In a bid to overturn rulings in favour of LG Electronics, by both the High Court and the Supreme Court of Appeal, the South African Revenue Service (SARS) has applied to take its import tax dispute with the company to the Constitutional Court.
SARS has been locked in battle with LG since 2007 over import taxes applied to television screens. At the time, LG imported two separate television components into the country - the screens by ship and the tuners by air.
LG stated its 42-inch plasma display screens were to be classified under “reflecting video monitors”, while SARS contended the correct classification would be “television sets or incomplete television sets”. The difference was that, if the screens were classified as “video monitors”, they would have attracted an import duty of 25%, and qualified under full rebate.
The revenue service argued, in court, that the screens were designed to be incorporated with the imported tuners and become television sets. They had a “sophisticated refinement”, which enabled them to be television receptors and were imported with television instruction booklets.
LG, in turn, argued that the screens were aimed at two separate markets and that, at the time of import, they functioned as video monitors.
The High Court, in 2009, and the Supreme Court of Appeal (SCA), in May this year, both found in favour of LG Electronics. The SCA approved the revenue principle that “a man may legitimately order his affairs so that the tax is less than it otherwise would be”, saying SARS could not prove a stratagem.
LG Electronics CEO Peet van Rooyen says the company was surprised to be served with papers filed by SARS before the Constitutional Court.
The approach
SARS says: “In the main, the issues raised by SARS in the Constitutional [Court] papers touch on administrative fairness, the constitutional duty of the [SARS] commissioner and SA as a country to abide with the international agreements it is signatory to, and the role and remedial powers of the courts with regard to tariff classification. Accordingly, SARS' case in the Constitutional Court is more about the approach adopted by the Supreme Court of Appeal.”
LG maintains it is not guilty of tax evasion, and is awaiting a refund of the monies from SARS on the basis of the court rulings.
“LG is confident of a favourable decision from the Constitutional Court,” says the company.
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