Curing SARS most important
The damage that former president Jacob Zuma’s efforts to hollow out state institutions did to the fabric of SA’s society and economy will take a long time and a great political will to fix. But if there is one area in which the turnaround is most urgent — and most material to the government’s ability to meet its own objectives — it is the South African Revenue Service (SARS).
That makes it essential that SA gets an outcome soon from the disciplinary procedure that has been launched against suspended SARS commissioner Tom Moyane. It makes it essential, too, that the inquiry into SARS that President Cyril Ramaphosa has promised starts as soon as possible and concludes its work smartly and speedily.
Moyane’s tenure at the tax authority has done deep damage to a once world-renowned institution whose effectiveness from the late 1990s did much to create the space for the government to bump up social spending while slashing the public debt. But under Moyane, who took over late in 2014, SARS’s independence, integrity and credibility were eroded, while his purge of senior staff, combined with the extensive operational restructuring he undertook, undermined its ability to collect taxes.
That has been evident in the cumulative total of almost R100bn by which revenue collection has fallen short of national budget targets over the past four fiscal years, culminating in the R48bn shortfall in the latest (2017-18) fiscal year.
Clearly, SA’s economic woes have been one factor: with growth falling consistently short of budget projections, revenue targets have proved consistently too high. But the economy is only part of the problem. A steep decline in compliance levels has played an even bigger part, and that goes to the sharp decline in SARS’s effectiveness, as well as to the decline in tax morality that Treasury officials and tax experts have been bemoaning.
SARS itself has reported a general decline in compliance across all taxes and in April said it was increasingly concerned about the continuous decline in filing of returns and payments by those tasked with the “agency function” — that is, businesses and other organisations that collect PAYE from employees and value-added tax from customers — taxes that they are supposed to pay over. Acting SARS commissioner Mark Kingon reports that revenue collections from large businesses have been flat in recent years. That’s a big problem given that large businesses account for two-thirds of corporate income tax and collect significant amounts of PAYE and VAT.
Tax morality is surely an issue, and who can blame taxpayers for avoiding tax any way they can, given the scandalous conduct of the tax authority itself in recent years, not to mention the capture of the state itself? But Moyane’s restructuring efforts are also implicated: he got rid of SARS’s Large Business Centre and the integrated and specialist capacity it had to engage with large businesses. The results are showing — and so too is the failure of SARS’s operating model to address the challenges across a range of tax types and taxpayers, from customs and excise collections to high-net-worth individuals.
Fortunately, there are still good people doing a good job. With Moyane out of the way, the recovery process has started and Kingon is looking, he says, at “tweaking” the operating model to make it more effective.
That’s a decent start. But tweaking is not enough. A new permanent commissioner is urgently needed, someone who can make key appointments and make and implement big decisions about how SARS is going to up its game. That means Moyane’s employment needs to be terminated, preferably with as few concessions as possible to a man who has behaved disgracefully during his tenure at SARS and since his suspension.
But Ramaphosa needs also to expedite publishing terms of reference for the commission of inquiry into SARS and appointing a judge to chair the commission. The commission needs to get to the bottom of the alleged corruption and fraud at SARS and to recommend measures that will ensure it cannot happen again.
Legislation gives it the power to do so and to breach the confidentiality about taxpayers’ affairs and about SARS’s internal affairs that has constrained the Davis tax committee and other probes into SARS.
The commission will need to look at what operating model is appropriate for SARS and how best to take it forward. That must be done as swiftly and thoroughly as possible.
SA’s public finances, and the government’s ability to deliver services, depend on it.
WHO CAN BLAME TAXPAYERS FOR AVOIDING TAX GIVEN SARS’S SCANDALOUS CONDUCT?