BOXING South Africa (BSA) processed a former CEO’s multimillion-rand settlement as an invoice instead of through its payroll, a blunder that has now left taxpayers facing a R4.2 million SARS bill.
And rather than Boxing SA paying for its own mistake, the financially crippled regulator has confirmed that the Department of Sport, Arts and Culture (DSAC) has committed to foot the bill.
The admission was made in Parliament on Tuesday, where MPs grilled Boxing SA over its R4.2 million tax liability to the South African Revenue Service (SARS).
ANC MP Gaolatlhe Kgabo questioned the regulator over the debt, which the Auditor-General of South Africa (AGSA) flagged as a PAYE liability linked to a former chief executive officer.
“The Auditor-General has identified approximately R4 million in PAYE liabilities to SARS. The PAYE liability of approximately R4 million is said to relate to the former chief executive officer,” Kgabo told the portfolio committee on sport, arts and culture.
“Can you take us into confidence as to what is the real issue?” Kgabo asked.
Boxing SA Chief Financial Officer Bertram Moses then laid bare how the regulator landed itself with the tax liability.
He said Boxing SA had to pay a former CEO who had been suspended following years of legal battles. The settlement was processed as an invoice rather than through payroll, meaning the appropriate tax was not deducted when the payment was made.
Moses said the full amount under a SARS tax directive was about R9 million. Boxing SA paid the former CEO R4.8 million, leaving about R4.2 million as the tax portion.
“The board decided to pay him, with the endorsement of the department, as an out-of-court settlement. When we did that payment as an out-of-court settlement, we paid as an invoice rather than via payroll.
“We did not pay via the payroll system, which could have then attracted tax at that time. Hence AGSA came in and said, no, no, no, guys, you did not treat this transaction accordingly,” he said.
The explanation drew a blunt response from Kgabo.
“It does not take a rocket scientist to understand that procedure,” Kgabo said.
“You are correct,” Moses replied.
The regulator is now setting aside money for the tax, interest and a 10% penalty but Moses made it clear that Boxing SA does not intend to carry the cost itself.
He said the regulator had engaged DSAC, which had committed to funding the outstanding amount.
“We have engaged the department. They’ve committed, based on discussions previously with the department, the board, the minister, that they will fund this commitment.
“We are currently just waiting on SARS to come back to us and say, right, guys, we’re doing a recon, this needs to be settled. We’ll approach the department to fund, because BSA is not going to fund that, and then we’ll proceed with payment,” he explained.
In other words, a tax liability arising from how Boxing SA handled its own executive settlement is now set to be absorbed by the department and ultimately by public funds.
The SARS liability is also helping to keep Boxing SA technically in a precarious financial position.
Moses told MPs that the SARS debt was the main reason the regulator’s liabilities exceeded its assets.
“If we settle this SARS obligation, we will then swiftly move into a net asset position,” he said.
Boxing SA currently has liabilities of R11.6 million against assets of R9.9 million.
That prompted Kgabo to question whether the regulator was technically insolvent.
“Would I be right to conclude, based on face value analysis, that Boxing South Africa is technically insolvent?” Kgabo asked.
“Technically, no. I do not agree,” Moses said.
But Moses acknowledged that Boxing SA would not be able to survive financially without government support.
“Cash flow wise, we would not have been able to pay if we were not funded by government,” he said.
Kgabo demanded that Boxing SA provide MPs with a plan to settle the SARS debt, as well as a recovery plan to address its wider financial problems.
The former CEO was not named during the meeting.
However, in 2023, Boxing SA settled an eight-year legal battle with former CEO Moffat Qithi, who was dismissed in 2015 and subsequently won his case at the CCMA, the Labour Court and the Labour Appeal Court.