Bain’s intervention at SARS led to high court litigation unit being cut

22 August 2018 - 15:47 By Natasha Marrian
Pieter Engelbrecht‚ who was the head of centralised projects at SARS‚ says his unit was effectively dissolved.
Pieter Engelbrecht‚ who was the head of centralised projects at SARS‚ says his unit was effectively dissolved.
Image: Reuben Goldberg

The South African Revenue Service (SARS) high court litigation unit‚ as well as another dealing with the illicit economy‚ were culled in the far-reaching restructuring conducted by consultants Bain‚ during suspended commissioner Tom Moyane’s tenure.

That resulted in the loss of "hundreds of millions of rands a year"‚ the SARS commission of inquiry into governance and administration chaired by retired judge Robert Nugent in Pretoria heard on Wednesday.

This has dented the tax agency’s ability to act against high-profile‚ high-risk taxpayers as well as organised criminal syndicates and players in the illicit economy‚ the commission was told.

Dion Nannoolal‚ senior manager responsible for high-value audit debt collection‚ described how the restructuring had fragmented his unit and made his job extremely difficult.

This is because the restructuring decimated the "end-to-end" approach that SARS had previously had in place to deal with high-profile and complex tax matters.

Pieter Engelbrecht‚ who was the head of centralised projects at SARS‚ described his unit as highly successful‚ which dealt with high-net-worth individuals who used offshore entities and special-purpose vehicles to hide money. It also dealt with illicit financial flows and organised crime.

After the restructuring he was informed that his position had been dissolved‚ yet senior management at SARS was not aware of the decision.

From a successful unit — which‚ aside from collecting billions in revenue‚ also helped boost compliance among the taxpayers it focused on (a high risk and complex sector) — it was effectively dissolved.

Engelbrecht told the inquiry that since 2016‚ he had not been involved in the majority of cases. He said that that particular function had become fragmented‚ and that no decisions were taken on those cases or that they were not done so timeously.

Nannoolal described a similar scenario‚ where the change in the structure resulted in weakened legal capacity at SARS‚ which in turn made it difficult to collect outstanding debts.

He was not at liberty to name individual taxpayers in the inquiry but described specific cases. In one case‚ dubbed Project J‚ he described how he had been waiting for approval to move on an "illicit economy taxpayer".

In another project involving the gaming industry — dubbed Project B — he had been waiting for a year for approval.

He described a "celebrity taxpayer" that SARS should have sequestrated‚ but he received an "odd response" from the tax agency’s legal counsel‚ which is no longer a unit: it has been decentralised and reports to regional managers.

As a result of the weakened legal capacity at SARS‚ Nannoolal said he was forced by a court to issue a compliance certificate to a taxpayer‚ while knowing that it was not compliant due to a weak submission by a legal consultant the tax agency had used. This case is in the public domain‚ as it was ventilated in court‚ and refers to the Red Ants case in May.

- BusinessLIVE