ALLAN GREENBLO: How Sars holds the key to accountability for Zondo revelations
In a flash, a clampdown on white-collar criminals would belie investors’ negative perceptions of a crime-riddled SA
There are basically two provocations for a tax revolt.
One is a pervasive belief that taxes paid far exceed the value which taxpayers receive — tantamount to a breach of contract between payer and payee for public services.
The second is a sense of unequal treatment between those who honour their responsibilities and those who evade them, reflected by disparities in compliance. SA, unfortunately, has both elements in abundance.
The former is the fault of state institutions, so decrepit with incompetence and corruption that service delivery is stymied. The latter is the fault of Sars, so afflicted by its legacy of incompetence and corruption that it creates a chasm for chancers.
The sooner Sars comes right, the better for the country's all-round cleanse. It would be an all-round boost to business and investment confidence, since these relationships are inextricably bound in reciprocal obligations.
On this success depends a turnaround in SA’s economic fortunes, waylaid not only by political torments (a ruling party that battles to rule itself) but also by the timid prosecution of commercial crime (too little, too late, too ineffectual to frighten).
It might be said that the absence of accountability poses a weightier deterrent to investment than even the risks around property expropriation without compensation — and that’s saying something.
On the strength of revelations before the Zondo commission, there should already be a queue for prison admissions. Instead, nothing happens.
On roll the disclosures, permeated with fraud allegations so obvious that they lose their capacity to shock, without apparent effect. The tide of evidence suggests the hearings could last for many months still — were it not for the ballooning costs.
Once the hearings conclude, whenever that might be, it will presumably take Deputy Chief Justice Raymond Zondo several months to produce his report. This implies an even longer period — perhaps years — before any recommendations are implemented. There is a way to short-circuit the process: Sars, which has been much refreshed under the leadership of Edward Kieswetter.
Unlike the National Prosecuting Authority (NPA), Sars doesn’t need to await either recommendations from Zondo or criminal trials. Kieswetter has himself intimated, perhaps unintentionally, at a means for swifter justice.
Simply, the tax authority can act on the evidence already presented to Zondo. There’s a veritable guest list for lifestyle audits, money-trail inspections and bank-account perusals. Quantify the proceeds from corruption, assess whether they’ve been declared for tax purposes and apply the delightful remedy of payment with penalty interest.
This would be an initiative to precede, not replace, criminal prosecutions. You’ll recall, for example, that the infamous Chicago gangster Al Capone was felled by tax evasion.
It’s a pity, in a way, that Sars is bound to protect taxpayer confidentiality. It would be in the public interest to know, for instance, whether Jacob Zuma has declared the state-funded improvements to his Nkandla homestead for fringe-benefits tax. Ditto on how former Steinhoff CEO Markus Jooste continues to indulge his taste for luxuries.
Kieswetter let the cat out of the bag a few weeks ago with his proud announcements of a R38bn tax haul higher than was forecast in the February budget. It was helped, he said, by a surge in mining profits (which might not last forever), consumer spending that was better than expected (notwithstanding the lockdown bans, job losses and retail closures), and Sars’s “own efforts to improve compliance”.
A few days later, Kieswetter added that Sars is developing the capacity to identify South Africans’ assets invested offshore. Estimated at over R400bn, calculated by sharing data with dozens of jurisdictions abroad, he believes a substantial proportion of this has probably not been declared.
Ok then. If SARS can identify offshore assets, legitimately earned but illegitimately not declared, it must by the same token to be able also to identify offshore and domestic assets illegitimately earned and illegitimately not declared.
A way to fund the Zondo commission
Which takes us back to Zondo — the recoveries of money could not only offset the costs of the commission but produce a nifty profit into the bargain. In which case, the longer that Zondo continues going, the greater the revelations.
What has so far restricted Sars, according to Kieswetter, has been the underfunding of the tax authority which has caused capacity constraints.
Late last year, he put that shortfall, to reverse the devastation under his predecessor, at R800m. This year, in his February budget, finance minister Tito Mboweni extended the allocation to Sars by R3bn for compliance improvements.
Part of this would be used to update technology, and part to replenish personnel. If the R800m is needed entirely to fill the 600-800 critical vacancies for professional staff in the near term, from where is the money to come?
Consider the possible introduction of a levy on financial institutions similar to that which underpins the Financial Sector Conduct Authority (FSCA). At last count, the FSCA’s annual revenue of R827m came from levy contributions. For these institutions, the better their profits, the higher their contributions to defined social outcomes.
A once-off levy, from those most immediately and substantially to benefit from a favourable review of country risk, could subsequently be repaid from windfall recoveries.
SA has a plethora of strong-arm law-enforcement agencies. They include SARS, the National Prosecuting Authority, the Special Investigating Unit, the Asset Forfeiture Unit and the Financial Intelligence Centre. Unless these bureaucracies are properly capacitated, which under the former presidency they weren’t, their mandates are little more than aspirational.
In a flash, a clampdown on white-collar criminals would belie investors’ negative perceptions of a crime-riddled SA. Such a reversal in attitude would benefit SA as a whole, and create a more positive outlook for investment returns — which is why financial institutions should be in the front line to collaborate.
There’s a warm glow in SA when the JSE outperforms overseas indices. How much warmer would the glow be were SA also to clobber its crooks, so to provide comfort that the rule of law is applied across the board?
Allan Greenblo is editorial director of Today’s Trustee (www.totrust.co.za), a quarterly magazine mainly for the principal officers and trustees of retirement funds.
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