Highly-specialised SARS unit left 'stripped and fragmented' under Moyane
A highly-specialised unit which dealt with the tax affairs of complex multinationals and local conglomerates was left stripped and fragmented under now-suspended SA Revenue Service commissioner Tom Moyane.
What was left of the entity was packaged and delivered to Moyane’s right-hand man at the time‚ Jonas Makwakwa‚ who oversaw the dismantling of key functions in combating tax evasion and the illicit flow of cash.
The deconstruction of the revenue collector’s Large Business Centre (LBC) under Moyane’s new operating model this week came under the spotlight at Judge Robert Nugent’s commission of inquiry into tax administration and governance‚ where witnesses described the resultant decline in the relations between the institution and taxpayers.
The LBC was once seen as the key cash-generating segment at SARS‚ accounting for about one-third of total annual revenue. It addressed offshore illicit trading‚ base erosion and profit shifting‚ and trade mispricing.
But Moyane’s wholesale restructuring in 2014‚ apparently at the advice of consultancy firm Bain & Company‚ saw the revenue contribution of the LBC slip from 34.8% in 2015 to 32.2% in 2017. It also saw the highly-skilled staffers at the unit scattered‚ and many others resigned.
Former SARS group executive Randall Carolissen told the inquiry last week that the LBC was “fragmented”‚ and its pieces placed under another division‚ Business and Individual Taxes (BAIT)‚ headed by Makwakwa.
“The LBC is no longer a segmented specialised unit. It is now‚ as I said earlier‚ split across enforcement‚ stakeholder management‚ legal‚ BAIT and some parts in strategy.
“So a number of people raised concern about the disappearance‚ the complete fragmentation of the LBC‚ given the strength of its revenue generating…A number of us raised concern about the concentration of power in BAIT‚” Carolissen said.
“Then the general state of health of an organisation is measured by its debt book and its credit book. Since roughly about 2015‚ the debt book has soared 50% from about R85-billion to R135-billion‚ and most of those debts are in the LBC environment.”
One of the divisions in the LBC that suffered a detrimental blow was the transfer pricing unit. Nishana Gosai‚ who resigned as the unit’s manager in 2016‚ said she was never consulted when the new model was introduced.
“Out the transition phase of this new structure‚ we experienced almost a paralysis in decision-making. I was at my wits end‚” she told the commission.
In the 2016/2017 financial year‚ the transfer pricing team completed 30 cases and their revenue yield was R2.57-billion. But a year later‚ only 22 cases were completed and the revenue yield dropped to R1.87-billion.
Becoming emotional‚ Gosai said members of her staff were left “broken”.
“I think a lot of people have suffered. It has (the operating model) broken people and it has broken the organisation and people need healing…We got caught up in a political narrative that we shouldn't have been part of in the first place‚” she said.
“I was put through a very vexatious process…I was bullied‚ I was intimidated. I had to go so far as to lodge a police complaint and I couldn't put my family at risk. I didn't know what was coming and I didn't understand why I was targeted in that way.”
And the effect of the dismantling of the LBC was felt across the board.
Ettiene Retief from the South African Institute of Professional Accountants‚ which represents about 10‚000 accountants in the country‚ also told the commission how the organisation’s members who dealt with SARS frequently on behalf of clients had been affected by the structure.
“When the LBC was formed‚ the structure was that you had a contact point‚ a key person who you engaged with. When the LBC was disbanded‚ that contact person became just a person who would just refer you on to someone else. It became very inefficient‚ very ineffective in addressing the issues that you would have‚” he said.
“The nature of these multinationals is a lot more complex so when you are dealing with a complex matter and the person on the other side is not well versed in that legislation or application…it’s problematic. It was very evident from multiple engagements that the skill level just isn’t there.”
But there may be change on the horizon.
On Friday‚ SARS announced that acting commissioner Mark Kingon had begun a process of re-establishing the LBC. Chief Officer for Governance‚ International Relations‚ Strategy and Communications Hlengani Mathebula had been tasked with leading the process.