David Maynier. Picture: TREVOR SAMSON
David Maynier. Picture: TREVOR SAMSON

The SA Revenue Service (Sars) is in the process of re-establishing a dedicated unit to focus on the illicit economy, which it says has a huge effect and is a real threat to the economy.

Sars’s previous unit — the so-called “rogue unit” — was controversial and provided former Sars commissioner Tom Moyane with a weapon to pursue his opponents, including former finance minister Pravin Gordhan and former top Sars executives.

Commenting on the move to establish a unit on the illicit economy, DA finance spokesman David Maynier said: “We do not want another Sars ‘rogue unit’ scandal and for that reason it is imperative to ensure that the illicit economy unit is established as a law enforcement unit, rather than an intelligence unit, and that its powers and functions are clearly set out in law, by Sars.”

The illicit economy ranges from the underground economy, which operates outside of the rules and regulations of the country, to organised crime. A well cited example of the illicit economy is the black market in tobacco products.

Sars says on its website that SA is “losing a large portion of its GDP every year to the illicit economy. This has mainly been in the form of smuggling tobacco products, counterfeit textiles, drug manufacturing and smuggling, illicit mining of gold and diamonds, ivory smuggling and the poaching of endangered species like abalone and rhino.”

Finance minister Tito Mboweni said in a written reply to a parliamentary question by Maynier that the establishment of the Sars illicit economy unit would be implemented in two phases, with the first phase scheduled to be functional by November 2018. The anticipated completion of the second phase, which would involve the complete operationalisation of the unit was June 2019.

A new conceptual design and interim structure for the illicit economy unit had been developed and approved.

“This two-pronged approach to establish the specialised enforcement capability and capacity is being pursued; first an interim capacity and capability to immediately respond to the current illicit economic activities, and second, developing and implementing the organisational design to build the full functioning unit of the future,” Mboweni said.

Given the current limited capability and capacity, the focus of the Interim illicit economy unit relates to organised tax, customs and excise evasion schemes inter-alia in the following industries: tobacco, cash and carry, textiles, alcohol and fuel. 

“In addition, abusive practices such as advanced import payments and currency smuggling, phoenixism, abusive liquidation and business rescue practices and syndicated refund fraud, including organised VAT fraud such as carousel structures will also be addressed as per the illicit economy unit mandate,” the minister said.

Mboweni said Sars had identified 58 potential cases that fell within the illicit economy unit mandate 

In reply to another question by DA deputy finance spokesman Alf Lees, Mboweni commented on the Sars IT systems, noting that “while they were ageing and required continuous maintenance, they are currently stable, operative and serving our clients well”.

“The Sars technical IT teams have the necessary skills to ensure we modernise our systems and Sars is committed to providing the required resources to enable us to eventually have the ideal technology offering. Sars is on record on the need to refresh its ageing ICT infrastructure and plans in this regard are under way.”