Cape Town - Electronics giant LG is “cheating” the South African Revenue Service (Sars) by importing TV set components separately to avoid millions in import duty.
Sars revenue tax attorney, Petrus Erasmus, claimed the scam in court papers submitted earlier this week to Chief Justice Sandile Ngcobo.
The dispute between LG Electronics SA and Sars refers to plasma screens and inductors (called “interface boards” in the court papers) which LG imports into South Africa from its manufacturing arm in Korea.
LG imports the two components separately and argues that it therefore does not need to pay import duty on them. The fact that the plasma screen and inductor can be assembled by any non-specialist using a cable, which is supplied, to create a TV set, does not make the importation of the two separate components taxable as imported TV units, says LG.
Earlier this year the Appeal Court found for LG. Sars has now submitted an application to Ngcobo to contest the appeal court's decision.
In his papers, Erasmus said the fact that LG imports the components separately is “pure eyewash” and amounts to fraud designed to escape import duty.
According to Erasmus, it is clear from invoices that almost every large retailer in the country buys LG’s television sets for resale to the public.
It is evident that after their arrival in South Africa, LG connects the two components or sells them as a single package. LG is thus importing the components for local sale as TV sets, and therefore is liable to Sars for import duty.
Erasmus said the appeal court decision tests, inter alia, Sars’ constitutional duty to levy taxes in compliance with international agreements.
The chief justice is considering the application.
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