The former head of a South African Revenue Service (Sars) advisory board admitted to the Nugent commission that they were wrong to say the so-called “rogue unit” was unlawful and that he had approved the restructuring of the revenue service’s operating model without knowing a thing about the one that was currently operational.
The commission — headed by retired Judge Robert Nugent — has from the start of its proceedings, heard how reports of an alleged rogue unit were used by suspended commissioner Tom Moyane to purge some of Sars’ executives. Moyane also detrimentally restructured Sars’ operational model on the advice of consulting firm Bain & Company, undercutting its efficiency.
In 2015, retired judge Frank Kroon was appointed to head up a committee in a bid to restore the integrity of Sars and advise it in the wake of turmoil at the revenue service. This followed a report by senior counsel Muzi Sikhakhane, who was appointed to investigate allegations of impropriety by former Sars investigator Johann Van Loggerenberg.
Sikhakhane’s panel found that the so-called rogue unit had been unlawfully established. It was on the basis of this report that Moyane suspended former deputy commissioner Ivan Pillay and group executive of strategic planning and risk Peter Richer.
Kroon confirmed the findings of the Sikhakhane panel’s conclusion on the establishment of the unit, saying Sars did not have the statutory authority to gather intelligence “covertly”.
On Friday, Kroon told the commission that the statement released by the board, that said the covert unit was unlawful, was not “thought through properly and in fact, were incorrect … certainly, the establishment on its own would [be] quite lawful”.
Kroon said at the time they had relied entirely on information given to them by Moyane, former chief operating officer Jonas Makwakwa and the Sikhakhane report as well as the now withdrawn KPMG report. In addition to saying the unit was unlawful the reports also said that the unit had spied on former president Jacob Zuma, state officials and that it owned a brothel.
“Did you make your own inquiries at the level of law as to whether or not advocate [Muzi] Sikhakhane is correct in his conclusion that the establishment of the unit was unlawful,” asked Steinberg.
“No,” Kroon said.
“We could not say that the unit was unlawfully established, we did not have the full information as to when and how it was established,” he added.
Kroon said they had apologised to Pravin Gordhan because he was the commissioner when the unit was formed and said it would be beneficial for an institution like Sars to re-establish that unit.
Kroon also approved Moyane’s proposal to restructure Sars’ operating model. The new model, designed by Bain, has been largely discredited in the testimony of numerous Sars officials who have spoken at the hearings.
He said he relied on a presentation given to them by Bain and oral and written submissions of Moyane and Makwakwa, when they approved a proposal to restructure Sars.
Carol Steinberg asked how he then approved the restructuring of the model if they could not determine if that would have been an improvement on the model to which Kroon said: “In retrospect, it would be fair to say that we should have investigated further”.
“I sent a letter posing that as one of the questions. I don’t believe we ever received a direct answer to that,” he continued.
Adviser Michael Katz asked Kroon if the board did not find it strange that Moyane, who was the commissioner of correctional services and had no tax background, would after a brief period at Sars wanted to make extensive changes to an institution with a successful reputation.
“That thought did not cross my mind,” said Kroon, who adding that he was only surprised that Moyane with a prison service background was appointed to the head of a tax institution.
The commission continues.