<\/p>\n\n\n\n
\u2018Tax evasion\u2019<\/h5>\n\n\n\n So why the convoluted structure? In a series of letters, Sars claimed the agreements were simply part of an \u201celaborate daisy chain\u201d designed to achieve some ulterior purpose.<\/p>\n\n\n\n
\u201cThe unstated purpose of Tullow UK was to remove the underlying assets of the taxpayer from SA without paying [capital gains tax] or [secondary tax on companies],\u201d it says.<\/p>\n\n\n\n
ENS wrote back to Sars, denying this.<\/p>\n\n\n\n
Rather, it said: \u201cThe [Tullow] restructure was the only reason the transactions were concluded at all.\u201d<\/p>\n\n\n\n
Sars believed the entire scheme was devised to \u201cmisuse or abuse\u201d a local tax break called a \u201cparticipation exclusion\u201d. This allows a South African to sell shares in a foreign asset to a foreign buyer and bring that money home without paying capital gains tax.<\/p>\n\n\n\n
However, this tax break is not allowed if the buyer and seller are connected parties and if the buyer does not pay the full price, among other conditions.<\/p>\n\n\n\n
So, practically, if a Tullow company in SA sold a R3.9bn asset to a Tullow company in the Netherlands for only R8.6m, Tullow would have to pay capital gains tax.<\/p>\n\n\n\n
But with ENS\u2019s trust playing the middleman, Energy Africa and Tullow\u2019s Dutch company were unrelated (on paper, at any rate) when the oil exploration assets were transferred from SA to the Netherlands.<\/p>\n\n\n\n
And because Tullow\u2019s Netherlands company had transferred a R3.9bn IOU to Energy Africa in return for the assets, a fee was paid \u2014 in theory.<\/p>\n\n\n\n
Sars argued this was all \u201can illusion\u201d. \u201cThe true substance of the transaction\u201d, it said, was that Energy Africa and Tullow\u2019s Dutch subsidiary were connected parties, while the R3.9bn price tag was also a simulation.<\/p>\n\n\n\n
\u201cThe consideration, if the suite of agreements is looked at holistically, is the [R8.6m] paid by [Tullow\u2019s Netherlands company] when the Tullow group \u2018bought back\u2019 it s own assets. That was the true consideration.<\/p>\n\n\n\n
There was never any intention that the [shares in the assets] would be disposed of by [Energy Africa] for an amount equal to the [R3.9bn] valuation.\u201d<\/p>\n\n\n\n
In other words, the Sars official concluded, \u201cI am of the view the ostensible consideration [R3.9bn] was a sham.\u201d As a result, capital gains tax had to be paid, according to Sars.<\/p>\n\n\n\n
And because assets worth about R3.9bn had changed hands between connected parties for just R8.6m cash, Sars considered the difference to be a dividend that Energy Africa had distributed to its \u201cparent\u201d Tullow.<\/p>\n\n\n\n
Sars argued that the company paying this \u201cdividend \u201d should also be taxed under an old provision known as a secondary tax on companies.<\/p>\n\n\n\n
In its letters to Energy Africa, Sars said:<\/p>\n\n\n\n
\u201cWith respect to the application of the doctrine of substance over form, it is the view of the commissioner that the taxpayer deliberately concealed the true substance of the transactions undertaken, and in doing so knowingly created a sham \u2026 with the intention of evading tax.\u201d<\/p>\n\n\n\n
Sars later calculated that the two taxes came to R940m. This, in addition to penalties of 150% plus interest, puts Sars\u2019 claim now at R3.7bn.<\/p>\n\n\n\n
Wiese\u2019s little tax haven<\/h5>\n\n\n\n It gets worse, however. The law firm\u2019s new trust was now the proud owner of Energy Africa, but while their acquisition had given away its assets, it did still contain a trump card: an asset known as an \u201cassessed loss\u201d.<\/p>\n\n\n\n
This is because, in previous years, Energy Africa had lost R198m, so it could theoretically write off future profits against this without paying tax. It meant the mysterious people behind the ENS trust could profit from this situation \u2014 which they did in step three.<\/p>\n\n\n\n
In April 2007, three months after the Tullow restructure, an ENS man named Gert Viljoen approached Wiese with a proposition. Viljoen, then ENS\u2019s \u201cexecutive head: special projects\u201d, had played a part in advising Tullow on its Dutch restructure.<\/p>\n\n\n\n
A more recent ENS letter in the court file said Viljoen had \u201ca longstanding relationship with [Wiese\u2019s Titan group], spanning more than 15 years\u201d.<\/p>\n\n\n\n
So on that day in April 2007, Viljoen acted \u201cas representative of the Enact Trust\u201d when he suggested that Wiese\u2019s company, Titan Premier Investments, should buy Elandspad. Titan duly did so, paying R12m to Enact.<\/p>\n\n\n\n
For Viljoen and ENS, this was an opportunity to release the value (and then some) tied up in Energy Africa\u2019s frozen R8.6m. That money passed on to Wiese for use later, while he also became the proud owner of Energy Africa\u2019s assessed loss, which he could then use for future tax write-offs.<\/p>\n\n\n\n<\/p>\n\n\n\n
Sars, however, says this was just another link in the \u201cdaisy chain\u201d in which, it said, Tullow and Titan \u201cbartered\u201d tax benefits.<\/p>\n\n\n\n
On Sars\u2019 \u201cbartering \u201d interpretation, Titan had helped Tullow to dodge taxes when it moved assets offshore, and in return, Titan got Energy Africa\u2019s tax loss plus R8.6m cash.<\/p>\n\n\n\n
In the process, Sars said: \u201cThe Titan group indemnified the Tullow group against any potential SA tax liability.\u201d<\/p>\n\n\n\n
But here, it seems Sars made an error. It had ignored the ENS trust\u2019s role as a middleman, and it was Elandspad (effectively the ENS trust) that indemnified Tullow, not Titan.<\/p>\n\n\n\n
ENS and Wiese jumped on this point, arguing strenuously against Sars\u2019 interpretation. In an e-mail to amaBhungane, Wiese made two points: \u201cFirst, the Titan Group had no involvement in the restructure by the Tullow group of its operations and there was no \u2018trading of tax benefits\u2019 between the Tullow and Titan groups.\u201d<\/p>\n\n\n\n
Sars disagrees.<\/p>\n\n\n\n
In an earlier letter to Energy Africa, Sars said: \u201cAt the time of the assessment, the involvement of the Enact Trust was not known to the commissioner of [Sars]. [He] does not know the terms of the agreement whereby the transfer from the Enact Trust to Titan was effected \u2026 In any event, the assessment raised by the commissioner is neither founded on nor rendered invalid by the involvement of the Enact Trust.\u201d<\/p>\n\n\n\n
In any event, if Sars was to decide that Tullow dodged tax, Wiese wanted nothing to do with it. According to letters from ENS in the court file, Titan had bought Elandspad on condition that the ENS trust indemnified Titan from \u201cany historic obligations or liabilities that may arise\u201d from the Tullow restructure.<\/p>\n\n\n\n
So the people behind the ENS trust appeared to remain exposed to any potential tax bills. In point number two of Wiese\u2019s e-mail to us, he said: \u201cSecondly, the Titan Group derived no tax benefit in respect of its subsequent acquisition of Energy Africa from Elandspad.\u201d<\/p>\n\n\n\n
Sort of.<\/p>\n\n\n\n
In the court papers, Sars says that immediately after buying Energy Africa, Titan shifted R657m cash into Energy Africa, with which it traded in single stock futures. It also got an \u201cinter group management fee\u201d and other fees.<\/p>\n\n\n\n
And every year that Energy Africa turned a profit, it wrote this off against Tullow\u2019s old assessed loss and did not pay tax.<\/p>\n\n\n\n
In a letter, Sars said: \u201cThe taxable income [Energy Africa] earned in the 2007 to 2012 years [after Titan bought it] amounts to approximately R200m, which dovetails with the assessed loss of approximately R198m. \u201cThe main objective of the Titan group [in buying Elandspad and Energy Africa] was to access the assessed loss. Once it had done so and exhausted the tax benefit of the assessed loss, it withdrew the activities it had introduced.<\/p>\n\n\n\n
\u201cThe taxpayer is now dormant.\u201d<\/p>\n\n\n\n
Much later, Sars slapped Energy Africa with a R100m tax bill (including penalties and interest) \u201con the basis that the sole or main purpose for the Titan Group acquiring the shares in [Energy Africa] was to utilise the assessed loss\u201d.<\/p>\n\n\n\n
Titan ultimately paid Sars an undisclosed settlement for this. So, yes, Wiese might say that Titan \u201cderived no tax benefit\u201d.<\/p>\n\n\n\n
Gunning for Wiese<\/h5>\n\n\n\n To step back into our chronology, a few years after Tullow\u2019s restructure in 2007, Sars went for Wiese\u2019s throat. It appears this was sparked by an unfortunate incident Wiese had in London.<\/p>\n\n\n\n
On April 27 2009, Wiese tried to board a flight from London City Airport to Luxembourg, carrying \u00a3120,000 cash in his carryon luggage. He had also stuffed another half a million pounds (about R9m then) into his suitcases.<\/p>\n\n\n\n
Customs officials stopped him and took the money.<\/p>\n\n\n\n
Wiese reportedly told them these were profits from his diamond deals back in the 1980s, and that he was off to invest the money in Luxembourg.<\/p>\n\n\n\n
Wiese fought in a British court and eventually got the money back. But according to later news reports, the scuffle sparked interest from Sars, leading to a big audit.<\/p>\n\n\n\n
A year and a half after the London bust, the first tax bill landed at Energy Africa\u2019s door. This was for its use of the assessed loss, discussed previously.<\/p>\n\n\n\n
Nearly a year later, in August 2012, City Press<\/em> and the Sunday Times<\/em> announced in tandem that Sars had slapped Wiese with a R2bn tax bill. It is unclear if this was related to the Energy Africa affair.<\/p>\n\n\n\nThe next month, Sars sent Energy Africa another R20m bill, and in November the big one landed: a 32-page letter from Sars\u2019 Large Business Centre in which officials explained their audit of the Tullow restructure, and they notified Energy Africa that they intended to claim R940m in unpaid tax, plus penalties and taxes (now R3.7bn).<\/p>\n\n\n\n
The Large Business Centre at Sars was a highly specialised unit that dealt with SA\u2019s biggest, most complicated taxpayers: large corporates like Tullow and \u201chigh net worth individuals\u201d like Wiese. It collected about a third of Sars\u2019 revenue.<\/p>\n\n\n\n
Recently, the former head of the centre, Sunita Manik, publicly accused former commissioner Tom Moyane of undermining and dismantling it. Moyane has denied this.<\/p>\n\n\n\n
In an e-mail to amaBhungane, ENS\u2019s Dachs tried to explain that Sars did not base its technical case on a charge of \u201ctax evasion\u201d.<\/p>\n\n\n\n
Tax evasion is a criminal offence as opposed to \u201cav o id a nce\u201d, which is sometimes allowed and sometimes not. However, it is easier for a revenue collector to sustain an allegation of avoidance.<\/p>\n\n\n\n
One person sympathetic to ENS who knows this case well told us that Sars will often accuse a taxpayer of evasion when it is arguing for a big penalty, even if the underlying claim is of avoidance. He said this was what Sars did in Energy Africa\u2019s case.<\/p>\n\n\n\n
Said Dachs: \u201cIn respect of the merits,\u201d \u2014 he underlined this part in the e-mail to us \u2014 \u201cSars has never alleged or argued that the restructure transactions constituted a \u2018tax evasion scheme\u2019.\u201d<\/p>\n\n\n\n
Instead, he said Sars argued that the \u201csubstance over form\u201d doctrine applied to thetransactions and, alternatively, that the general antitax-avoidance rules applied to the transactions.<\/p>\n\n\n\n
Wiese tries to wash his hands<\/h5>\n\n\n\n Meanwhile, Gert Viljoen left ENS in 2011 to start his own boutique financial advisory firm, nestled on the first floor above a famously trendy bakery and coffee shop in Bree Street, Cape Town.<\/p>\n\n\n\n
It was Viljoen who sold Wiese the scheme in 2007 on the condition that, should Sars come knocking concerning Tullow\u2019s tax affairs, it would not be Titan\u2019s problem.<\/p>\n\n\n\n
Then Sars had come knocking \u2014 and Wiese sent someone from Titan to tell<\/p>\n\n\n\n
Viljoen. Wiese\u2019s man \u201crequested\u201d that Viljoen take over Elandspad and Energy Africa \u201cto deal with such an inquiry\u201d, according to letters in the court file.<\/p>\n\n\n\n
Viljoen was ready to oblige.<\/p>\n\n\n\n
Writing to Sars on his behalf much later, ENS said: \u201cIt was relevant for Mr Viljoen\u201d that Titan had major interests in Shoprite, Steinhoff International Holdings and Pepkor Group.<\/p>\n\n\n\n
\u201cMr Viljoen thus considered it in the interest of his business to acquire the shares in [Energy Africa] as requested by [Titan].\u201d<\/p>\n\n\n\n
In other words, Viljoen\u2019s fledgling outfit relied on Wiese\u2019s business.<\/p>\n\n\n\n
As ENS put it: \u201cMr Viljoen considered himself, together with ENSafrica, to be best placed to deal with Sars\u2019 inquiries.\u201d So Viljoen and ENS prepared themselves for a R3.7bn fight.<\/p>\n\n\n\n
In April 2013, five months after the Sars Large Business Centre\u2019s letter, ENS\u2019s Dachs replied, setting out why his client, Energy Africa, believed the tax claim was baseless.<\/p>\n\n\n\n
Three days later, Wiese resigned from the Elandspad and Energy Africa boards. There was another twist: at the time, one of Titan\u2019s group companies still owed Energy Africa R217m for some unfinished business, even though Wiese ultimately owned both.<\/p>\n\n\n\n<\/p>\n\n\n\n
But before handing the Energy Africa lemon back to Viljoen, Wiese wanted to ensure he kept this R217m loan asset.<\/p>\n\n\n\n
As ENS explained to Sars: \u201cAs Dr Wiese did not wish for a third party to hold a claim against [Titan], it was decided that [Energy Africa] would distribute the loan claim to Elandspad, and thereafter, Elandspad would distribute [it to Titan Premier Investments], whereafter the shares were sold.\u201d<\/p>\n\n\n\n
So in a nutshell, Energy Africa declared the money as a dividend to its erstwhile parent, Titan. This ensured the R217m loan asset remained with Wiese\u2019s group, rather than going with Energy Africa to Viljoen. After that was done, Wiese signed the papers to transfer Elandspad, Energy Africa (and hopefully the tax woes) to Viljoen.<\/p>\n\n\n\n<\/p>\n\n\n\n
Still, Sars was unmoved by Dachs\u2019s arguments and issued a \u201cfinalisation of audit\u201d letter in August 2013.<\/p>\n\n\n\n
Dachs \u2019s colleague wrote back to say Energy Africa still disputed the claim. Anyway, it \u201cdoes not have cash or assets and \u2026 is therefore not able to make payment of the disputed tax\u201d.<\/p>\n\n\n\n
In June 2014, Sars issued a \u201cfinal demand\u201d that Energy Africa should pay its tax debt within 10 days. But Viljoen wrote back to say Energy Africa was dormant.<\/p>\n\n\n\n
The shutters were drawn. The money was gone.<\/p>\n\n\n\n
The illusion<\/h5>\n\n\n\n To put this in context, it was in November 2012 that Sars first told Energy Africa it believed the R3.9bn price tag for the Tullow assets that went to the Netherlands was a \u201csham\u201d, a \u201csimulation\u201d and an \u201cillusion\u201d.<\/p>\n\n\n\n
While ENS disputed this, Energy Africa\u2019s 2013 and 2014 audited financial statements underscore the apparent absurdity of ENS\u2019s structure.<\/p>\n\n\n\n
The financials, both published in April 2015, show that, up to 2013, Elandspad owed Energy Africa R3.9bn; but the next year, Energy Africa simply wrote it down to R1.<\/p>\n\n\n\n
This meant that for seven years from 2007, a R3.9bn \u201cdebt \u201d based on assets that had long since gone to Tullow\u2019s Dutch company remained on Elandspad and Energy Africa\u2019s books, before vanishing in a puff of accounting smoke.<\/p>\n\n\n\n
Personal liability<\/h5>\n\n\n\n In February 2016, Sars liquidated Energy Africa through the Western Cape High Court.<\/p>\n\n\n\n
In October that year, Sars sent notices to Wiese, Viljoen and two of their colleagues, seeking to hold them personally liable for the R217m asset they had allegedly \u201cknowingly dissipated \u2026 in order to obstruct the collection of the [R3.7bn] tax debt\u201d.<\/p>\n\n\n\n
Investigative journalism takes time and money. Help us do more. Be an amaB Supporter.<\/a> <\/span><\/p>\n\n\n\nENS \u2019s Dachs fought this, on behalf of all the parties. Dachs wrote that when Energy Africa\u2019s assets were spirited up to Titan, Wiese \u201centertained the good faith belief\u201d that Sars was wrong and no tax was owed.<\/p>\n\n\n\n
\u201cDr Wiese placed reliance on the representations and warranties obtained from the Enact Trust at the time,\u201d the lawyer said.<\/p>\n\n\n\n
This included the warranty that when Tullow restructured, \u201cadvice was sought from tax advisers, and opinions were obtained from senior counsel who confirmed that no [capital gains tax] and [secondary tax on companies] implications should arise\u201d.<\/p>\n\n\n\n
In any case, ENS argued, Wiese had resigned from Energy Africa the day before the alleged \u201cdissipation\u201d. Sars rejected this, calling it a \u201ccontrived argument\u201d.<\/p>\n\n\n\n
\u201cTo put it plainly, you sought to drive a wedge between the Titan group and that of the problematic taxpayer [Energy Africa] and to prevent Sars from laying its hands on the only remaining asset of the taxpayer,\u201d it said.<\/p>\n\n\n\n
In fact, Sars argued, the \u201cclear purpose\u201d of Wiese, Viljoen and the others was to \u201cdelink the taxpayer (and hence its tax liability) from [Titan].\u201d<\/p>\n\n\n\n
In August 2017, Sars wrote to Wiese, Viljoen and the two others, demanding payment of the R217m within 10 days. Three weeks later, a high court sheriff served them with summonses.<\/p>\n\n\n\n
Wiese and the others filed an \u201cexception\u201d which is a technical objection \u2014 with the court. They claimed Sars had failed \u201cto allege any facts in support of the allegation made\u201d that they\u2019d had knowledge of obstructing the collection of tax.<\/p>\n\n\n\n
Sars\u2019 claim was so vague, they argued, that they could not defend themselves against it without being prejudiced. This argument will be heard in the high court in Cape Town on August 22.<\/p>\n\n\n\n
ENS<\/h5>\n\n\n\n When amaBhungane asked Sars if it was pursuing ENS or those who controlled the Enact Trust or the Tullow Group for their role in this alleged tax-evasion scheme, Sars said it did not comment on taxpayer information in the public domain.<\/p>\n\n\n\n
\u201cSars is bound by the confidentiality clause, that is, section 69, not to divulge specific information and details on the affairs of taxpayers,\u201d it said.<\/p>\n\n\n\n
However, Dachs told us that Sars \u201chas all the relevant facts in relation to the role of each of the advisers in relation to these transactions. Sars has not sought to impugn the role of any of the advisers arising from these transactions.\u201d<\/p>\n\n\n\n
And we asked Wiese: \u201cIt strikes us that ENS\/the Enact Trust sold you a very sour lemon (R3.5bn sour). Do you wish to comment on: (a) if you have received advice on whether you have a claim against the firm or its agents? and (b) whether ENS is representing you for its own account (gratis to you)?\u201d<\/p>\n\n\n\n
He responded: \u201cDear Sam. The answer to both of your questions is no. Regards, Christo Wiese.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Tax advisers at ENSafrica sold tycoon Wiese a lemon \u2014 one that now implicates him in what Sars has described as an elaborate “tax evasion” scheme.<\/p>\n","protected":false},"author":3,"featured_media":21993,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[64,65,66,59,67],"class_list":["post-6148","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stories","tag-christo-wiese","tag-ens","tag-sars","tag-tax-haven","tag-tullow-oil"],"acf":[],"_links":{"self":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/6148","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/comments?post=6148"}],"version-history":[{"count":1,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/6148\/revisions"}],"predecessor-version":[{"id":30456,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/6148\/revisions\/30456"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media\/21993"}],"wp:attachment":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media?parent=6148"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/categories?post=6148"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/tags?post=6148"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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