SA tax agency accuses BP of tax fraud over 13mln litres ‘exported’ to Zimbabwe

Tax agency says the diesel was not exported to Zimbabwe as claimed

By Business Live

SOUTH AFRICA: The SA Revenue Service (Sars) is going after the local unit of British multinational oil and gas major BP, accusing it of engaging in fraudulent tax conduct at the expense of the fiscus.

SA’s tax laws make provision for Sars to refund excise duties, fuel levies and Road Accident Fund (RAF) levies paid on fuel manufactured in SA but ultimately exported elsewhere.

The tax agency believes that the 3-million gallons of diesel the oil major purports to have exported to Zimbabwe between June and September 2019 never left the country, and the company was therefore not due the R220m (US$12m)  in rebates it has claimed from the national purse.

Sars is demanding about R274m (US$15m) from BP, arguing that instead of delivering the diesel it says it exported to consignees in Zimbabwe, BP was “perhaps unwittingly” part of a scheme by which the diesel was diverted elsewhere.

It says the likelihood is that the diesel was sold locally at a price roughly equal to its value less the excise duty that would have been payable had it not been marked for export.

At the heart of Sars’ case is that BP attempted to mislead it into believing that it had exported the fuel, when the company knew that it had not done so. BP has denied the allegations.

Sars claims to have evidence that none of the fuel was exported from a licensed warehouse and that the Zimbabwean consignees did not exist or were not importers of fuel.

The tax agency also maintains that the vehicles purportedly used to transport the diesel never crossed the border, since Sars’ electronic records indicate that the vehicles did not reach the port of exit.

BP has approached the high court in Pretoria asking that the dispute between it and Sars be referred to trial.

On Friday, judge Stuart Wilson found that on the facts before him the diesel never left SA.

“Entirely absent from BP’s papers is a positive factual case that the diesel it said it sold to the Zimbabwean consignee actually crossed the border into Zimbabwe.

“The best evidence of that fact would have been an affidavit from the person who physically took the fuel across the border.

“The commissioner contends that the consignee probably does not exist, but I need not go that far.

“The fact is that no case has been made out that the diesel ever left the country, the commissioner has no record of it ever having done so, and everyone accepts that the document purporting to record the export is a forgery,” Wilson said.

However, the judge said that while the evidence indicates BP claimed rebates it was not entitled to, he cannot find that this was done with the intention of defrauding Sars.

“BP’s accounting practices and apparent lack of the kind of internal controls needed to ensure compliance with the Customs Act clearly call for an explanation,” Wilson said.

“It appears that BP has sold large quantities of diesel for export in circumstances where it has not been able to put up the evidence necessary to show, as the Customs Act and its subordinate legislation require, that the diesel has been lawfully dealt with, and that it has actually left the country.”

The dispute will now go to trial on a date yet to be determined, where oral evidence will be led.

BP SA spokesperson Hamlet Morule said: “As this is an ongoing legal matter, BP SA is unable to comment on the merits of the case at this time.

“We can confirm that we have received the judgment and our legal team is studying it.”

BP Southern Africa has more than 500 branded service stations across SA and a 50% share in one of the largest refineries in Africa, Sapref, which accounts for 35% of SA’s refining capacity.

In another blow to BP, the Supreme Court of Appeal (SCA) on Friday also unanimously rejected its bid to appeal against a 2020 decision by the high court in Pretoria that denied its application to interdict Sars from attaching and disposing of its property, pending the finalisation of the dispute between the parties.

This matter also concerns the diesel purportedly exported to Zimbabwe.

BP argued that it would suffer irreparable harm should Sars attach its property.

“I agree with the full court that BP’s audited financial statement belies its assertion that it would suffer irreparable harm,” the SCA found.

“Its annual turnover was R47bn and it had access to credit facilities in excess of R4.7bn.

“BP argued that it will suffer irreparable harm because it now has a civil judgment against it and that Sars misused the wide powers the act gives it.

“It is true that Sars has wide powers. However, the constitutionality of those powers were [not] challenged before the high court [or] in this court.”