SARS has uncovered a tax-dodging racket in which foreign diplomats buy large volumes of alcohol at duty free retailers and sell it locally, cheating the tax collector of an estimated R100m in taxes every month, reports News24.

It says two investigations by SARS, one in 2019 and the other last year, singled out diplomats from Rwanda, Lesotho, Ghana, Guinea, Malawi and Burundi as being involved in the scam.

At least three senior officials from the Department of International Relations and Co-operation reportedly told News24 last year SARS agents caught a German diplomat, inside a duty free retailer, using his credentials to buy alcohol for three friends.

The sources said the diplomats bought the alcohol from duty free retailers based around Hatfield, Brooklyn and Arcadia in Pretoria.

The department's regulations permit diplomats to buy goods from duty free retailers. But the condition is that the goods can only be consumed or used inside the diplomats' embassies.

Tax laws also forbid the reselling of duty free goods in local markets.

The 2019 investigation has been confirmed by the department, which said in a statement: ‘SARS obtained information from licensed duty free shops regarding the sales values, product quantities and the details of the foreign diplomat to whom such goods have been sold. The stores were requested to supply a complete list of all transactions from 1 March 2019 to 30 August 2019. The list had to include the type of sale, embassy involved, diplomat involved and method of payment. Over six months, the stores had sales to the amount of R423m. The 2 200 diplomats spend on average R70.5m per month at these stores.’

In an effort to stem the abuse of diplomatic privileges, SARS and the department have developed new sets of regulations which will introduce quotas and limits to the amount of alcohol and cigarettes which diplomats will be allowed to buy at duty free retailers, notes News24.

‘The new regulations will kick in sometime towards the middle of the year. The abuse of the rebates extended to foreign diplomats when purchasing duty free products shows the lack of respect for SA laws, diplomatic protocols, immunities and privileges extended to them by Pretoria. They are aware that what they are doing is illegal,’ a senior department official said.

A second official said SARS' investigations showed a number of diplomats were spending up to R5m per month on duty free liquor, bought to be resold locally. There are two cases in which two diplomats spent more than R10m on duty free liquor, each.

The executive said at least two diplomats had admitted to buying duty free alcohol with the intention to resell it to local liquor traders.

‘It is not even the entire diplomatic community that was investigated, it is just a few diplomats. This means that the problem out there could be far worse than we think.’

The embassies of Ghana, Burundi, Guinea, Rwanda and Malawi reportedly did not respond to questions.

A spokesperson of the German Embassy said authorities were not aware of any complaint laid by the department about the conduct of any of the country's diplomats.

Lesotho's High Commissioner in Pretoria, Bereng Sekhonyana, said he viewed the allegations ‘in a very dim light’ and was concerned by their gravity.

Full News24 report (subscription needed)