FORMER African National Congress (ANC) Youth League president Julius Malema’s proposal to pay R4m to settle his tax liability of more than R16m has been rejected by the South African Revenue Service (SARS).
The agency this week applied in the North Gauteng High Court for the sequestration of his estate.
Mr Malema has been in the political wilderness since his expulsion from the ANC last year and now faces financial woes after SARS rejected his offer.
SARS states in the court papers that Mr Malema is factually insolvent — he planned to borrow the R4m to settle his tax debt. It would be to the benefit of his creditors if his estate was sequestrated to enable a trustee to find the hidden assets, lift the corporate veil where necessary, and collect monies and assets due to the insolvent estate.
SARS started investigating the tax affairs of Mr Malema and the companies associated with him in 2010. It assessed him for outstanding and additional taxes, and interest from 2005 to 2011, to the tune of R16.1m. Another assessment for the 2011-12 year indicated an additional R2m tax liability.
The court documents referred to discrepancies in his explanations of where large amounts of money that were deposited into his bank account and that of the Ratanang Family Trust came from.
The value of his Sandton property was initially set at R7.1m, but subsequently dropped to R3.6m.
SARS said in the court papers it had confirmed that the property was bought for R3.6m and that a further R5.8m had been paid to a contractor for "building works".
Mr Malema initially said his net assets were worth R8.5m, but later changed that to R5.6m and eventually R1.4m. "It is contended that these discrepancies are not conducive in concluding that the respondent has indeed made a full and frank disclosure to SARS," the agency said in its notice of motion.
SARS advised Mr Malema in 2009 that his tax affairs were not in order. He subsequently filed his tax returns, but did not include a statement of assets and liabilities.
Mr Malema further did not include indirect assets such as the Schuilkraal farm that is registered to an entity linked to Gwama Properties, which is 100% owned by his family trust. He neither disclosed any loan account or any rights associated with the farm.
According to the court papers, the trust received a large number of deposits, "a significant amount of which was in cash, and the majority was spent on Mr Malema’s personal expenses". The trust was a conduit for Mr Malema to receive funds and was "in actual fact (his) alter ego".
When SARS questioned Mr Malema about monies deposited into his bank account and that of the trust, he first said they were donations from anonymous donors, but when it was pointed out that SARS had established where the deposits came from, he changed tack.
SARS further pointed out that only a few people and entities had deposited the money. Mr Malema then said the sums were not really donations, but "distributions of earnings" and "exempt dividends".
Efforts to contact Mr Malema through his attorneys of record were unsuccessful.
Mr Malema has until February 18 to indicate whether he will oppose the sequestration application.
The matter has been set down for February 27.