Nugent tells finance committee of ‘massive failure’ of governance at Sars
The judge highlighted weaknesses in existing legislation, including the Sars Act, for not including mechanisms for governance oversight
There was a “massive failure of integrity and governance” at Sars under the leadership of former commissioner Tom Moyane, parliament’s finance committee was told on Wednesday.
MPs were briefed by retired judge Robert Nugent on the findings and recommendations of the commission of inquiry he headed up into the tax administration at Sars.
Nugent said the failure of governance was made possible by weaknesses in the governing legislation for the revenue authority, which did not entrench governance structures in the organisation.
Nugent submitted his interim report to President Cyril Ramaphosa towards the end of September 2018. It recommended the urgent removal of Moyane as commissioner so as to restore revenue collection. This was done and Moyane has failed in several court bids to challenge the president’s decision. A process is underway to find a replacement.
A key focus of the recommendations was the introduction of mechanisms to prevent a recurrence of the breakdown of governance that occurred.
Business Day reported on Wednesday that Sars is expected to conduct a forensic review of all contracts deemed by Nugent's report to have been dodgy, including with Boston-based consultancy Bain & Company for the damaging restructuring of Sars, as well as with IT specialist Gartner.
Together, the contracts were found to have cost the tax agency about R400m.
Nugent pointed to the gaps in the Sars governing legislation that enabled Moyane to dispense with oversight mechanisms soon after taking office, such as the dissolution of the executive committee, which was not mandated by law.
Nugent said Sars was set up as an autonomous body but the danger of this is that there is great potential for an autocratic body. The existing Sars legislation provides for very little control to be exercised over the commissioner.
“The commissioner is in charge of Sars and is answerable to no one,” Nugent said.“There are very few restrictions and guidelines in the legislation as to what they may or may not do. That can, of course, be a very dangerous situation. The legislation is quite weak over the controls to be exercised over the commissioner.”
An organisation such as Sars, which was involved in revenue collection, particularly needed strong governance structures.
The Nugent report recommended the appointment of a deputy commissioner on the grounds that a principle element of good governance in an organisation is the oversight role of senior management structures that are able to restrain any abuse of authority.
The South African Revenue Service Act does not make provision for a deputy commissioner “leaving the commissioner of Sars with sole and unfettered authority”, Nugent told the finance committee members.
The report also recommends that the act be amended to require the Sars commissioner appoint an advisory executive committee that must include the deputy commissioner.
The report also recommends the appointment of an inspector- general at Sars to investigate matters of governance, and that the act be amended to require an annual business plan to be prepared by Sars and approved by the finance minister.