Dearth of prosecutions swells tax avoidance tide, says Edward Kieswetter
Dearth of prosecutions swells tax avoidance tide, says Kieswetter
● South African Revenue Service (Sars) commissioner Edward Kieswetter says that to stop a tax revolt people need to see criminals and tax dodgers being prosecuted.
“The public want to see that people who break the law are brought to book, and the public is not seeing enough of that. They want to see people being prosecuted for any offence, including tax offences.”
He doesn’t want to use the term “tax revolt” but told a Sandton tax indaba last month that rising levels of “tax avoidance” were costing the fiscus tens of billions of rands every year.
A major cause of this is a loss of confidence in Sars, but a greater cause is lack of confidence in the government, says Kieswetter, who became commissioner in May.
The lack of tax compliance is part of a general breakdown of law and order.
“No-one is brought to book. What’s happening in Sars is a microcosm of what’s happening in SA.”
Given the lack of capacity in the investigative and prosecutorial organs of state, those with “criminal intent” in government and private sector are happy to take their chances, he says, and they’re being seen to get away with it.
“If you’re an ordinary taxpayer struggling to make ends meet, then you may begin to feel morally justified to fiddle with your taxes. If you’re a large corporate or a wealthy individual you’ll begin to rearrange your tax affairs and engage in aggressive tax planning.”
Kieswetter says Sars signed a memorandum of understanding with the Special Investigating Unit and National Prosecuting Authority (NPA) two weeks ago, and is “in discussion” with the Hawks to get a memorandum of understanding in place with them too.
“The organs of government that are responsible for managing the integrity of the investigation and prosecution system must begin to work together.”
He says he shares the public “hunger” for action by the NPA, “but [national director of public prosecutions] Shamila [Batohi] has the same challenge I have, which is to rebuild internal capability”.
How much longer can this be used as an excuse given the plethora of detailed evidence from investigative journalists and the Zondo commission of inquiry into state capture?
“It’s not as simplistic as that,” he says. “You cannot take a case to court and win on the basis of anything other than ‘beyond reasonable doubt’. Organisations like Sars and the NPA can’t go on hearsay.”
But their desire “to bring big cases to book” shouldn’t be doubted.
“We know that part of building public confidence is to bring one or two big cases to court. We understand there is impatience. But the big cases we will finally bring to book, we need to have a high level of confidence that we’re going to win those cases.”
Meanwhile, he admits the fiscus is losing billions because of noncompliance by people who won’t comply until they see these big cases being prosecuted.
“In the short term we have identified a number of revenue recovery projects which we are prioritising and focusing on,” he says.
But what people want to know is when they’ll see high-profile tax dodgers in court.
“We have to do that as well, but I’m talking about short-term revenue recovery.”
Don’t we need to see you going for the high-profile tax dodgers?
“We don’t announce that we’re going after this or that high-profile person. That’s newsworthy. I’m not here to create news. I’m here to do my work without fear or favour. You don’t know the work I’m currently doing, you don’t know the high-profile cases I’m currently pursuing.”
The US revenue office very publicly arrested high-profile gangster Al Capone for tax avoidance. Isn’t this what we need to see if he wants to regain public confidence?
“You will, but not at the pace you demand.”
No-one understands better than he does the need for the public to see high-profile tax dodgers being jailed asap, he says.
“How do you know I don’t have some big things up my sleeve? For you, this is about writing another story. For me, it’s about why I took this job. It’s about my integrity, my professional competence. But most importantly about reclaiming the captured state from those who have stolen it from us.”
He says no Sars executives implicated in state capture will be allowed to go quietly. Some have resigned, five have been placed on suspension. Attempts are being made to recover R2.1m in legal costs from former commissioner Tom Moyane.
But no criminal cases have been referred. “If we uncover a criminal case to be answered we’ll pursue it.”
He admits that the capacity of Sars to do this is seriously limited because of the destruction during Moyane’s tenure.
“There’s been a mass exodus of experienced, technically competent staff such as auditors and investigators, and a massive decline in morale, impacting on the way people do their work.”
If anyone can turn it around, it’s Kieswetter, because he’s done it before.
He was part of the high-quality team gathered by former commissioner Pravin Gordhan that turned a hopelessly inadequate Sars into a world-class institution. He was a deputy commissioner and was expected to succeed Gordhan as commissioner.
When he was passed over, he became group CEO of financial services company Alexander Forbes with a mandate to restore that organisation’s credibility after it was nailed for fleecing pensioners.
Kieswetter says a major concern in addition and not unrelated to the lack of compliance issue is SA’s eroding tax base.
This is not only about a stagnant economy, he says.
“It’s about people who’ve emigrated because they’ve lost faith in the country.”
Push factors such as crime and corruption need to be addressed.
“If we’re in denial about why people are leaving then we are part of the problem, not the solution.
“The erosion of the tax base and lack of confidence in our country should be a concern for all of us, because we all bear the brunt of that.”
If you’re an ordinary taxpayer struggling to make ends meet, then you may begin to feel morally justified to fiddle with your taxes