SARS dismantled during Moyane’s reign
The veil over events that led to destruction at the South African Revenue Service (SARS) was lifted this week at the commission of inquiry into governance at the tax agency. SARS may well emerge as a textbook case of state capture over an incredibly short period, through skullduggery and the wanton abuse of power.
The evidence presented thus far raises a critical question about why then finance minister Nhlanhla Nene approved far-reaching restructuring by consultants Bain when, as the commission heard, SARS employees were asking “why fix what’s not broken?”.
We are beginning to understand how the institution went from one hailed as a hallmark of excellence to one that failed to reach its revenue targets for two consecutive years, resulting in a R50bn hole in the fiscus. And one lambasted by the tax ombudsman for withholding refunds.
It went from an employer of choice for professionals who described working there as “fun” and “challenging” to one in which employees sought to hide from cameras over their desks and bugs in their phones.
The hearings also showed that the restructuring was conducted under a shroud of secrecy to which only revenue commissioner Tom Moyane and his second-in-command, Jonas Makwakwa, were privy.
The inquiry heard explosive evidence of the bizarre restructuring of the SARS operating model, which saw senior, experienced employees shifted out of key posts. One former executive described how she earned an executive salary but simply read newspapers for months on end. The restructuring was intended simply to concentrate power in the hands of Moyane and Makwakwa. From a normal, thriving organisation in which power was dispersed among senior executives, SARS became the pair’s fiefdom, which they ruled through fear, intimidation and bullying.
The submissions went a long way to explaining why Moyane so desperately protected Makwakwa when he received a Financial Intelligence Centre report into unusual and suspicious transactions involving his second-incommand’s account; the pair were exploiting SARS for their own purposes.
The commission heard this week how SARS’s large business centre was dismantled. The unit was specifically aimed at corporate taxpayers, multinationals and high net-worth individual taxpayers and had contributed some 30% to SARS’s overall revenue collection.
While at this stage it is difficult to assess the effects of this, they are likely to be farreaching. The unit’s former head, Sunita Manik, was shunned and moved to a remote office to twiddle her thumbs before being replaced.
Another harrowing story was that of former group executive for corporate legal affairs, Makungu Mthebule. She described how Makwakwa interfered in the VIP taxpayer unit, which dealt with the tax affairs of politicians, judges and other high-profile South Africans. The disclosures in Jacques Pauw’s book, The President’s Keepers, come to mind, especially concerning the tax affairs of politicians such as former president Jacob Zuma.
Mthebule described how Makwakwa wielded an inordinate amount of power under Moyane, so much so that she complained about his “dictatorship”. She told the commission Makwakwa would call and SMS her, instructing her to do certain things for particular high-profile taxpayers. She said he did not ask her to act only on taxpayer matters but told her specifically what to do, for example to write off taxes or penalties.
Another area of the organisation that was decimated, according to the evidence presented, was SARS’s enforcement capacity. Other executives told how they were sidelined over their handling of grievance matters raised by Makwakwa’s girlfriend, Kelly-Ann Elskie.
Former chief officer for enforcement Gene Ravele told the inquiry SARS’s capacity to conduct criminal investigations and prosecutions had been neutered. “The operational review was about dismantling enforcement,” he said.
Ravele said an instruction was issued, allegedly by Makwakwa, for SARS to halt all inspections of cigarette companies. “The amount of revenue SARS collects from excise is dropping … if you are going to stop inspections people are going to do as they wish.”
Ravele was at the helm of the division that housed the alleged “rogue” unit, the dismantling of which weakened the institution and led to a purge of senior executives.
From the beginning of Moyane’s reign, SARS executives alleged, large tobacco firms, organised crime networks and key politicians colluded to neutralise the unit’s capacity to do its work.
The SARS story is unfolding thick and fast. The danger for the commission, the Cyril Ramaphosa administration and South Africans in general is that the damage inflicted is far too deep to reverse quickly.
LARGE TOBACCO COMPANIES, ORGANISED CRIME NETWORKS AND KEY POLITICIANS COLLUDED TO NEUTRALISE THE UNIT’S CAPACITY