Malusi Gigaba pushes ahead with probe
Management, huge revenue shortfall and low tax morality under scrutiny
speckmana@sundaytimes.co.za
● A probe into affairs at the South African Revenue Service, at Finance Minister Malusi Gigaba’s insistence, would go ahead and the groundwork had already begun with the National Treasury finalising the terms of reference, his spokesman said this week.
Gigaba dropped the bombshell in November, soon after his medium-term budget in October at which he revealed that significantly weaker tax revenues were expected for the 2018 budget. He said the inquiry would help assess reasons for the under-collection of tax and the steps necessary to improve performance management at the revenue service.
There was speculation that his action was an attack on SARS commissioner Tom Moyane, whose relationship with the finance minister is believed to be strained. Although appointed by the president, the SARS commissioner reports to the finance minister.
This week Gigaba’s spokesman, Mayihlome Tshwete, declined to comment on the relationship.
“There’s a number of issues [the] minister is taking up with SARS. The terms of reference [for the inquiry] have been finalised by Treasury and engagement is happening with the presidency. We want to see this thing happen as soon as possible,” Tshwete said. A judge had, however, not yet been identified.
Moyane said on Thursday that he had not received further communication on the inquiry. “I don’t know. When I say I don’t know, I really mean it.”
Moyane, who celebrated his 65th birthday on Wednesday, has 19 months left on his contract. Although the retirement age at SARS is 65, SARS employees who are of retirement age and are on contract retire at the expiry of their contract, said SARS acting spokesman Sicelo Mkosi.
Mkosi added: “The talk of a strained relationship [between Moyane and Gigaba] is completely untrue. The relationship . . . is good, professional and based on mutual respect. SARS and the commissioner appreciate any action from the minister which will assist SARS in achieving our mandate of tax collection.”
Tshwete declined to elaborate on the issues Gigaba is focusing on at SARS.
The problems likely to be raised by Gigaba are low tax morality, the larger than expected R50.8-billion revenue shortfall in the 2017-18 year and the return of controversial SARS executive Jonas Makwakwa to the institution.
Makwakwa returned to work late last year after being absolved by a SARS-commissioned inquiry into allegations that he was involved in corrupt activities.
In November, the Treasury said a shortfall in tax collected impacted on the size of future budget deficits and future debt-to-GDP forecasts and the government’s credit rating.
Economists this week were divided about the need for an inquiry.
Lesiba Mothata, chief economist at Alexander Forbes, said: “The minister seems to have thought that [an inquiry is necessary], therefore it is.”
He said Gigaba appeared “very concerned” about the large shortfall. Mothata predicted that the Treasury would as result amend VAT to cover the gap.
Mothata believes that the headline VAT rate of 14% will not change, but expects “VAT to be introduced in online transactions, on cloud computing and items like petrol which is not VAT-paying at the moment”.
Kyle Mandy, the head of national tax technical at PwC, said: “I think the challenges are well understood both outside SARS and within SARS.
“It’s more a case of taking the steps necessary to address problems rather than wasting time, resources and money on unnecessary commissions of inquiry.” These challenges included lack of confidence in SARS, leading to low tax compliance, and the exodus of people with institutional memory.
Mandy forecast the tax burden for higherincome earners to be increased, such as a hike in capital gains tax from 40% to 50%, less provision for fiscal drag. Adjustment of the fuel levy could net R3-billion to R4-billion and the sugar tax R1-billion, he said.
Nazrien Kader, Deloitte managing partner for Africa tax and legal services, said the inquiry was announced at a time when there was pressure on SARS to explain why it had delayed paying refunds “with a view that compliance was not where it should be”.
Kader said under Moyane SARS had restructured, leading to some loss of skilled individuals. But he had not achieved “anything significantly different” to his predecessors. To the disadvantage of Moyane’s track record, the economy had underperformed since his appointment in September 2014.
However, Kader noted that an improvement in the environment could reflect positively on SARS. Better Christmas retail sales had boosted VAT takings while a lift in global trade had improved customs duties. “Those were the two [areas] that actually suffered in his initial years,” she said.
I don’t know. When I say I don’t know, I really mean it. Tom Moyane SARS commissioner