In a surprise move Finance Minister Malusi Gigaba has called for a judicial commission of inquiry into the national tax collection agency, the South African Revenue Service. The president has acceded to his request. It may open the door to the probing of the so-called SARS “rogue unit” -a top notch anti-corruption unit – which the current SARS commissioner Tom Moyane has been intent on shutting down
The Finance Minister reported that he had approached the President for an urgent establishment of such a commission “into the tax administration and governance of the South African Revenue Service”.
He has reported that President Jacob Zuma has acceded to this request. Gigaba said in a statement: “The commission will be established soon and its details will be released in due course.”
Gigaba said the inquiry would help to assess “what factors are resonsible for the under-collection of revenue by SARS, and what steps need to be taken to improve performance management systems at SARS to improve its capacity to collect revenue”.
In the recent medium-term budget policy statement, Gigaba reported that for the 2017-18 financial year, revenue was projected to be R50.1 billion lower than anticipated. He said today: “Such under-collection would extend over the next medium-term expenditure framework.”
The statement released by the National Treasury said: “The MTBPS (the Medium Term Budget Policy Statement) recognised that while the economic cycle is the most likely and significant factor driving lower revenue-collection, other factors could also be at play, like weakening tax morality and challenges facing tax administration. Whatever the reason for such shortfall, the risk of under-collection of revenue impacts directly on the size of the future budget deficits, and hence on the sustainability of the projected debt-to-GDP trend, and directly on our credit rating and growth prospects.”
Gigaba rang the warning bells in the MTBPS – known colloquially as the mini-budget – last month. “Whilst most of our taxpayers remain responsible, we are noting slippage in compliance. SARS has enforcement powers, which are, in the main, punitive and this will be applied to taxpayers who wilfully and cynically avoid paying their taxes. However, SARS also remains sensitive to taxpayers who are facing challenges.”
But he also said the fairness and integrity of the tax system “is critical for the deep social contract between government and the people, and shapes the willingness of the people to pay their just dues to the state which governs on their behalf.”
It was important, however, he said, that “we continually strenghten tax morality and deal with any underlying causes that may undermine it, such as public concern about government corruption, poor governance or those undermining or abusing the fairness of the tax system”. These were his words in the Medium Term Budget Policy Statement.
SARS has been at the centre of the growing scandal surrounding alleged State Capture of government institutions by murky business people.
A story broken by the Sunday Times in 2014, three years ago, claimed that a “rogue unit” within SARS had run a brothel and spied on President Jacob Zuma – and other ANC big guns. The details of this were gleaned from a report by the auditing firm, KPMG. SARS commissioner Tom Moyane had gunned for the closure of the unit since 2010.
That was a beginning of a turf war between then Finance Minister Pravin Gordhan and Jacob Zuma’s mate, Moyane. The unit – which was called the National Research Group – was behind exposing tax evasion and corruption. About 50 staff of SARS left the organisation in the fallout that occurred, including Johann van Loggerenberg, who was group executive at SARS before he resigned from the tax authority in 2015, and Adrian Lackay, a former spokesperson for SARS, who worked closely with Gordhan when he was SARS commissioner. They have produced Rogue: The Inside Story of SARS’s Elite Crime-busting Unit.
KPMG retracts its findings on the so-called ‘rogue unit’
Recently KPMG retracted its findings on the unit – which investigated Billy Rautenbach, Irvin Khoza, Julius Malema, Lolly Jackson, Glenn Agliotti and Radovan Krejcir.
KPMG said it had decided to withdraw the recommendations contained in its report as they did not meet “the required standard of their work”. Since then KPMG has been dropped as an auditor by a number of big companies and some government departments. It came under focus when #GuptaLeaks emails reported that they had not picked up how R30 million rand earmarked for a Free State dairy farming operation was used instead to pay for the infamous Gupta wedding.
The wedding occurred at Sun City in 2013.
Gigaba has not alluded to the SARS capture scandal or the so-called rogue unit directly, but this action of setting up a judicial commission looks most likely to focus attention on these matters.
Meanwhile, Alf Lees, the DA’s finance deputy spokesman has welcomed Gigaba’s announcement of an inquiry.
Lees said these were not new issues, but have been plaguing the SARS for some time now, and include:
• The mass exodus of Senior and effective employees;
• Reports of unlawful (according to the Auditor-General) bonuses paid out to SARS executives;
• Undue delays and wrongful obstructions to tax refunds;
• As well as factually incorrect communication surrounding people’s tax returns.
“The problems are clearly not new and have only worsened through the course of this year. The latest estimates, announced in the Medium Term Budget Policy Statement, pencil in a staggering revenue shortfall in excess of R50 billion for the current financial year.”
“In light of the continuing deterioration of the situation at SARS, the terms of reference that will guide the inquiry need to be defined and must be made public as soon as possible.”
“With the wide range of issues plaguing the SARS, the leadership of the institution must be thoroughly investigated, and the scope of the inquiry must extend at least as far back as when Tom Moyane was first appointed as the Commissioner of SARS,” said Lees.
This is imperative in ensuring transparency and openness over an issue that has to date been mired in a cloud of confidentiality.
The deterioration of the public’s trust in SARS must be halted to avoid further shortfalls in revenue collections.