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South African Government Thwarts Organised Income Tax Scam

by Robert Lee, Tax-News.com, London

18 June 2007


In a joint operation conducted early on the morning of June 13, investigators from the South Africa's Directorate of Special Operations (the Scorpions) arrested a number of members of an organised crime syndicate on charges of fraud and money laundering.

The arrests are the result of a large-scale joint investigation between the South African Revenue Service, the Scorpions and the Special Investigating Unit.

The charges relate to an alleged Income Tax scam in which syndicate members exploited the identities of unemployed taxpayers to commit tax fraud. Among the arrested individuals is a SARS official as well as a former SARS official, believed to be one of the leaders of the syndicate.

Some time ago SARS, with assistance from the SIU, initiated a large-scale forensic investigation into significant losses relating to tax refunds. When it became clear that an organised crime syndicate was involved, the DSO was requested to investigate alleged fraud and money laundering as contemplated in the Prevention of Organised Crime Act, as well as contraventions of Section 104 of the Income Tax Act.

SARS said it will continue to co-operate with all law enforcement agencies to act decisively against any form of corruption inside its ranks or by external parties involved in criminal acts at the expense of the fiscus or honest taxpayers.

"By targeting the unemployed who were not registered for tax, the suspects callously preyed on poor, vulnerable, unemployed people," the Scorpion unit, SARS and the SIU said in a joint statement.

The arrested persons appeared in the Pretoria Magistrates court on the morning of 14 June, on charges of fraud and money laundering. With the investigation ongoing, more arrests are expected to follow.


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