Corporates aren’t tax compliant, probe told

THE majority of big corporates doing business in South Africa are not tax-compliant, which is hampering efforts by the SA Revenue Service to collect revenue.

This was the damning evidence of Dr Thabelo Malovhele – formerly executive of tax compliance and risk analysis at Sars – who was testifying before the Nugent Commission tasked to probe tax administration and governance at Sars after the appointment of Tom Moyane as commissioner in 2014.

The inquiry, which began its work in June, was appointed by President Cyril Ramaphosa after he suspended Moyane.

Ramaphosa appointed Judge Robert Nugent to chair the commission, which is also probing allegations of financial misconduct at Sars, including a shortfall of R50 billion between 2014 and 2018 under Moyane.

Yesterday, two key witnesses, Malovhele and Dr Randall Carolissen, a former senior executive at Sars, painted a bleak picture of Moyane’s tenure, saying that under him a growing number of companies and individuals failed to meet their tax obligations.

Malovhele said that before Moyane’s tenure he had set up a compliance programme in 2011, aimed at monitoring compliance rates of individuals and companies towards their tax obligations.

The programme was able to ensure that individuals and big corporations paid their taxes.

“The International Monetary Fund also approved our programme and encouraged other countries to use our programme. A lot of African countries came to South Africa to learn about our compliance programme,” Malovhele said.

According to him, troubles started in 2015 when his compliance unit was dismantled and he and some of his juniors were demoted when Moyane and his team introduced a new operating model at Sars.

“The compliance programme was shifted to other units at Sars. It was shifted to people who didn’t have the necessary skills and competence to do the job,” Malovhele said.

He said owing to the lack of a compliance programme at Sars, about 89% of companies operating in South Africa failed to pay their CIT (corporate income tax), 33% failed to comply with pay as you earn (PAYE), 20% failed to pay personal income tax and 39% failed to pay VAT.

The figures are for the 2017/18 financial year, but Malovhele said the level of non-compliance grew from 2015.

Carolissen, who heads revenue, planning, analysis and reporting at Sars, testified that the radical restructuring was not communicated with them. “None of us anticipated the radical restructuring. No, definitely not.”

He said Moyane’s operating model was an erosion of excellence and was unnecessary as they were meeting their core mandate.

“There were people working for the organisation for 25 years, they were suddenly put in the departure lounge and we were left wondering what they did wrong,” he said.

One of Sars’ senior officials, who anonymously issued a sworn statement to the commission, noted that some companies said they would pay tax only once Ramaphosa had completed dealing with corruption in the government.

Evidence leader advocate Caroline Steinberg said the statements were made through the Sars contact centre. Some of the taxpayers, Steinberg noted, had vowed to start paying tax only once Moyane’s case was finalised and Sars’ credibility was restored.

This was corroborated by Carolissen, who testified that during that period, Sars’ debt book increased to R135 billion from R85bn in 2015.

Carolissen also said money owed to taxpayers and kept by Sars spiralled to R70bn in 2017 from R55bn by the end of 2016.