SARS Clamps Down on Tax Evasion: Karino Homeland Distribution Faces Seizure of Goods

The South African Revenue Service (SARS) has made a decisive move against tax evasion in the country, sending a stern message to businesses operating within its borders. In a recent clampdown, the agency seized goods valued at approximately R10 million from Karino Homeland Distribution, a Cape Town-based liquor distributor, on allegations of diverting a consignment meant for Mozambique into the South African market without paying the requisite duties and value-added tax (VAT).

Karino, known for distributing an array of imported spirits including Scottish and Irish whiskies, Armagnacs, and Italian craft liquors, faced a hefty tax bill of nearly R4 million for purportedly rerouting shipments. The allegations suggested these consignments, which included one transaction from December 2022 involving alcohol imported from Namibia with a claimed destination of Mozambique, were instead intended for sale in the South African market. When asked to provide evidence to back up the claim of transit to Mozambique, Karino reportedly failed to convince SARS, incurring an initial tax bill of R3 million.

The matter swiftly escalated as SARS, under the leadership of Edward Kieswetter, expanded their investigation to include additional consignments, leading to an extra R3.9 million tax liability for a separate batch supposedly bound for Zimbabwe. Karino contested this liability, asserting they had complied with all necessary protocols and provided adequate documentation to prove the proper export of the goods. SARS, however, contested the legitimacy of the documentation, suspecting forgery.

In response to these accumulating charges and the seizure of goods, Karino sought relief from the Western Cape High Court to reclaim its property, claiming that the value of the goods seized far exceeded the debt owed. Their appeal, however, was not persuasive enough for the court, which recently dismissed their application following a judgment that highlighted the ongoing settlement negotiations and proposals including deferred payment arrangements admitted by Karino themselves.

This case highlights not only the challenges that SARS faces in curbing tax evasion but also its recent successes, particularly in the wake of an October report by Business Day. Following a constitutional court confirmation, steps have been taken by the national treasury to close loopholes previously exploited by diplomats. These individuals were previously authorized to purchase alcohol and tobacco products duty-free, a privilege suspected to have been abused through illicit trade, costing the fiscus an estimated R100 million per month. Amendments to the Customs and Excise Act and VAT Act in 2021 have since removed these duty-free perks for diplomats, thereby protecting valuable revenue streams for the country.

Karino's case provides a cautionary tale for businesses regarding compliance with tax regulations and the potential ramifications of diversionary practices in international trade. As South Africa tightens its fiscal policies, it is clear that SARS will continue to take firm action to protect the integrity of its tax system and pursue entities that attempt to bypass due financial obligations to the state.