Scientific analysis of SARS vital: Davis
Rot goes deeper than just Moyane
JUDGE Dennis Davis, who headed the Davis tax committee, says the problems at the South African Revenue Service go way beyond commissioner Tom Moyane, who has now been suspended.
The need for a full inquiry into SARS is as urgent as ever, he says.
“One thing that is typical in South Africa is that we always tend to blame one person. Generally speaking, there are structural reasons way beyond that person that cause the problem.”
Was it coincidental that the problems at SARS coincided with Moyane’s appointment in 2014?
“The fact that the problems at SARS seemed to escalate at that point may not be coincidental, but there were problems at SARS before he came.
“There was a previous commissioner who was fired by [then finance minister] Pravin Gordhan,” Davis says.
But there wasn’t a R48-billion hole in revenue collection.
“No, but neither was there the decline in the economy that we’ve had in the past three or four years,” Davis says.
There needs to be an urgent scientific analysis of the situation at SARS.
Half the shortfall could be explained by slow economic growth, Davis says. Declining tax morality, erosion of the tax base and profit-shifting contributed to the other half.
“These things would challenge revenue services around the world.”
We should be careful about blaming the decline in tax morality on perceptions of Moyane’s involvement in state capture, he says.
“I’m supposed to be very well-informed about what’s going on at SARS. But when I read Jacques Pauw’s book [The President’s Keepers] there was a lot of stuff in there I was unaware of, and I’m sure the public was unaware of.”
Tax morality was declining before allegations surfaced linking Moyane and SARS to state capture, he says. But there is an undeniable link between growing tax avoidance and government criminality.
The voluntary disclosure programme produced a very low R2.7-billion, much lower than similar programmes have produced in other countries.
Tax consultants told him that because of widespread government looting of the fiscus, their clients were not prepared to pay.
“That had little to do with Moyane. It had a lot to do with what we’ve just come out of – 10 years of a parallel state in which corruption was utterly rife.”
The revenue hole might have become a chasm under Moyane, but this was after a very rapid decline in growth rates.
Even Gordhan, who ran an extraordinarily efficient system, would have struggled to make targets in such an economic climate, Davis says.
Moyane, of course, blamed everything on the economic environment.
“Yes, but … the economic environment only accounts for a portion of the shortfall. That is why there needs to be an urgent scientific analysis of the situation at SARS.
“It must go way beyond Moyane,” he says, but removing him was a necessary first step. “It would have been much more difficult to investigate SARS when Moyane was there.”
Moyane obstructed the Davis tax committee’s investigations, he says.
“We didn’t have subpoena powers, so when we did our tax administration report we did not have access to a whole lot of things.”
His committee wanted to deal with the way SARS was handling profit-shifting, transfer pricing, high-net-worth individuals and fraudulent flows.
“We certainly did not get enough information from SARS,” Davis said.
His committee tried to ensure that another Moyane would never be put in charge of SARS again. It recommended that future commissioners and deputy commissioners go through a far more rigorous and open selection process.
Leaving such a critical appointment to the president is not sensible.
Meanwhile, Davis supports a wealth tax, with reservations.
“If you push it too high, you may have a flood of money leaving the country,” he says. —