A culling of staff after suspended commissioner Tom Moyane restructured the South African Revenue Service (SARS) left its compliance unit in the enforcement division so understaffed that unions have begun laying complaints about working conditions at various labour forums.
Fareed Khan, the executive responsible for compliance in enforcement, told the Nugent Commission on Thursday that units’ capacity had been stalled and decreased over the past four years. This meant they had to rely on more overtime and made increasing demands on their staff.
The Nugent commission, headed by retired Judge Robert Nugent, began its second leg of testimony on Tuesday. It is investigating tax administration and governance issues at the revenue service.
“Staff are largely willing and understand the importance of their work and have come in support of the revenue services but at some point fatigue sets in and we have seen an increasing number of disputes being lodged at the various labour forums being their national bargaining forum or national consultative forum even the [The Commission for Conciliation, Mediation and Arbitration] CCMA,” Khan said.
Khan explained that the compliance unit — which is responsible for pre-filling a taxpayer’s tax return obligations — was one of the most significant operational improvements that Sars had ever seen. Until Moyane’s restructuring effort, done on the advice of consultants Bain and Company, the unit was “well-resourced” with one group executive, four executives, one senior manager and 16 regional managers.
Since its establishment, Khan said the compliance unit went from auditing less than 5% to over 18% of taxpayers, increasing from 200 000 to 2.2-million compliance audits a year. Between 2011 and 2018, the unit had collected R849-billion in revenue through this process, the vast majority coming from value-added and personal income taxes.
However, soon after the new operating model was implemented what Khan described as “the engine room” of the enforcement division, was reduced to one executive and six senior managers.
Khan detailed to the commission how he had made various attempts to raise his concerns about the new structure with Bain and Co’s consultants and the then chief officer Jonas Makwakwa. Khan says these were not considered nor was the unit consulted when changes were finally brought forward.
According to Khan, he raised these issues in two meetings with the Bain consultants, saying he even walked out of one of the meetings because he “indicated in no uncertain terms that that structure would destroy the immense gains that the compliance division had achieved in the past”.
In response to his complaints, Khan claims he was simply told: “that’s the structure”.
Evidence leader Carol Steinberg then drew him to two emails that he had sent to Makwakwa, who was at the time responsible for the new operating model, lamenting the effects that the model had had on the compliance division.
One of the emails was in response to questions that Makwakwa had raised about the way in which compliance was functioning. Khan said they had taken decisions at an operational level to ensure that they continued to be persistent because of deficiencies in the operating model that required them to do so.
Khan read Makwakwa’s email response to the commission where he said the model was never intended to frustrate business and that even though he was “the sponsor of the project [his] involvement did not go too deep”.
Makwakwa was the head of the steering committee that was working with Bain to implement the new operating model. “In my opinion that was an acknowledgement of the deficiencies that were pointed out in the past and there was a need for us to fine tune but unfortunately that engagement didn’t happen,” said Khan.
During that time, staff morale was low. In addition, compliance unit members began to feel they were being blamed by senior managers for the inefficiencies of the model despite doing everything they could, Steinberg continued.
Khan said a 2016/2017 routine connection survey by analysis company Ipsos found that the engagement rate within the division fell from 66.5 to 58.7 points. The survey measured six criteria such as personal attachment to the job and pride in working for Sars.
All six engagement criteria had dropped among staff, said Khan.
Khan said one of the key takeaways from Ipsos’s assessment was that the “increase in negative perceptions regarding the experiences that employees are having on a day to day basis could be linked with the implementation of the Sars operating model”.
The hearings are still underway with a focus on the implications of dismantling Sars’s large business centre, that was previously responsible for collecting tax from huge corporates and high net worth individuals.