The anatomy of the capture of the SA Revenue Service (Sars) is emerging in stark relief as the commission of inquiry into governance and administration at the tax agency holds its first public hearings.

Retired judge Robert Nugent, who is chairing the commission, aptly said in his opening remarks that "sunlight is a great sanitiser". The inquiry, though still in its early days, has already shed much-needed light on the goings-on at the tax agency.

A key aspect that has quickly emerged is the way Sars’s accountability and governance structures were systematically dismantled — contributing to the hole of nearly R50bn in revenue collection as well as the propensity of the tax agency in recent years to withhold tax refunds.

The playbook of this capture started with the appointment of the now suspended commissioner Tom Moyane, when basic governance structures were dismantled, followed by a far-reaching restructuring carried out in secret.

Then came the purging and sidelining of officials in charge of high-stakes portfolios, and the centralisation of power in new structures led by Moyane and his lieutenants. The tax agency’s enforcement capacity was eroded, and the section known as the large business centre was dissolved.

The inquiry heard from four witnesses how, one month into his tenure, Moyane dismantled the agency’s executive committee. He called in its members, eight or so top executives, and told them the body had been "disbanded".

Former finance minister Pravin Gordhan, a predecessor of Moyane’s as commissioner, told the inquiry that the committee had originally been created to improve governance at the tax agency.

It was aimed in part at diluting and "democratising" the powers of the Sars commissioner; it comprised the head of each division — including legal, enforcement, the large business centre, human resources and strategy — and its role was "to create a regular system of governance".

"He told me what to do, to write off things especially for one particular taxpayer
Makungu Mthebule

Moyane’s scrapping of the committee marked the beginning of the formation of new power structures in the organisation — a process that witnesses indicated last week resulted in senior and experienced executives and managers being sidelined and purged.

Sobantu Ndlangalavu, former head of small business amnesty, sketched the way the once "vibrant" culture at Sars quickly disintegrated into fear and suspicion. He told the commission how he arrived at his office one day to find that the memory sticks used to access the computer system he used no longer worked.

When he asked about this, he was told the sticks — which had long been an integral part of the information technology network — were now regarded as posing a risk.

Ndlangalavu’s evidence clearly showed the paranoia of the Sars leadership under Moyane. He described how trees were uprooted around the tax agency office because they "posed a security risk", how cameras were installed everywhere, including above printers and mounted on desks, and how listening devices were planted in the remaining trees and in common areas.

Then came the restructuring.

Dealing with this, former executive for ethics and integrity at Sars, Tshebeletso Seremane, told the inquiry that staff kept asking, "Why fix what is not broken?"

She was among the leaders who complained that the review of the operating model by consultancy Bain "brought nothing new" and who questioned the motives for it. Seremane was dismissed in 2016 for her forthright criticism of the process. The mother of three, who was employed at Sars for nearly two decades, remains unemployed.

The restructuring was conducted behind a veil of secrecy, with senior managers who were expected to drive the process never having sight of the Bain report. They received vague PowerPoint presentations that left them none the wiser.

The true extent of the restructuring at Sars was outlined by the former head of the large business centre, chartered accountant Sunita Manik.

In an interview with the FM, Manik, who joined Sars in 1993, said her career and the tax agency meant everything to her. She was in effect married to her job. When the centre she had created was destroyed, leaving her to twiddle her thumbs without a real job, she left Sars and worked briefly at a law firm.

Now unemployed, she describes herself as a "Sars lifer" committed to the organisation and the role it plays in SA’s developmental state.

The large business centre was benchmarked against international models. More than 85% of tax administrations around the world have similar units dedicated to the tax matters of corporations and high net worth individuals. The Sars version was a one-stop shop dedicated to a tax constituency that contributes a whopping 30% to revenue collection in SA.

Manik said Moyane’s restructuring effectively did away with the large business centre by shifting overall responsibility for it to Moyane’s trusted lieutenant, Jonas Makwakwa.

What it means

The breaking down of Sars’s accountability and governance contributed to the R50bn hole in revenue and the drying up of tax refunds

She said the large business centre could provide rich pickings for personal enrichment by the corrupt.

Makwakwa, a central figure in the Sars tale, was described as a bully by those testifying last week.

Former group executive for corporate legal affairs Makungu Mthebule said Makwakwa had inordinate power under Moyane — so much so that she complained about his "dictatorship".

After deputy commissioner Ivan Pillay was suspended in 2014, Mthebule was appointed to act in the post, with responsibilities that included the "restricted taxpayer" or VIP unit, which dealt with the taxes of prominent individuals such as politicians, judges, the head of the army and others.

She told the commission that Makwakwa would call and SMS her, instructing her to do certain things for specific high-profile taxpayers. (No taxpayers may be identified during the inquiry’s public proceedings.)

Mthebule said Makwakwa’s calls included directives to write off tax arrears or penalties for certain people.

"He did it with a certain level of force," she said. Asked if this was normal procedure at Sars, Mthebule said it was not. "Definitely, he told me what to do, to write off things especially for one particular taxpayer."

She told the inquiry that staff in the VIP division complained to her that Makwakwa had also sought to interfere in cases they were handling. She had refused to assist him and instructed her staff to do the same.

Mthebule said she did not understand why Makwakwa was interfering in matters in her department.

He was also the only member of the Sars leadership other than Moyane himself who was privy to the organisational redesign conducted by Bain.

After the restructuring the VIP unit fell into a division headed by Makwakwa.

Former head of enforcement Gene Ravele said his division too was culled, and told to cease all inspections of tobacco manufacturers.

His submission tied in with that of treasury official Cecil Morden, the former chief director of economic tax analysis, who said hobbling the enforcement division had led to a 5.1% drop in domestic and import excise tax revenue. Morden said this was worrying and required further investigation.

Morden dismissed as "smoke and mirrors" a submission to the inquiry by Moyane’s lawyer, Dali Mpofu, that revenue collection had hit the R1trillion milestone on Moyane’s watch. Morden said the mark would inevitably have been reached no matter who was in charge.

It is no wonder Moyane is now fighting for the inquiry to be halted. The way he destroyed Sars is coming out into the open for all to see.

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