Commission shines a light into the shadow state at SARS

For most of the week, the practices of SARS have been under the X-ray of a judge and three formidable lawyers. Judge Robert Nugent, assisted by Professor Michael Katz, Advocate Mabongi Masilo and lawyer Vuyo Kahla, has listened intently to testimony revealing what’s eating SARS. Tax revenues are down and VAT has gone up for the first time in over two decades, signalling a weakening in the system of how taxes are collected. The commission of inquiry into tax administration and governance at SARS was appointed by President Cyril Ramaphosa to probe why tax revenue and tax buoyancy are going down. There has been a skills exodus from SARS, and numerous executives who gave evidence told stories of being marginalised, embarrassed and stripped of their incomes after suspended commissioner Tom Moyane allegedly undertook a scorched-earth policy to get rid of staff he didn’t want. But the commission itself was heartening. It marked a triumph of the rule of law over SARS’s descent into a shadow state from which it may not have been possible to retrieve the institution if its decline had been allowed to slide for even months longer.

The idea of a shadow state was explored by scholars Ivor Chipkin and Mark Swilling, who described what happened to South Africa in the years of state capture as a turnaround of the state from constitutional to one that was run by powerful but unelected networks who used the levers of state to build considerable fortunes.

The commission will only send final findings to Ramaphosa in

November, but the contours of the SARS shadow state were clarified this week.

Former acting commissioner Ivan Pillay said that in 2000 he had begun to analyse how SARS faced a misinformation campaign which arose from the circulation of intelligence dossiers aimed at discrediting the institution. As its high-risk investigations unit began to tackle the illicit economies in cash & carry, tobacco and abalone, and the gangland activities of drugs and protection, among many others, it made enemies. Politicians and the media were allies as the illicit economy lieutenants fought back to destabilise SARS.

Moyane has yet to explain to the commission why he halted a successful and long-running modernisation programme at SARS, but ending it meant that arbitrariness was reintroduced to revenue collection. By automating tax from submission to assessment to refunds and returns, the collector grew revenue because the system was more efficient and fast. A by-product of automation is that it takes subjectivity out of the process. It helped stop what Public Enterprises Minister Pravin Gordhan called the whisky culture he found when he took over the old inland revenue department and turned it into SARS. Assessors would often be given whisky or other gifts by taxpayers who got assessed more gently. It was corruption by whisky.

Moyane returned SARS to arbitrary systems. In addition, he dismantled systems of checks and balances at SARS. The former head of the Large Business Centre, Sunita Manik, said that as the unit which dealt with the country’s top companies and was responsible for collecting a substantial portion of the corporate tax, systems had been developed to ensure that settlement and assessment decisions were made by committee. Manik was one of many executives sidelined and marginalised by Moyane and his new team because she objected when it came to her attention that the commissioner had been negotiating tax settlements directly with the big companies.

Moyane may yet have his day before the commission if he wants to. He will have to answer this question: what made you break what was fixed?

Moyane must answer this question: what made you break what was fixed?