EDITORIAL: A Soviet-style SARS brag fest
The effort by the tax office's current leadership to airbrush out successful predecessors, including Pravin Gordhan, is an outrage
This newspaper wishes most of the 14,000 people who work at the South African Revenue Service (SARS) a happy 20th anniversary. But not all of them.
The Soviet-style efforts of SARS’s current leadership to airbrush out those who set up the new institution two decades ago, and transformed tax collecting in SA, is an outrage.
The people who work at SARS do not deserve a leadership team that is so petty and pathetic that it felt the need to rewrite history in the media release and self-congratulatory media adverts it placed for this week’s 20th anniversary. There was no mention of Pravin Gordhan, nor for that matter of former commissioner Oupa Magashula or acting commissioner Ivan Pillay.
Lest anyone had forgotten, it was Gordhan who led SARS from its inception until he was appointed finance minister in 2009. It was Gordhan and his team of dedicated professionals who fundamentally changed the culture of paying tax in SA during that period.
Revenue collections had more than tripled by the time of SARS’s 10th birthday
The huge turnaround in SARS’s efficiency and service levels in that first decade was combined with tax policy changes to generate a crucial democratic dividend for SA. Revenue collections had more than tripled by the time of SARS’s 10th birthday, and revenue collections overshot budget projections, sometimes massively, in all but one of its first 11 years. That provided the basis for the democratic government to fix the public finances and expand pro-poor spending on a large scale while at the same time cutting tax rates. It is a turnaround story that has been the subject of business school case studies, and one that was fundamental to the redistributive policies that the new democratic government was able to put in place.
For current commissioner Tom Moyane and his merry men to stage a 20th birthday campaign without acknowledging the contribution of the team that shaped and led SARS in the years until Moyane was parachuted in is shocking. But it is hardly surprising, given that Moyane’s first order of priority when he arrived at SARS was to destroy that very team using allegations of a "rogue unit".
The leadership, which was so carefully built up at SARS in its first decade-and-a-half, has been almost entirely driven out by Moyane, who has done much to erode the reputation and credibility that was so painstakingly built up in earlier years.
That erosion of the institution has done nothing for its ability to collect taxes, especially at a time when the economy is stagnating, taxpayers are feeling squeezed by successive tax increases and new evidence is emerging daily of state capture and corruption. In that kind of environment, taxpayers are bound to be less than enthusiastic about paying up and it needs astute tax administrators, whose integrity and professionalism is beyond reproach, to ensure that they do.
In that, SARS is signally failing. The current fiscal year is expected to see a R51bn revenue shortfall, the largest since the great recession, with shortfalls over the next couple of years lifting the cumulative shortfall to R209bn over the three years of the medium-term fiscal framework.
That reflects the dire state of SA’s economy. But it also reflects the state of SARS itself, and the deterioration in tax culture for which the revenue service must take at least some of the blame. The tax ombud found that persistent complaints about SARS’s tardiness in paying refunds are justified, suggesting the tardiness may be deliberate as SARS struggles to meet targets. That can only undermine the relationship SARS has with taxpayers.
Wednesday’s medium-term budget policy statement comments that "policy and administrative factors may also be contributing to the shortfall", adding politely but pointedly that "implementing the recommendations from the tax ombud’s report on delays in the payment of VAT refunds … will help to improve taxpayer confidence in revenue administration".
Judge Dennis Davis’s tax advisory committee has been asked to probe the state of tax administration at SARS. Is it too much to hope it can be fixed long before the next anniversary?