Julius Malema faces the real prospect of losing his parliamentary seat should his estate be sequestrated, says lawyer Haroon Laher.
It was announced on Monday that the matter between Malema and the South African Revenue Service (SARS) would be due back in court on 1 June 2015.
The application by SARS in the Pretoria High Court was for the sequestration order to be made final.
“By ‘losing his case’, Mr Malema would end up having his estate sequestrated. That does not necessarily mean that the outstanding assessed taxes will be repaid,” Laher, a partner for Johannesburg at Bowman Gilfillan, told CNBCafrica.com.
“It does not also mean that creditors will get paid every cent they are owed. It will depend on whether his trustee is able to recover sufficient unencumbered assets, and by this I mean assets not subject to any lawful security in favour of a secured creditor.”
Laher added that he is not convinced, from what he has seen in media reports, that Malema has any assets of value to avoid the sequestration of his estate.
“That may well drive the decision by SARS to afford him such extended indulgences,” he said.
“The rope around his neck seems to be the real consequence that will arise in sequestration and that is the loss of his parliamentary seat and voice.”
(READ MORE: S.Africa’s Malema escapes political ban, for now)
On 11 September 2012, SARS obtained a judgment in terms of the Tax Administration Act 28 of 2011 confirming an outstanding tax debt by Malema of 16.2 million rand.
“As I understand the taxes payable have been all assessed. That being so, there is no room available to Mr Malema to contest the amount assessed as payable,” Laher stated.
“If he fails to pay the assessed taxes within the context of the sequestration proceedings, his estate will be sequestrated and administered by a trustee appointed by the Master of the High Court in Pretoria. The only option available to him at this stage is to oppose the sequestration application.”
Laher added that he gets the sense that Malema is not engaged in opposing the sequestration application, but rather that he is engaged in a process whereby a commitment of some nature has been made and is playing itself out in the application.
On 10 February 2014 the Gauteng North High Court granted a provisional sequestration order against Malema for this tax debt and on 26 May 2014, SARS issued a statement confirming that a compromise agreement had been reached with the taxpayer, due to which the provisional sequestration order was extended.
“SARS main objective in seeking the sequestration of the estate of Mr Malema is to recover all outstanding assessed taxes. That being so, they could extend the application for as long as it would take to recover the outstanding assessed taxes,” Laher added.
“My sense is that Mr Malema must be giving assurances as regards payment for SARS to extend the application. If I were advising a creditor in a similar situation, I would only extend the application against satisfactory assurances of payment.”