Sars – Please protect me from yourself

In its 2019 financial report, the South African Revenue Service (Sars) announces itself as many things.

It is the collector of all taxes, administrator of laws, facilitator of legitimate trade, the protector of our economy and society (not much protection is evident).

It’s also the encourager of “fiscal citizenship” (I guess this refers to those who willingly rush to pay their taxes plus more), enlister of “new tax contributors” (presumably this means the shadow and illicit economy is being hollowed out), not to mention the provider of quality and responsive service to the public (though wasn’t this the reason the Office of the Tax Ombud was established?).

Taxpayers remember the last five years – adopting as a slogan the now-famous words introduced to the public at large by a then Sars exco member who implored a television interviewer: “Please protect me from yourself.”-

Read: Nugent loosens the final shackles

Slowly extricating itself from the grip of corruption, Sars received an unqualified (with findings) audit report, and demonstrated positive signs that it is on the road to recovery. But don’t get too excited. The road ahead is long and arduous, with tricky bridges to cross before it regains its lost reputation.

The findings relate to the Office of the Public Protector’s report on “maladministration, corruption and improper conduct” issued in July. This relates to a prior period, and has been taken on review.

With Sars Commissioner Edward Kieswetter in charge, the rallying motto of “higher purpose” will gain traction – and hopefully long-standing issues between honest taxpayers and Sars will be resolved as soon as possible. The tax ombud is playing an essential balance in alleviating the suffering of taxpayers resulting from bad policies (repayment of refunds) and inept officials.Read: Tax Ombud provides exemplary service to taxpayers

It only takes a few inept tax officials to damage relationships with taxpayers, and in the report Kieswetter acknowledges the majority of staff “who, despite difficult circumstances, endeavoured to honour their commitment to the higher purpose”.

Man with a plan

With a new commissioner, comes a new plan, in this case the 2024 Vision, built on several strategic objectives: clarity and certainty, public trust and confidence, efficient use of resources, modernising systems, increasing use of data, “high performing, diverse, agile and engaged workforce …”, make it easier for traders/taxpayers to comply, make it hard and costly for non-compliant traders/taxpayers.

Sars was R14.5 billion short of the March 31 revenue target of R1 302 billion (collected: R1 288 billion). This is a big number and who would have suffered? The poor, of course – those in dire need of sustenance, health services, transport, education, the list goes on. Not the badly managed zombie state-owned entities who are given cash on demand to fill their empty troughs. This includes the myriad of funds that never publicly publish their annual financial statements.

Irregular expenditure, incurred before then acting commissioner Mark Kingon took charge, amounted to R29.1 million.

Bain & Co, the US-based management consultancy that contributed to the destruction of Sars during the tenure of axed commissioner Tom Moyane, repaid R29.7 million (which includes interest).

The R14.5 billion shortfall would barely have made a dent in the fast-rising levels of government debt, which at June 30 stood at some R2.8 trillion. And this amount should be expanded by what-ifs. What if a large state-owned enterprise (SOE) defaults on debt and government is mandated to cough up? What is the sum total of all the government guarantees issued, and the potential risk therein? Does the government have any idea of the financial status of those SOEs that haven’t yet filed their 2018 annual reports?

As Sars is the self- appointed “encourager of fiscal citizenship” perhaps it can encourage National Treasury to answer these what-ifs before it tries to raise further taxes.

The days of keeping taxpayers in the dark and forcibly fleecing them like captive sheep are coming to an end. Taxpayers want answers and criminal prosecutions.

Some of the statistics given have no impact whatsoever on the amount of revenue raised nor on the efficiency of staff.

Questions, questions

For example, the number of tax returns filed. How long is a piece of string? How many companies did not bother to file tax returns? What did the penalties amount to? How many wealthy individuals who drive expensive cars without number plates and live below the radar pay tax? How many companies did not pay over pay-as-you-earn tax collected from staff? Has the lifestyle questionnaire been updated? Is it being used? How many companies were registered as dormant when, actually, they are not dormant? And what of those dormant companies with massive tax losses, with assets valued in the balance sheet at R1? Has a senior tax official with vast tax experience (this is a diminishing number) ever scrutinised the list of dormant companies?

During the year 1.9 million tax audits were conducted. So what?

How many of the 50 largest companies were audited? Does Sars have a plan – that a large company is audited every three or five years? What percentage of medium-size companies were audited? Were any loopholes/tax avoidance schemes detected? How many successful audits (those that resulted in additional revenue) were conducted? And how many did not have to be reported to the tax ombud by aggrieved taxpayers?

Targeted customs interventions seem to be gaining steam, with R3.7 billion collected from 6 828 seizures. This should improve when Sars decides on the stamp or track-and-trace system it will use to counter the illicit tobacco trade.

The Voluntary Disclosure Programme (VDP) coughed up R3.2 billion.

Internal investigations

Sars has stepped up its fight against internal corruption, cases of which are investigated by a dedicated internal corruption unit; 173 were referred to the South African Police Service, an active balance of 466 is being dealt with, and 13 individuals (including four Sars officials) were criminally convicted.

Now that Sars is cleaning from within, what is the percentage of its staff who take the full allocation of annual sick and family responsibility leave? How many of its staff run side businesses? How many arrive at work, switch their computer on, and leave for the day?

Sars is slowly sorting out its exco, but still has to reach down to all the other management layers.Like the shothole borer beetle, corrupt officials (the enablers and enforcers) have burrowed deep into Sars, laid their eggs, and are destructively sucking out the sap.

Inept officials are in vital posts and should be subjected to a skills audit. Sars is spending millions sending senior officials on expensive management training courses when, in fact, they require some basic tax knowledge. In a couple of years, some of Sars’s best brains are at risk of taking early retirement …

Kieswetter has my sympathy. He has walked into a vastly hollowed out organisation compared to the one he left behind some years ago. But he is inspirational, energetic and filled with moral purpose.

The 2020/21 budget is looming.

Perhaps it will disclose the amount by which the fiscus has benefitted from the forfeited assets of tax criminals.

Taxpayers are waiting for the criminals to be jailed, and for their assets to be forfeited.

They are no longer willing to fund this mess.

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