Mark Kington. Picture: SUPPLIED
Mark Kington. Picture: SUPPLIED

President Cyril Ramaphosa is expected this week to announce the terms of reference of the commission of in inquiry into the South African Revenue Service (SARS) and who will serve on it, Treasury deputy director-general Ismail Momoniat said in Parliament on Wednesday.

He told members of Parliament’s standing committee on finance that the commission would focus on past issues such as transgressions related to various tax laws.

Earlier, acting SARS commissioner Mark Kingon said in his briefing to the committee that SARS had dealt with the matter involving its former head of business and individual tax, Jonas Makwakwa, in the wrong way.

The commission of inquiry is expected to consider the adequacy and legality of steps that SARS took to address revenue shortfalls in the past two years, including unauthorised bonuses to top executives and withholding of refunds to ordinary taxpayers.

Also expected to be included in the terms of reference is SARS’s adherence to tax administration processes, including for VAT refunds, mining rehabilitation funds, and adherence to customs and excise provisions with particular reference to tobacco.

“Treasury hopes that the commission’s work could also assist in strengthening SARS’s capacity to deal with illicit financial flows and tax evasion by highly connected invidivuals,” Momoniat said.

He said that given the law on tax confidentiality, only a commission of inquiry had the power to go into specific tax-related transgressions or to consider whether there were any transgressions related to, say, VAT refunds.

Momoniat referred to the role of private-sector auditing, forensic and legal companies involved with the investigation of Makwakwa.

Tom Moyane, right, and Jonas Makwakwa. Picture: PUXLEY MAKGATHO
Tom Moyane, right, and Jonas Makwakwa. Picture: PUXLEY MAKGATHO


“KPMG and Hogan Lovells were directly commissioned by SARS and remained silent (hiding under ‘confidentiality’) even when their reports were deliberately distorted to mislead Parliament and government,” he said.

“Treasury hopes that the commission of inquiry will also look at all correspondence between these companies and SARS and to what extent there was abuse. Overseas regulators are much more intrusive and act quicker than many of our regulators.”

Momoniat raised the question of the confidentiality of tax matters and how to ensure that this was not abused to hide criminal and administrative abuses.

He questioned how to ensure more transparency to expose blatant acts of corruption or state capture which also affect the integrity of SARS.

In terms of the law, all tax-related information is known only to SARS and the specific taxpayer, and SARS is not allowed to tell anyone else, including the finance minister and the president.

Makwakwa case mishandled

Kingon told the committee that, rather than addressing any human resources matters of Makwakwa’s alleged wrongdoing first, SARS should have focused primarily on the possible tax evasion involved in the case reported to SARS by the Financial Intelligence Centre (FIC).

Only when tax evasion had been established should the human resources consequences have been dealt, with Kingon said in his briefing to the finance committee on finance.

Kingon was limited in what he could say about the case because of the pending disciplinary inquiry into suspended SARS commissioner Tom Moyane.

The FIC reported suspicious transactions by Makwakwa to Moyane about two years ago. These involved the deposits of more than R1m into Makwakwa’s bank accounts.

The way Moyane dealt with the case — which led to Makwakwa being suspended and then exonerated before he resigned — is one of the key issues to be raised in the disciplinary inquiry into Moyane.

Kingon said there was a fence between SARS as the tax authority and SARS as an employer. On receiving a report from the FIC, SARS’s function was limited to investigating tax evasion and not money laundering. Only once tax evasion had been established should disciplinary action be followed.

Instead SARS’s human resources department appointed Hogan Lovells to investigate the case from a human resources point of view, which Kingon said was the wrong approach.

“This is the crux of the matter,” he said. He insisted that under his watch the law would be applied. “We will do what is right in all circumstances.”

He believed SARS staff needed to be tax compliant and that this should be made a condition of their employment. The tax affairs of senior employees of SARS needed to be transparent.

The finance committee agreed that it would take up the matter after the disciplinary inquiry has been completed. It hoped that this would happen expeditiously.