Businessman Dave King rose to prominence towards the end of the 1990’s as Chief Executive Officer of Specialised Outsourcing which initially listed at 50 cents per share, rising significantly to R70 per share.
King had made himself a royal fortune selling Specialised Outsourcing shares to a market that was hungry for stock.
After making his money, King went about spending it like the prodigal son before he returned home to his forgiving father (which turns out to be the South African Revenue Services [SARS]). He bought Glasgow Rangers Football Club, was the one-time owner of the Premier Soccer League’s AmaZulu, bought up an impressive amount of property and then bought an Irma Stern painting.
That’s when King caught the attention of a mid-ranking SARS official, Mr Chips.
Chips took a look at Kings tax returns, his expenditure and soon the questions followed.
King became privy to the taxman’s investigations in 2002 when wanting to travel to the Laureus Sports Award from Lanseria Airport.
“I was stopped by an official and he warned me that, if I tried to get on the plane, they would arrest me,” said King.
Thus began a fight worth an initial R2.4-billion which ended up lasting for more than a decade.
“It was really a lot longer than I had even remotely anticipated it would be,” said King.
The R2.4-billion fee SARS fined King with came from the shares that were sold for Specialised Outsourcing which he regarded as capital gain and was later corrected by SARS to be revenue gain.
“There were two aspects: the one was the quantum and the other was, at the time, I genuinely held the belief that it was in fact capital and should not be taxable,” said King.
“When you get an amount of money like that, and it incorporates 20% penalties in interest, you end up with a tax bill that’s more than 100% of what you’re worth,” continued King. “Therefore, if you don’t get to a point of an agreed settlement with SARS, one really has little option but to continue the fight”.
Besides the misunderstanding about capital gain versus revenue gain, King felt the Draconian exchange control laws pre-1994 necessitated his actions.
“I was one of those many business people, politicians and professional people in South Africa who had structures outside the country. South Africa was a very different place. If South Africa did blow up, you’d have to leave with nothing because in those days the exchange control laws were extremely tight. So to me the issue was more around exchange control rather than tax,” he said.
The tax battle culminated in then SARS boss Pravin Gordhan making a poster-boy out of King for settling. King also faced the Department of Trade and Industry, the Scorpions, the South African Reserve Bank and… criminal charges.
“The stakes for me were very, very high and it was important that either we got to a point of where we could have a negotiated settlement or, alternatively, it was quite a dire prospect for me,” said King.
What were also quite high were the legal fees he had to spend over the last decade.
“On my side, I would say R300-million has been spent,” estimated King.
That brings the total cost of King’s battle with SARS to an astonishing R1-billion.
As for time spent, King estimates that 20% of his life has been dedicated – or lost – to the SARS battle.
“It’s living with you every day. You’ve got attachment orders on your property, you’ve got the stress it has on your family - because my family has obviously gone through this and been very concerned about it.
As for the actions he took in building his nest egg outside of South Africa, King does have his regrets.
“I think greedy would be right but it’s also probably disrespectful – I did make money in this country, this country has been very kind to me and even though it may have been legitimate, I think I pushed it far too hard and that is one of the things that I regret,” said King.
“So my recommendation to other taxpayers in fact would be don’t do what I did, rather try and get to a point of settlement as early as you possibly can,” concluded King.
King is now back to business as Chairman of MICROmega who have seen an almost 50% rise in its share price since his settlement with SARS became public.