VAT fraudster's R250m loot could've fed 714 000 kids for a month

18 July 2016

Cape Town – The impact to society of a Cape Town man convicted of a fraudulent VAT returns scheme was revealed in the Western Cape High Court on Monday.

On June 28 the court found Johan van Staden guilty on 35 of 184 counts related to defrauding the South African Revenue Service (Sars) of at least R250m between 2005 and 2008.

The court found Van Staden conducted a multi-million rand fishing business as a front for submitting false VAT returns. The state described it as one of the largest fraud cases ever prosecuted in the high court.

The money was used to buy numerous luxury vehicles, two farms, game, an aeroplane and a flat for his daughter – all registered in a family trust. He also chartered a luxury jet to Mauritius for a family holiday.

Van Staden sat with his head down, occasionally wiping away tears, as his sister Anna Botha testified for her brother.

However, his attention was piqued when Rory Cohen, a criminal investigator at Sars, disclosed how the money Van Staden had defrauded could have been used to employ teachers or pay welfare grants.

Using 2014 tax statistics, Cohen said the amount represented a month’s payment of social development grants to 166 667 people.

He added that in today’s terms, the amount defrauded came to R370m adjusted for inflation. “In 2015, this amount could have funded 2 100 primary school teachers,” he said. “It could have also fed about 714 000 children for a month.”

Judge Anton Veldhuizen said he understood the argument: “Money that should have been used for the betterment of society has been used by a single user,” he said.

Having studied the judgment, Cohen said the fact that Van Staden had run a “sophisticated scheme” over a number of years should be noted when sentencing.

The judgment revealed “the sophistication of the scheme operated by Mr Van Staden, that he went to great lengths not to be detected by Sars and that he disguised it”, said Cohen. “He also induced people to provide invoices, which could have had negative impact on those individuals.”

Cohen said in this case, the crime was not only tax evasion. “Here, this case involves theft by other taxpayers and treating Sars like a bank,” he said.

Comparing the severity of the amount, Cohen said that in 2014/15, 256 people were convicted for fraud totalling R196m.

He said Sars is only able to audit a “minute fraction of taxpayers”.

“In the 2013/14 fiscal year, for example, Sars audit coverage target was approximately 6% of total registered taxpayers, while indepth audits of those taxpayers above the tax threshold were in the region of only 0.18%.”

The state asked for a 25-year sentence, while the defence requested eight years. Sentencing will be handed down on Friday, said Veldhuizen.

This article first appeared on Fin24, see here.