Court case puts SARS on the spot over ‘rogue’ unit

court image 1Author: Natasha Marrian (BDlive)

An alleged tax offender, who was also suspected of drug smuggling, is taking the South African Revenue Service (SARS) to court over millions he paid in penalties in a case that tests the lawfulness of the work of a covert unit of the agency.

Martin Wingate-Pearse has argued in court papers that information on his case was obtained through unlawful means, in particular through the work of the alleged “rogue unit” whose existence came to light last year.

The case is set to shed further light on the activities of the unit and places SARS in an awkward position as it is forced to defend the actions of a unit it has already found to be unlawful.

The case also puts it at risk of having to account for millions in tax penalties as it also opens the way for similar challenges by other tax offenders who were nabbed through the work of the unit.

Mr Wingate-Pearse, a businessman and shareholder in tobacco company Carnilinx and with interests in the property and clothing industries, wants estimates of his taxable income — that amounts to tens of millions of rand — from 1998 to 2005 by SARS to be declared inconsistent with the Constitution and invalid.

In a sworn affidavit, he details his long battle with SARS. He has applied to the High Court to have all information that was obtained by SARS through specific investigations “reviewed, corrected and set aside”.

These include investigations based on reports by former national police commissioner Jackie Selebi, information supplied by underworld boss Glenn Agliotti, any information arising from unlawful interception and monitoring, and any information supplied by Pretoria-based attorney Belinda Walter.

Mr Wingate-Pearse became the subject of a SARS probe in 2005 at the request of Mr Selebi. He was among three individuals under scrutiny as the probe included Mr Agliotti and tobacco company Carnilinx director Adriano Mazzotti.

Mr Wingate-Pearse is relying on the Sikhakhane Report, a media statement by Judge Frank Kroon and a supporting affidavit by Ms Walter, to argue his case.

The Sikhakhane Report arose out of an internal SARS investigation headed by Advocate Muzi Sikhakhane into the covert unit.

It found “prima facie” evidence of the existence of the rogue unit and recommended that a judicial commission of inquiry investigate the matter further, but that has not been done.

The report found that the unit might have abused its power and resources, and violated SARS’s human resources policy in the recruitment, funding and practices of the unit.

The report added that there was prima facie evidence suggesting that the activities of the unit might have included rogue behaviour with the potential to be damaging to the reputation of SARS.

The findings prompted a widespread shake-up of senior SARS executives, such as its former deputy commissioner Ivan Pillay who resigned earlier this year after reaching a settlement with the agency during a long suspension.

Retired Judge Kroon was tasked by the Treasury to, among other matters, look into the findings of the Sikhakhane investigation.

Judge Kroon endorsed the findings of the investigation earlier this year. SARS had hoped that that would put to rest the speculation around the rogue unit after months of damaging media reports.

Mr Wingate-Pearse is not the first person to use the existence of the unit to argue against the tax agency’s investigations — according to insiders, it was also used by Economic Freedom Fighters leader Julius Malema.

Mr Wingate-Pearse argued that his right to privacy and dignity had been violated by SARS and former investigations head Johann Van Loggerenberg when they had unlawfully monitored and intercepted his communication and that of his attorney. This also violated his right to a fair tax appeal. He has asked for the “thorough and systematic dismantling” of the “apparatus and decisions” that had prejudiced him, namely, the unit.

He argues that if the establishment of the “rogue investigation unit” was illegal, it had to follow that the “result of the unit’s conduct” was also unlawful and that SARS’s “relentless” pursuit of him was biased and without basis.

“My dignity has similarly been offended by the allegations of drug smuggling activities … I have been investigated unjustifiably and on the basis of false information,” he said in the affidavit.

“The very fact that my communications were unlawfully surveilled and intercepted by SARS officials necessarily means that SARS, in litigating against me, was privy to information that it should not have had.

“It follows that in the tax appeal, I cannot be afforded the right to a fair public hearing.”

SARS has opposed the application.

In the court record, there was only a small number of pages in the case file on Wednesday.

In one of the documents in the file, SARS said that it did not make any decision to unlawfully investigate Mr Wingate-Pearse, and did not make any decision to unlawfully surveil him and intercept his communications.

Mr Pillay and Mr van Loggerenberg have been cited as respondents in the case.

Mr Pillay set out the history of the unit and the many investigations into its existence since 2010. He added that investigations into Mr Wingate-Pearse’s tax affairs dated back to 2002 and the unit, known as the National Research Group, was established in 2007 and thereafter.

Mr Wingate-Pearse has also cited the ministers of finance, police, state security and the national director of public prosecutions as respondents.

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