The news that the South African Revenue Service is starting to rebuild capacity under the leadership of Commissioner Edward Kieswetter evokes mixed feelings. For the economy, it is obviously much needed and we all want the country to start making progress against state capture but even law-abiding taxpayers may view this with a little trepidation. Kieswetter told Parliament’s standing committee on finance that he was making progress in implementing the recommendations of the Nugent Commission that unveiled the scale of state capture at SARS under the leadership of Tom Moyane and his cronies. It left a once proud SARS  described in the books, ‘Death and Taxes’ and ‘Tobacco Wars’ by Johann van Loggerenberg, missing its revenue targets since 2014 and resulted in a skills flight in key revenue collection units. Kieswetter told the Tax Indaba in Sandton in August that SARS was in the process of signing a memorandum of understanding with the National Prosecuting Authority as it sought to ramp up prosecutions for corruption. 1,177 tax-related cases were awaiting prosecution and the list continued to grow. He said the loss of trust in SARS had planted a seed of tax revolt in the minds of some South Africans, which will prevent the government from creating a strong and capable state. – Linda van Tilburg

SARS Commissioner determined to act on Nugent report

From South African Revenue Service:

South African Revenue Service (SARS) Commissioner Edward Kieswetter has told Parliament’s Standing Committee on Finance (SCOF) that SARS has made substantial progress in implementing the Nugent Commission (Commission) recommendations.

Commissioner Kieswetter informed the committee that consultancy firm Bain had paid back the R217m to SARS. However, IT consultants Gartner had declined to do the same despite several engagements.

Owing to the way in which these companies conducted their business activities consideration should be given to placing them on a restricted suppliers list which if approved, means they would not be able to do business with the South African government.

Furthermore, where criminal conduct is suspected relating to matters of Bain and Gartner these have been referred to the Directorate for Priority Crimes Investigation (Hawks) for criminal investigation.

In a comprehensive presentation to the SCOF on progress made in implementing the recommendation of the Nugent Commission, Mr Kieswetter also highlighted the following:

• The Large Business Centre which was abolished has gone through an organisational redesign and is now functional and will be launched at its new premises in October;
• The Illicit Trade Capacity has been re-established in the Enforcement division. The primary focus of this unit will be on tax relating to Organised Crime, Customs and Excise evasion schemes in the following industries: Tobacco; Cash and Carry; Clothing and Textiles and Alcohol, among other industries.
• The Compliance Unit has been re-established to facilitate the development, implementation monitoring and reporting of the compliance policy and risk strategy;
• SARS will re-constitute its High Court Litigation Unit, which had been broken up into regional entities, hampering the pace at which the unit functioned and this will be activated in October 2019;
• The IT division has been stabilised by temporarily filling key positions with experienced IT professionals;
• Re-establish the Integrity Unit which performs an important function within SARS; and
• Resourcing of the required critically skilled resources for the IT division will begin later this year.

Regarding the resignation of senior employees, the recruitment policy has been revised to allow for the recruitment of staff that left the employment for various reasons. Employees who were shifted into meaningless roles have all been given meaningful work.

Mr Kieswetter said he was currently conducting performance reviews of EXCO members as required by the Nugent recommendations and as an incoming leader to perform an all-round assessment of leadership capabilities. Disciplinary proceedings affecting certain individuals are underway. While meetings of the existing EXCO have been put on hold, specific operational meetings on the implementation of SARS’ business are held with the broader executive team on an ongoing basis.

All benefits of EXCO members and appointments without ministerial approval have been submitted to the Minister for review and approval as per Section 18(3) of the SARS Act.

Mr Kieswetter said that from 1 October 2018, SARS no longer applied a monthly VAT refund target to limit the refunds paid in a particular month. Instead, when a VAT refund becomes payable, it is paid without considering the monthly refund target.

This change in approach has resulted in an additional R30bn of refunds being paid out in the 2018/19 financial year.

With regard to legal costs incurred by the former commissioner, Mr Kieswetter said SARS is in the process of recovering the amounts involved including an unauthorised trip to Russia in November 2017 as well as addressing legal costs incurred in seeking advice on the Makwakwa matter. These costs amount to R2,143,167.42.