NOMPU SIZIBA: The South African Revenue Service updated the finance committee in parliament on its annual report today, Wednesday. The institution lost its way in recent years, losing its respectability as a first-class tax-collection service. It has often not met National Treasury’s revenue targets over the past number of years, and its conduct under previous leadership has been called into question with the consequence of a massive exodus of skilled professionals from the institution. President Cyril Ramaphosa fired former Sars commissioner, Tom Moyane, on recommendation from the Nugent Commission. New leadership has since been installed and slowly the revenue collector is working on improving its performance and in turn its image.
Well, to take us through the Sars turnaround, I’m joined on the line by Mr Edward Kieswetter, the commissioner at Sars. Thanks very much, Mr Kieswetter, for joining us on the show. What’s been the progress in re-establishing some of the divisions that were closed down at Sars, like the Large Business Centre?
EDWARD KIESWETTER: The Large Business Centre – later this month we will be officially opening it. But behind the scenes we’ve already begun to re-assemble the various functions under one leader. We have moved into new premises, and so we will be adding to the capability and the capacity so that it is fully functioning again.
We’ve also re-established the High Court Litigation Unit that was dismantled under the former commissioner. We’ve also re-established the Integrity Unit, as well as the Compliance Unit at Sars. The two types are managed professionally and adequately within proper governance processes, the various laws and committee structures. You’ll have known than there is, according to Judge Nugent, a massive breakdown in governance and integrity, so it’s all about restoring that and recreating the capability for us to be a world-class revenue authority.
NOMPU SIZIBA: I hear you. We know that Sars has not done very well in meeting Treasury’s annual revenue targets in recent years. What’s your analysis around that? Have the targets been too ambitious, given the lacklustre economy, or has the lack of capacity over time been responsible for this?
EDWARD KIESWETTER: There are a number of issues, Nompu. The first is that our economy has really “misbehaved” in the past few years, if you can call it that. So, we probably haven’t played this game. Naturally, tax is just an overlay on the economic activities, and when economic activities contract, naturally the tax revenue performance will contract. That’s the one issue, but there are two other important issues.
The first is one to which the Nugent report makes reference. Because of the deliberate dismantling of corporate abilities and the exodus of skilled people from Sars, we were not able to administer our laws as efficiently and effectively as we needed to. So, clearly, a significant portion of our revenue comes from our compliance programmes, our administrative actions, to enforce the laws and to service the wide services that enable those who are willing to fulfil their obligations. That’s the second area.
A third has to do with public confidence. When the public loses confidence in Sars, but also in the overall system of government, they begin to feel morally justified to withhold their taxes. And, from the economy’s side, we’ve seen some real challenges for many businesses which then end up with cash-flow difficulties, then end up using the taxes they collect on behalf of Sars from customers, or Pay as You Earn that they may have collected from their employees. They end up withholding that with a good intention to pay it later. But you know what happens – later doesn’t happen. So we find a significant under-collection because businesses are just struggling.
So, it’s a confluence of effects. It’s the state of the economy, the state of Sars and the decline in public confidence that merely results in the underperformance of the tax revenue collection.
NOMPU SIZIBA: Yes. What conversations are you having with the Ministry of Finance around trying to get to the targets, and what you guys can realistically do on the ground to merge a bit more than in the past?
EDWARD KIESWETTER: We are having active discussions with our Treasury colleagues who administer the budget allocation for Sars – as well as with the minister. We’ve made a specific request for additional resources so that we can recruit and bring back some of the skilled professionals that we require. And I am very confident that the minister will, in his re-allocation proposals to parliament, react positively to that.
And then, also, internally we’ve become inefficient in the way we allocate resources. And so we’ve begun what I call a “drive to meaningful work campaign” to ensure that we work smarter. Very often we think that busyness translates into effectiveness; sometimes busyness doesn’t have high impact. So we are talking internally, I’ve met with 90% of our staff is already continuing to visit all of our offices and other areas. But we engage with our staff to ensure that we can rebuild trust and confidence, improve the morale, and also assign people to work that is meaningful, that has a high impact.
So it’s a combination of reprioritising our work internally, and reassigning people to high-value work, and building additional capability, and installing the capability that we require to be respectful and well-functioning individuals.
NOMPU SIZIBA: In boosting this morale that you are talking about, are you satisfied that you’ve got rid of the bad apples, if you like, at Sars, so that people are on the same page?
EDWARD KIESWETTER: No, and that’s a blunt answer. I wish I could say to you “yes”.
NOMPU SIZIBA: Wow! Okay, elaborate.
EDWARD KIESWETTER: People don’t put up their hand and say “I’m a bad apple”, or “I will continue to undermine”. And, sadly, one of the things that is a tragedy for our country is that the divisive leadership that we have been exposed to, which has created the whole state-capture project, has divided the country into factions, into camps; and there is a constituency that supports every faction. So we find within organisations, within government – and Sars is no different – people actually take sides. They support a particular leadership style; they think they can benefit more from a particular leadership style. And so, when a new leader comes in and begins to communicate a different doctrine, a different set of values, don’t assume that everyone says, “Wow, this is the best thing since sliced bread!” There will be those who say, “Well, that doesn’t really field our interests,” and they begin to undermine you.
Why do I know that? I know that because information leaks out of Sars. You have a confidential discussion and the next thing is you get a phone call from a journalist who says, “I believe there was a meeting and the following things were discussed. Please tell me more about it.”
So, the integrity of the organisation – to fix that will take years.
NOMPU SIZIBA: One last thing, Commissioner, before I let you go – how has the tax season gone this year? Has the level of filings that have been made been in line with your expectations, and has there been an increase or otherwise in the number of filings that you guys have been auditing? You did warn us a number of months ago that Sars is going to be very vigilant in the area of tax compliance.
EDWARD KIESWETTER: Well, I can report that the filing season is going very well. So far, we have reported that, with the new enhancements we have brought to bring more people to use the online filing has grown. So far more than two million taxpayers have used it. It’s a very positive result. More than three out of every four taxpayers have used that, and they’ve had their assessments done in literally a few seconds. More than 80% of taxpayers have been given their refund or part of their refund without 72 hours. And we’ve already paid out, as of last week – which is the last update I have in my mind right now – well over R15 billion in refunds to taxpayers.
NOMPU SIZIBA: Wow. That’s a lot of money.
EDWARD KIESWETTER: So, we’ve made good progress. But, having said that, we still have many teething problems, we have many challenges. Our queues are still too long. Often when I visit our branches I find grannies or people who come in and take off time from work spending hours in our queues. Those things are still matters that challenge us. We are working hard to improve the service to taxpayers, but we can’t declare victory yet. We still have a lot of hard work to do.
NOMPU SIZIBA: I guess it’s one day at a time, commissioner.
EDWARD KIESWETTER: It’s a game of inches, literally.