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‘Corruption, exodus of skilled staff’ – Sars is still reeling from Moyane’s legacy

2019-09-02 00:00

The exodus of skilled staff and ‘deliberate acts of corruption’ effected during Moyane's tenure will take years to repair, but the tax agency’s new boss is determined to restore it to a world-class entity.

The SA Revenue Service (Sars) is still reeling from the rot effected by its former commissioner, Tom Moyane, under whose reign more than 2 000 experts resigned within three years; another 550 retired without transferring their skills; and approximately 600 disciplinary processes to get rid of senior staff were started.

Current Sars boss Edward Kieswetter revealed these disturbing details at the annual Tax Indaba, held in Sandton last week.

He said the rebuilding process to restore Sars to a world-class service, showing integrity and good corporate governance, was under way, but this would take years of relentless hard work.

Kieswetter, who took over as commissioner in May following Moyane’s axing, did not mince his words about the damage that had been wrought on the institution in terms of capacity, skills, its reputation and service delivery.

This, amid a state capture project that involved “deliberate acts of corruption” at the tax agency.

Kieswetter said that Sars could only be rebuilt if there were honest revelations about the nature and the scope of the plunder, and if everyone – government, tax practitioners and taxpayers – worked together.

The critical technical skills that Sars has lost since 2014 are many and varied: more than 100 investigators, 300 specialists in compliance audits, 250 professionals in debt management, more than 60 employees in trade administration and 113 people from the dismantled Large Business Centre (LBC), which was responsible for technical analysis and drawing up risk profiles and investigations into transfer pricing.

Although these losses, together with the weak economy, will make it difficult for Sars to reach this year’s tax revenue collection target of R1.433 trillion, the agency will not rest on its laurels.

According to Kieswetter, some of the steps being taken to increase efficiency include:

  • Conversations with Treasury to release funding to build up Sars’ capacity and competence over the next five years;
  • The finalisation of a Sars memorandum pledging close cooperation with the National Prosecuting Authority on the more than 1 100 cases awaiting prosecution;
  • Discussions about the Davis committee, which investigated the country’s tax system a few years ago, being reconvened to look into the tax gap (tax due to government versus tax which it actually receives);
  • The reopening of the LBC, which focused on services and support rendered to large businesses and ultra-rich individuals, as well as on improved collection, compliance and processing of transactions;
  • A focus on unlawful economic activity (currently, Sars is investigating 17 cases which could result in about R30 billion in tax income); and
  • An income recovery programme that determines where income is being lost and takes action against taxpayers and practitioners who transgress.

Kieswetter said public confidence in Sars was central to its success at tax collection.

“When public trust wanes, as is the current case, taxpayers feel morally justified to withhold or manipulate their taxes,” he said.

“I caution against this [tax revolt], as has been suggested by some. This places us on a slippery slope that further undermines the building of a capable state and a well-functioning democracy. We will simply contribute to a state of lawlessness and decay that will serve none of our interests.

“The success of Sars is integrally linked to the well-being of our democracy. If Sars fails, our democracy fails.”

Kieswetter emphasised that Sars was striving for voluntary tax compliance as this approach would ensure the greatest yield at the least expense to the country.

He said he was pleased with the progress being made in the current tax collection season, which kicked off on July 1.

At the start of last week, more than 1.65 million returns had already been submitted and 74.5% thereof were finalised within three seconds.

Altogether, R10.3 billion was paid back, 83.5% of it within 72 hours.

Kieswetter’s message to the government was to spend taxpayers’ hard-earned money discerningly, without wasting it through corruption and poor financial management.

He admitted that low morale among scores of traumatised Sars employees had affected the institution’s service delivery.

Many taxpayers have complained about bullying tactics and unprofessional conduct by Sars staff.

“This is unacceptable, unethical and we cannot defend it. Please point it out to us,” he urged.

During a panel discussion at the indaba, Elle-Sarah Rossato, the head of tax controversy and dispute resolution at PwC, shared the results of a survey the firm had conducted among its corporate clients regarding their interactions with Sars.

According to the survey, VAT repayment is one of the areas where Sars is doing better: 86% of respondents said they received their money within 21 days, compared with 81% in 2018.

There are, however, problems with audits, which take 12 to 18 months to finalise. More than 40% of respondents pointed this out as a problem – up from 20% in 2018.

About 99% of respondents experienced Sars as very aggressive when it came to fines for income that was underdeclared – up from 96% in 2018.

A further 5% said that audits dealing with transfer pricing were a long, drawn-out process and were so complicated that companies often had to hire external consultants to assist with the process.

Patricia Williams, a partner in the tax division at law firm Bowmans, told delegates at the indaba that Sars could use different legal routes to collect money more easily.

For instance, she said, fines could be imposed for underdeclared income.

According to the scale for fine imposition, this can be as much as 150% of the underdeclared amount.

Sars can also use the Insolvency Act and the personal liability provisions in the Tax Administration Act.

In line with this, 43% of PwC clients said it took Sars up to six months to react to a proposed settlement agreement.

In response, Rossato said it made no sense for the tax agency to drag its feet when it came to money that could be collected immediately.


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September 15 2019