Fear, dysfunction and how SARS was brought to its knees

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The Nugent Commission of Inquiry into the SA Revenue Service on Friday concluded its hearings for the week with witnesses painting a damning picture of an organisation brought to its knees by a dysfunctional operational structure which has opened it to corruption, revenue slump and brain drain.

At the centre of SARS's management woes is the controversial operational structure implemented under suspended commissioner Tom Moyane in 2015.

The inquiry heard that the new structure which replaced what has been described as a  well-functioning model was not aligned with the company’s vision.   

Although the model was established with the help of Bain & Company, the inquiry heard that the final model differed from the four models presented by the business consulting group.
 
Here are the key elements that emerged from the four-day hearing:

Dismantling of enforcement units

The discontinuation of enforcement units such as the one looking into the illicit tobacco trade, poaching and tax evasion have hampered the effectiveness of revenue collection.

“The most important segment that suffered fragmentation was the Large Business Centre,” Randall Carolissen, who is a group executive for research in SARS testified.   

The Large Business Centre (LBC) is the key revenue generating segment, accounting for about one third of SARS revenue. 

As a result, the contribution of the LBC total revenue slipped from 34.8% in 2015 to 32.2% in 2017.

Impact on tax collection

The number of outstanding tax returns has jumped from 4.2 million in 2008/09 to approximately 57 million this year.

Non-returns by companies is currently at 40%. Carolissen stated that although companies paid taxes, there was a need to file returns and conduct final reconciliation.

Since 2015, the SARS debt book soared from R85 billion to R135bn.

Carolissen described the trend  as “very, very worrying”.

No compliance model

Dr Thabelo Malovhele, a former Tax and Customs Compliance Risk and Analysis expert who now holds the position of Domain Specialist revealed that SARS had misled parliament about having a tax compliance programme.

"However, it was not implemented, so as we speak SARS does not have a compliance programme, although we have made commitments to Parliament and said we do. We don't.”

Asked if SARS had lied to Parliament, Malovhele responded, “Well, I wouldn't use the word lie, but we told Parliament a half-truth.”

Fear and trauma 

There is a prevalent culture of fear and trauma among staff. Some employees have expressed unwillingness to participate in the commission for fear of reprisals.

Witnesses described the climate as symptomatic of “severely traumatic events that SARS had gone through”.

While other top executives have stayed on, numerous skilled managers have left due to pressure and a deteriorating working environment.

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