CR17 campaign donations may have serious tax implications, APF calls for investigation
CAPE TOWN – The Anti-poverty Forum (APF) has called on the South African Revenue Services (Sars) Commissioner Edward Kieswetter to have a CR17 campaign fund donation investigation regarding possible tax law violations.
In an open letter to Kieswetter, the APF said there were possible tax law violations linked to the donations.
“As the APF, we have decided to approach Sars and call on it to fulfil its duties as prescribed in Chapter 13 of the Constitution of the Republic and Tax Administration Act No. 28 of 2011. In particular Paragraph 3 (2)(a-h), under which Sars is legally obligated to investigate possible or alleged tax offence and if need be, lay criminal charges against perpetrators,” the APF said in the letter.
In July, Public Protector Busi Mkhwebane found that President Cyril Ramaphosa misled Parliament and violated the Executive Ethics Code by not disclosing the CR17 donations.
Mkhwebane referred the matter to the National Director of Public Prosecutions for further investigation into the prima facie evidence of money laundering uncovered during the investigation.
In response to questions from Business Report Sars said a tax inquiry was private and confidential in nature, therefore, was not in a position to provide details on the matter.
“Sars is bound by Chapter 6 of the Tax Administration Act, 2011, dealing with confidentiality of information, and more specifically section 69 of the Act, which provides for the secrecy of taxpayer information,” Sars said. “This includes investigations into taxpayers or traders.”
Sars sent a clarification note on what constitutes a donation and can be taxed, as well as the impact of paying an amount without it being a donation.
Sars said the term “donation” referred to a gratuitous disposal of property. “Firstly, donations tax applies to any individual, company or trust that is a resident as defined in the Income Tax Act. Secondly, the law contains a list of exempt donations, which include, among others, donations between spouses and to any sphere of government, any registered political party, or any approved public benefit organisation.”
A donation would be exempt if the total value of donations for a tax year did not exceed R100 000 of property donated by a natural person or R10 000 of casual gifts in the case of a taxpayer who is not a natural person.
Donations tax must be paid to Sars by the end of the month, following the month during which the donation was made. The donor is liable for the tax, but if the donor fails to pay the tax within the set period, the donor and donee are jointly liable for the tax.
Mkhwebane found that the CR17 campaign received monetary donations from individuals and companies.
The APF said it was inevitable that such financial activities would attract tax obligations. It said it was impressed by Sars’s swift move on Bosasa allegations as presented at the State Capture Commission, including Sars establishing a committee to investigate the tax implications.
“Sars must be seen as acting consistently. The APF is calling on Sars to establish a committee – similar to that established for Bosasa – or extend that committee’s terms of reference to investigate the CR17 donations,” the APF said.
In August Ramaphosa told Parliament those who received money from the CR17 account did not have to explain as no taxpayers’ monies were used to fund the campaign.
The APF said this argument was problematic and needed to be investigated as it potentially misled the public and encouraged tax evasion.
“The majority of people whose names are listed in the bank statements in circulation are taxpayers… of which a legal requirement arose that they declare the funds they received from the CR17 account(s), failing which, their actions are tantamount to tax evasion,” the APF said.
South African Students’ Congress president Avela Mjajubana recently approached the Johannesburg High Court for relief after his organisation’s national executive committee sidelined him following revelations that he had received almost R1 million from the CR17 funds.