capital, and the R1.22 billion cash distribution should not be taxed as Treemo had over R1 billion in Secondary Tax on Companies (STC) credits.
- SARS accuses Erasmus of contriving complex transactions to obtain the STC credits solely to evade dividend tax. They argue that the distributions were not exempt and should be subject to taxation.
- Erasmus took the tax assessment on review to the Western Cape High Court, seeking a quicker and more convenient resolution. However, the court ruled that tax reviews can only succeed in civil courts under exceptional circumstances and that Erasmus should follow the regular process of lodging an objection or appealing to a tax court.