Diplomats Sent Packing, SARS pounces on Shops that sold them much cheap booze

Specialist South African shops that sell tax-free booze to diplomats stationed in South Africa have been given a two-week countdown to get their paperwork in order, or they are likely to have their operating licenses revoked.

The SA Revenue Service (SARS) on Monday gazette a 24-page technical update to rules under the Customs and Excise Act, which governs sin taxes in South Africa, and which exempts diplomats from paying such taxes on goods for their own consumption.

“In one change, those who operate special customs warehouses “where goods are sold free of duty to persons entitled to diplomatic immunities or privileges under the Diplomatic Immunities and Privileges Act” are given 15 days to update licensing information.”

Failure to do so may see the tax commissioner cancel or suspend their licenses, the regulations say.

Operators are likewise warned that they could lose their licenses should they fail “to comply with any requirement for special shops for diplomats”.

Various new requirements around record-keeping are due to come into effect for such shops on 1 August, though they have been given two more months, until the end of September, as a “grace period” before enforcement will kick-off.

The crackdown comes after a large number of diplomats from countries including Lesotho and Malawi were expelled from South Africa, along with their families, at 72-hours notice. 

Ongoing investigations, which include diplomats from Rwanda and Burundi, may see further such expulsions, in what could numerically come to be the biggest diplomatic incident in modern South African history.

SARS and the department of international relations and cooperation believe that, between them, those diplomats cost South Africa some R100 million per month in lost tax revenue by buying enormous quantities of booze using their diplomatic credentials, then reselling it to South Africans.

It is not clear to what extent the shops selling the duty-free alcoholic drinks were involved in the resale.

Unlike the diplomats, proprietors of shops have no legal shield if they were found to have broken rules intended to govern the tax exemption.

Special shops for diplomats may only be licensed in the metropolitan areas of Tshwane, Johannesburg, and Cape Town, in terms of the new rules, and products sold duty-free must have unique inventory codes for control purposes.