Nugent: Sars revamp benefited tax dodgers
Report recommends Ramaphosa remove Moyane and appoint a new boss without delay
Delinquent taxpayers and criminal networks benefited from the restructuring at the SA Revenue Service (Sars) by suspended commissioner Tom Moyane and international consultancy Bain & Company, with these networks, including the illicit tobacco industry, now operating with “little constraint”.
This is among the explosive revelations on the effect of Moyane’s tenure on the tax agency and the country’s revenue regime contained in retired judge Robert Nugent’s interim report submitted to President Cyril Ramaphosa at the end of September.
Nugent chairs the commission of inquiry into tax and governance at Sars. His report, which Business Day has seen, also suggests that the “rogue unit” narrative, which was the context in which Moyane overhauled the agency’s operating model, was false.
The report states that the commission has not yet found why the establishment and
functioning of the unit was said to be unlawful. Nugent’s view that the unit was not unlawful is supported by a legal opinion received by Moyane in late 2015, almost a year after he took office and after the former leadership departed, which Moyane did not publicly disclose.
The report recommends that Ramaphosa remove Moyane and appoint a new Sars commissioner without delay, in order to arrest ongoing revenue losses and the continued erosion of compliance by taxpayers.
While Nugent has not made a definitive finding on what led to the R50bn revenue loss, evidence before the commission from senior officials as well as industry players indicate that the erosion of capacity at Sars was partly to blame, culminating in the first VAT increase in SA in two decades. “There is no doubt that all this has compromised revenue collection and tax compliance and that is set to continue if things go on as they are.
“We do not think it will be possible to attribute the decline in revenue collection with any accuracy, but the analysts we have heard all agree that a material part is to be laid at the door of ineffectiveness at Sars, and the ongoing loss is set to continue in the absence of decisive intervention,” Nugent’s report says.
“Today the air at Sars reeks of intrigue, fear, distrust and suspicion. We have heard of it in evidence, and we have encountered it ourselves.”
The Bain restructuring had displaced about 200 managerial employees from their jobs, and that “measures to counter criminality have been rendered ineffective ... those who trade illicitly in commodities like tobacco operate with little constraint”.
Relations between Sars and other state institutions, such as the Treasury, the Davis tax committee, the auditor-general and the Financial Intelligence Centre were “icy”. The report also reveals that Sars, which previously enjoyed international acclaim, was now “isolated” from international tax bodies.
Ramaphosa has been locked in a protracted battle with Moyane after his suspension in March, with the embattled tax boss’s case now headed towards a court showdown.
Moyane has disputed his disciplinary process and the commission’s work and establishment, and has applied to the Constitutional Court for relief.
He has not yet responded under oath to the damning allegations, which emerged at the Nugent inquiry or were contained in the charges put to him in the Sars disciplinary case.
Moyane’s attorney Eric Mabuza said the president had given Moyane until October 26 to respond to Nugent’ s report. He said the Constitutional Court had yet to pronounce on the “legality” of the commission.