Current Public Enterprises Minister and former Sars commisioner Pravin Gordhan painted a picture of a robust and well-functioning revenue service during his tenure.
‘It’s almost as though a piece of you gets chipped [away] every day, every day, every day. I reached a stage where I decided to resign in 2016.”
This is how Vusi Ngqulana, the South African Revenue Service’s former head of debt collection, described his mental state during his final days at Sars.
He was testifying this week in the first round of hearings by the commission of inquiry into tax administration and governance at Sars. The testimony by a range of current and former senior executives offered insight into why so many civil servants have left the public sector.
The inquiry, headed by retired judge Robert Nugent, is looking into what happened at the revenue service between April 2014 and March 2018, when Tom Moyane was at the helm.
Moyane is central to concerns about Sars’s weakened ability to collect revenue after his costly operational restructuring programme and purge of senior employees.
The probe wants to determine whether this led to the R48‑billion revenue shortfall in the 2017-2018 tax year and find out what was behind the exodus of highly skilled Sars employees. Moyane has blamed the strained economy for falling tax collections.
The problems at Sars coincide with growing pressure on public finances, as the government struggles to contain costs and debt exposure to struggling state-owned entities. Last week, Finance Minister Nhlanhla Nene said the government will struggle to finance the public sector wage agreement, which will cost an extra R30.2‑billion. He said it may adversely affect public spending and service delivery.
Public Enterprises Minister Pravin Gordhan was the first to testify this week, recounting how he helped to build the once world-renowned revenue institution during his time as commissioner from 1999 to 2009.
Using a 140-page slide presentation, 99% of which were original records drawn from his tenure as Sars head, Gordhan took the inquiry through Sars’s transformation into an integrated, service-oriented and autonomous intellectual think-tank with a growing, compliant tax base.
Gordhan was adamant that the revenue service’s operating model did not have to go through the restructuring conducted by consulting firm Bain & Company.
A common theme among the senior executives who testified was that the institution was driven by a “higher purpose”, where employees would go the extra mile to meet revenue targets and deliver on expectations.
When evidence leader Carol Steinberg asked them: “When did the atmosphere change?”, all witnesses pointed to Moyane’s arrival in 2014. Executives said they felt afraid, intimidated, humiliated and excluded under the new administration.
The former head of the revenue service’s large business centre (LBC), Sunita Manik, told the commission how the efficacy of the one-stop-shop unit that focused on large corporate taxpayers and high-net-worth individuals was brought to a standstill when the centre was dismantled during the restructuring process. Manik said the centre brought in 30% of the total revenue collected in a tax year.
Manik said, after the restructuring, it became standard to hold back all refunds that were due to taxpayers — even legitimate refunds, which, she speculates, was to “manipulate” revenue figures. “What it means is your revenue outflow is minimised and [you] look good from a revenue point of view, because [you] can manipulate all this R20‑billion in revenue a year to meet targets,” she said.
Former chief operating officer Barry Hore said there was a 57% (R22‑billion) increase in Sars’s credit book from 2014 to 2016. This reflects tax refunds that Sars needs to make.
In 2017, tax ombud Judge Bernard Ngoepe found that Sars unduly withheld refunds due to taxpayers, which, he said, could result in financial hardships for individuals and businesses. At the time, Sars denied this.
Manik said the LBC had a strong governance, accountability and audit record which did not allow individuals to make decisions on their own. She speculated that the centre was dismantled for corrupt purposes — “to have access to high-net-worth individuals and large corporate taxpayers”.
Manik, who left Sars in 2016 after 23 years of service, said she was not informed when she was removed from her post. “I was the last one to find out. I arrived one morning and everyone across Sars received a circular of acting positions, and one of those positions was mine,” she said.
Describing her final days, she said: “I sat in an office … I was given no work and I was given no title.”
The inquiry heard about the growing culture of mistrust and exclusion at Sars, directed at employees who were seen to be aligned with the previous administration.
Former integrity head Tshebeletso Seramane said she was demoted and dismissed simply for doing her job.
Seramane alleged that central to her dismissal was a draft code of conduct she had presented, which included clauses pertaining to nepotism. Referring to claims that former business and individual tax chief Jonas Makwakwa used his influence to promote his unqualified girlfriend, Kelly-Ann Elskie, to a position in the agency’s litigation unit, Seramane said that practice was not unusual among group executives at Sars.
“There were quite a number of instances where it has happened that a girlfriend or wife or whatever gets appointed into a position that, if you were to have followed the proper process, the person would not have been appointed,” she said.
Seramane claimed she was demoted because of “targeting certain individuals and how to get rid of them. Because downgrading your post would humiliate you.”
During this time, she and some 40 employees, including group executives earning more than R1‑million a year, spent months without any work to do. “Now, is that not wasteful expenditure?” asked Seramane.
The head of tax public education, Sobantu Ndlangalavu, the only witness on Tuesday who was still employed at Sars, was visibly anxious. He described how the work atmosphere went from being vibrant to fearful. Cameras and listening devices were apparently installed in trees and in the corridors of Sars.
“It got to the point where staff began using Sellotape to block the inbuilt cameras on their laptops because people felt they were being monitored, even if they were not,” said Ndlangalavu.
Eric Mabuza, the lawyer representing Moyane, did not respond to questions because Moyane will make an appearance at the hearing on Friday, June 29.
Tebogo Tshwane is an Adamela Trust financial journalist at the Mail & Guardian