The SA Revenue Service potentially lost hundreds of millions of rands in unpaid taxes as a result of a decline in the efficiency in its enforcement division.
The Nugent Commission of Inquiry into the administration of the revenue service on Wednesday heard that under a new operating model implemented in 2015 under now suspended commissioner Tom Moyane, several key units were disbanded and their members 'scattered' throughout the organisation.
Witnesses Pieter Engelbrecht and Dion Nannoolal gave evidence to this effect, detailing how units that handled sensitive and high-value cases were effectively killed overnight.
According to Nannoolal, this led to a potential loss of hundreds of millions of rands and a general decline in tax compliance across various sectors of the economy – specifically illicit sectors, including tobacco and poaching.
"The new operating model created challenges in executing cases relating to the illicit economy," Nannoolal said.
Currently, Nannoolal operates a unit in the debt collection division of SARS that deals with the tax agency's most sensitive, dangerous and valuable cases, alongside other work.
He testified that since the implementation of the new operation model in 2015, it had become almost impossible for him to gain approvals for new projects or cases.
He is also responsible for liaising with external legal counsel to bring legal action, such as sequestration applications, against delinquent tax payers.
Delays in securing such approvals have in the past 18 months led to cases dragging and SARS losing millions.
In one case, delays in getting approval cost SARS at least R50m on a R600m sequestration order, Nannoolal said.
Engelbrecht, meanwhile, testified over the closure of the Centralised Projects unit, which he managed for a number of years.
He has since been appointed in the legal division, where he assists with litigation.
He has also come under repeated investigation internally, on what he described as "spurious" charges. In the past three years, he has been subject of four investigations.
In one case, an independent entity found that SARS officials tasked with investigating Engelbrecht were instructed to – and did – fabricate findings against him.
Advocate Carol Steinberg summarised the evidence as follows: "I understand this to be the crux of the matter. That what you used to have when you talk about an end-to-end unit, you would have what you need in one unit. You could act quickly," she said.
"It also meant that if there were 33 cases under one project [relating to one taxpayer or related entities] – it would be under one unit."
The new operations model, Steinberg emphasised, had essentially broken down the holistic approach that enforcement units in SARS had previously taken towards specialised investigations.
Engelbrecht agreed with this assessment.
The commission is set to continue this afternoon continuing with a focus on the enforcement division of SARS.