On the second day of the commission of inquiry into SARS the panel heard how the new restructuring under currently suspended SARS commissioner Tom Moyane “broke” the Large Business Centre (LBC) and sidelined employees seen to be close to the former leadership.
The entire "modernisation project", started in 2001, was also halted under Moyane – with allegedly little to no explanation why.
Witnesses before the commission again painted a picture of a tax revenue service that was operating well and that was constantly being improved - until Moyane’s arrival.
Former SARS chief operating officer Barry Hore, took the panel through how this modernisation process was driven with IT infrastructure, with "gobsmacking" success figures that turned SARS into a streamlined, efficient and well-governed institution.
According to Hore, the modernisation project cost SARS R3.6bn – but through this investment it realised nearly R50bn in revenue in seven years through the risk engine, which was developed as part of this modernisation.
The former head of the LBC, Sunita Manik, who left SARS in 2016 after 23 years at the institution, told of how, under the new drive to restructure SARS, the LBC was “cut out” and an efficient service for high net-worth taxpayers and large corporates was essentially dismantled.
A large number of the 580 staff were asked to start operating from the head office in Pretoria, instead of at Megawatt Park as they had previously done. Reporting structures were also changed, Manik said.
The LBC, at its peak, accounted for 30% of the total annual revenue collection for SARS and was specifically focused on providing an “end-to-end” service for corporates - a one stop shop to resolve tax queries, VAT refunds and audits.
Under the restructuring undertaken by Moyane, at a cost of R300m – the LBC was essentially dissolved in 2016.
Consultancy firm Bain and Company was hired to advise SARS on what its "new" operating model should be.
The role Bain played is likely to come under scrutiny, as former commissioner Pravin Gordhan also testified on Tuesday that he did not believe the restructuring was necessary.
These sentiments were shared by both Hore and Manik.
Manik told an altogether far more concerning story over the dismantling of the LBC – which has been described as the backbone of revenue collection agency - and how she was sidelined. She said the only good reason she could think of for breaking down the LBC, would be to reconstitute it in an even better format.
This never happened.
When pushed by evidence leader adv. Carol Steinberg on her suspicions over why the LBC was broken down, in light of a lack of evidence, Manik said fraud could lie at the heart of it.
Recent reports in the media have shown dubious VAT repayments to businesses owned by the Gupta family, for instance.
In May acting SARS commissioner Mark Kingon said in an interview with Business Day that he would not be reversing the new operating model implemented under Moyane – but it required a few “tweaks” in key areas to improve service delivery and revenue collection, particularly for large businesses.
For the past four years, SARS has fallen short of revenue collection targets with a cumulative shortfall of R100bn.
Fixing this would involve rebuilding relationships between SARS and big business.
Manik’s departure from SARS was not amicable. She said she felt intimidated and scared, and even lodged a grievance with then finance minister Gordhan.
Prof. Michael Katz, a member of the panel under retired judge Robert Nugent, asked Manik if it could be determined, through looking at the data, if the dismantling of the LBC was a cause of the decline in revenue collection.
Manik said it would indeed be possible.
Both Manik and Hore were pushed to elaborate on a meeting in December 2014 when Moyane disbanded the executive committee of SARS "after he read a report on the rogue unit in the Sunday Times," Hore said.
The theme of the disbanded exco was recurring and seems to be a key focus area of the commission.
In December 2014 Moyane dissolved the exco – three months after his appointment – without consultation, according to Hore.
“If my recollection was correct, it was after one of the rogue unit reports he had read in the Sunday Times,” Hore told the inquiry.
Hore left SARS shortly thereafter, under a cloud, following a verbal spat with a colleague. But allegations leaked into the media, which Hore maintains are not true.
As part of an agreement surrounding his departure, these perceptions in the public domain were supposed to have been corrected, but this, he told the inquiry, was never done.
Earlier in the day the inquiry heard from other witnesses, who spoke of a culture of fear at the institution following Moyane’s appointment.
Tshebeletso Seremane, the former group executive for integrity, also testified how she was sidelined after raising issues over the restructuring.
On Thursday, former enforcement executive Gene Ravele and former deputy commissioner Ivan Pillay are expected to give evidence
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER