South Africa is embroiled in a complex tax case involving a gold smuggling ring, a Zimbabwean tobacco magnate named Simon Rudland, and accusations of cross-border money laundering. Referred to as the “Gold Mafia,” the scheme allegedly involves a black market cigarette empire built by Rudland across southern Africa, which generated illicit earnings that needed to be laundered. This led to the routing of cash through a web of businesses, including a gold smuggling operation, and the bribery of officials at various South African banks.
Al Jazeera’s 2023 documentary shed light on the situation, but the South African Revenue Service (SARS) had already taken action by freezing the assets of Rudland’s Gold Leaf Tobacco Corp in 2022. Despite denying the allegations in the documentary, Rudland faced further enforcement action in January when SARS issued a civil summons against Sasfin Bank for ZAR 4.87 billion in an attempt to recover owed income tax, VAT, and penalties. SARS found evidence of taxpayers colluding to expatriate funds offshore in a way that hindered the recovery of tax in South Africa.
Sasfin Bank acknowledged that some clients engaged in tax evasion through an unlawful scheme and took swift action by terminating relationships with the implicated clients and employees, while also opening criminal cases against them. However, the bank distanced itself from the illegal activities and cooperated with authorities in their investigations. The increased crackdown on cross-border tax evasion in South Africa has resulted in record revenue collection for the 2023/24 financial year, with targeted investigations into high-net-worth taxpayers and their international activities yielding positive results.
South Africa is not alone in its fight against illicit financial flows. African tax authorities are actively pursuing unreported income, as evidenced by the significant increase in revenue identified through the exchange of information on request (EOIR) frameworks. The Africa Initiative’s members reported identifying over €2.2 billion in additional revenue in 2023, representing a substantial increase compared to previous years. The region’s efforts to build EOI relationships, data privacy protections, and revenue-generating capabilities are paying off.
While progress in Africa’s tax transparency and revenue collection efforts is commendable, there is still work to be done to ensure all member countries can equally benefit from EOIR frameworks. Only a small group of countries have been using EOI on a substantial scale, with a handful of nations driving most of the growth in revenue identification. African countries have increased the volume of requests sent to partner countries, demonstrating the effectiveness of using EOI frameworks successfully.
The growth in EOI activity across Africa over the past decade is encouraging, with a significant increase in bilateral partnerships and more countries signing on to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Despite setbacks due to the COVID-19 pandemic, African tax authorities rebounded in 2021 and 2022, with record revenue collections from EOIRs. Issues such as monitoring revenue gains from EOI and ensuring beneficial ownership transparency remain key priorities for the Africa Initiative’s members as they continue to enhance their tax transparency efforts and cooperation.
As African countries aim to boost intracontinental trade through initiatives like the African Continental Free Trade Area, opportunities for cross-border tax evasion may also increase. Strengthening information exchange among African nations can help combat tax evasion in the region. The rise in intra-African EOIRs in 2023 is a positive development, signaling increased collaboration and cooperation among African countries to enhance their EOI activities and combat illicit financial flows effectively.
