Finance Minister Malusi Gigaba has cited declining tax morality and negative sentiment on the South African Revenue Service (SARS) as justification for an inquiry into the receiver of Revenue’s administration of tax.

The inquiry into SARS tax administration and governance, which Gigaba announced on Tuesday, came as a surprise to tax experts, including Judge Dennis Davis, who heads a committee conducting continuing work on the tax system.

Gigaba said the goal of the inquiry, expected to be set up soon, was to assess other factors responsible for revenue under-collection and the steps necessary to improve performance management systems at SARS.

Gigaba shocked financial markets in October by flagging wider deficits and rising government debt in a closely watched budget speech, attributing the dismal forecasts to sluggish growth and low tax receipts.

On Tuesday he told reporters that President Jacob Zuma had granted his request for an inquiry by a judge into the administration and governance of SARS. “It is critical for government to determine the cause of the tax-revenue under collection in order to enable the government to take urgent remedial steps to ensure that SARS is able to meet its revenue targets,” Gigaba said.

SA’s strained public finances are in the spotlight ahead of rating reviews scheduled by major international agencies Moody’s and S&P Global later in November. If Moody’s and S&P downgrade SA’s local currency rating one notch to sub-investment grade or junk status, that could trigger forced selling of up to $12bn of the country’s bonds.

Treasury estimated a budget deficit of R50.8bn in the 2017 fiscal year, which is greater than the shortfall of R40bn-R50bn economists expected. Markets reacted negatively to this revelation. In the two weeks before Gigaba’s statement, foreign investors bought a net R277m in bonds. By the Monday following the speech, they had sold R6.284bn worth of bonds. This was followed by the sale of another of R7bn worth of bonds by the following Monday.

Treasury would engage teams of experts to provide advice. Details of the inquiry, including the presiding judge, would be released in due course. This will be the fourth inquiry into the tax system. The Davis tax committee was appointed in 2013. The Kroon commission in 2015 was to restore integrity in the wake of scandals and court action at SARS. In September tax ombudsman Judge Bernard Ngoepe published a report showing that SARS was unduly delaying tax and VAT refunds.

Davis said on Tuesday he was not informed of the new inquiry. “We’ve done our work but at a very limited scale. I think he is looking for something more targeted. That may not be our work.” The committee was nearing the end of its work, he said. An increasing negative climate, given allegations of state capture, was eroding tax morality, but there were also broader societal issues “which has nothing to do with SARS”.

“What we’ve really got to ask ourselves is how do we develop structures which can deal with the challenges and these challenges are being faced right across the world.”

Keith Engel, CEO of the South African Institute of Tax Professionals, said: “The question is why do we need an inquiry with a judge.… An inquiry is some sort of investigation — as if there is criminality involved. Have Zuma and Gigaba turned on Moyane?”