Getting (un)Lucky: Why Montana’s tax gamble should fail

Lucky Montana, who is squaring off with the South African Revenue Service (Sars) over a R55m tax bill, may be in for a reality check. The former CEO of the country’s hobbled passenger rail agency is seeking a 90% write-off on his outstanding debt – but he’s likely to discover that the taxman is rarely that generous. 

Not only that, Montana, now a member of parliament for Jacob Zuma’s MK Party, has gone on the rampage against Sars, claiming he owes it “not even a cent”. He’s accused the authority of abusing its power and waging a politically motivated “witch-hunt” against him. 

Perhaps he should ask himself – or his advisers – whether it’s wise to attack Sars publicly and then privately ask for mercy. As most tax experts will tell you, the system rewards transparency, not theatrics.  

“The evidence that Sars is serious about enforcement is there for anyone to see,” says Thomas Lobban, director at Ibex Consulting. “Delaying the inevitable is just courting disaster.” 

A timeline provided by Sars shows how Montana’s liability snowballed. After failing to submit his returns for 2017 to 2019, his audit was widened to cover 2009 to 2019. Extensions were granted, but Montana’s documents never arrived – a criminal offence. In July 2021, he was informed that Sars wanted R15.5m in capital because he had unlawfully evaded tax by under-declaring income from various sources over that decade. 

Because no valid objection or suspension of payment was filed, the assessments became final. After much to-ing and fro-ing between Montana, his lawyers and Sars, the tax authority applied for the sequestration of his estate in May 2023 to recover the debt. 

It was only in August this year that Montana offered a settlement of R5.4m – which Sars can accept only if the tax debt is not disputed, meaning the taxpayer must acknowledge that the tax is due and payable. 

Another lesson: deal with it early. 

“The older it gets, the more those amounts accumulate, often with interest overtaking the original capital tax,” says André Daniels, head of tax controversy and dispute resolution at Tax Consulting South Africa. “Either you object or you compromise. But ignoring Sars is the worst thing you can do.” 

A clinical process

To many South Africans, a tax compromise sounds like a loophole – a way to pay a fraction of what’s owed and move on. The reality is far stricter. 

“Offers of 10% of your tax liabilities are very seldom accepted,” says Lobban. 

“Sars generally expects to recover more than half the principal tax, excluding penalties and interest. Anything less must be justified with audited evidence – not just pleading poverty.” 

To qualify, a taxpayer must be fully compliant with all other obligations and submit extensive proof of financial incapacity – including a complete statement of assets, liabilities, expected income and even details of connected persons who might hold hidden assets. 

The application appears before a Sars committee, which assesses the cost of collection against potential recovery, whether the settlement will be more beneficial than enforcement, and the taxpayer’s future prospects. Even when approved, Sars typically requires an upfront payment, with the remaining balance often paid over six to 36 months. 

Should a taxpayer successfully enter into a compromise agreement with Sars and default on that agreement, the taxpayer may not enter into another compromise agreement for a period of three years.

Despite the noise, Lobban believes the process will remain clinical. “Sars isn’t a body that takes things personally,” he says. “The compromise will be judged purely on its merits.” 

But there is plenty at stake: Sars’s own credibility. The institution discloses details of an individual’s tax affairs only when forced into the public arena, as it was when Montana made what it considered false and damaging claims. 

Under commissioner Edward Kieswetter, who took office in May 2019, Sars has worked to rebuild its reputation after a commission of inquiry found that former head Tom Moyane had severely damaged the organisation’s integrity. Appointed by Zuma, Moyane was found to have undermined Sars’s investigative and collection capacity between 2014 and 2018 by purging key staff and dismantling critical units. 

Derailed

Montana, a staunch Zuma ally who led the Passenger Rail Agency of South Africa (Prasa) from 2010 to 2015, was long associated with the ANC until he defected to the MK Party in 2024. 

During his tenure as Prasa CEO, Montana presided over a period marked by allegations of maladministration, irregular procurement, abuse of power and wasteful spending. A probe by the public protector, aptly titled “Derailed”, found that he wrongfully expelled executives and made improper appointments of advisers and consulting firms.

The agency also concluded a R3.5bn deal for locomotives that were too tall for South Africa’s rail infrastructure, while the state capture inquiry later found that Prasa’s slide into dysfunction accelerated under his leadership and contributed to its near-collapse. At 77-million passenger trips recorded this financial year, Prasa is still only operating at 15% of its 2013 capacity. 

The tax authority’s case against him, Montana says, is “aimed at creating an impression that Lucky Montana made millions when he worked for Prasa and is refusing to meet his tax obligations”. He has also accused Sars of “deliberately” inflating its claim against him to “unsustainable levels” and denied that his conduct was “reckless, dishonest or fraudulent”. 

By October 14, Montana was supposed to have filed information addressing the “legal and formal requirements” for a compromise. However, by Thursday this had not been received, says Siphithi Sibeko, a Sars spokesperson. Asked whether the offer would be accepted, he said the committee considers the merits of each case, regardless of the amount involved. 

Sars handles many disputes involving much larger sums than Montana’s, most of which never make the headlines because taxpayers seeking relief don’t air their disputes. 

“The public doesn’t see most of these matters,” Lobban says. “What’s unique here is not the amount, but that Sars disclosed taxpayer information to protect its integrity.” 

Montana’s saga offers a cautionary lesson for anyone tempted to gamble with the taxman. The system is designed to outlast bluster and follows a simple logic: pay now, argue later. Time, interest and the law all work in the taxman’s favour. 

“South Africa’s tax authority is among the most effective in the world,” says Daniels of Tax Consulting South Africa. “It will collect from anyone who owes – regardless of their profile.” 

Defiance may play well in politics, but it’s no defence in tax law.