The rebuilding of the South African Revenue Service has begun, but the damage suffered is incalculable and the effects will linger for years to come. So says Sars Commissioner Edward Kieswetter, who has been in the job since May.
The tax collector has lost 2 200 of its employees since 2014 and a culture of fear and mistrust in the leadership still prevails. Around 400 professionals involved in compliance investigative audits left Sars and its Large Business Centre lost more than 130 people with highly technical skills.
Kieswetter delivered the keynote address at the annual Tax Indaba in Sandton, which looked at the role that participants, intermediaries and consultants played in state capture and the hollowing out of state institutions such as Sars.
Kieswetter says Sars needs to be frank about its own inefficiencies and the tragedy of the current situation it finds itself in.
“It pains me that there are still those who perpetuate a denialist narrative about the fact that Sars had suffered a significant blow since 2014. It is even more distressing that there are still those who continue to undermine the efforts to rebuild Sars.
“They do this to our collective detriment.”
Sars was the target of deliberate capture that supported a narrow self-serving intent by firms such as Bain, Gartner and advisory firm KPMG.
These firms were appointed and paid millions – to fix something that was never broken. This led to a world-class IT system being neglected to the point where it was merely a matter of “keeping the lights on”.
The capture of Sars led to a breakdown in governance, loss of confidence and trust, and the subsequent decline in revenue collections.
Deputy finance minister David Masondo says the period of institutional instability coupled with slow economic growth has led to an increase in tax revenue shortfalls – from R7 billion in the 2014/15 tax year to the latest shortfall of R57 billion.
One of the key lessons of the last 10 years is that policies and institutional designs are not sufficient to enhance economic growth, he adds.
“This can be easily dismantled if powerful forces with predatory agendas are present in society.
“We need a coalition of active citizenship that is committed to ensuring that our institutions are protected.”
Masondo says powerful forces can regain their strength and may recapture the state institutions if civil society is weak. If South Africa did not have such a robust civil society, the level of state capture could have been much worse, he adds.
Kieswetter says that a strong and capable state is needed to combat the stubborn prevalence of poverty and address inequality and unemployment. “Fundamental to building a capable state is fiscal integrity.”
This requires a well-functioning revenue authority that provides government with the ability to provide goods and services without its debt growing out of control.
“Our flag and our anthem will mean nothing if we have to hand away our sovereignty to multinational funding agencies who will effectively own us once we lose our financial independence.”
It is therefore incumbent on all South Africans to make sure the tax system remains one that is characterised by integrity, effectiveness and is known for professional engagement with taxpayers that is beyond approach.
Sars has been working on 17 cases in the so-called illicit economy where there is a suspected tax compromise of R30 billion. It is also working on 16 transfer pricing and international tax cases where it is of the view that there is a tax risk of R3 billion.
Kieswetter says Sars is working closely with the National Prosecuting Authority and currently has a backlog of 1 177 cases waiting for prosecution.
He also referred to the culture of fear and intimidation that was prevalent during the reign of former commissioner Tom Moyane.
It resulted in unacceptable service and even bullying by auditors of taxpayers and tax professionals. “There can be no excuse for poor taxpayer treatment. This behaviour is unacceptable, unprofessional and even unethical.”
Kieswetter cautions against any talk of a tax revolt, saying it would put the country on a slippery slope that would further undermine the building of a credible state and functioning democracy.
“It would contribute to lawlessness and decay that would serve nobody’s interest.”