What a shameful shambles Tom Moyane has left SARS in
Suspended tax commissioner damaged public confidence and compromised national finances
When now-suspended SA Revenue Service commissioner Tom Moyane refused to resign as the president had asked him to do, he made it known that he wanted to preside over the traditional April 1 presentation of the tax year-end results to show that SARS had again met its targets, as it had done since he arrived.
Well actually, no.
Since Moyane was parachuted into SARS by Jacob Zuma in September 2014, revenue collections have recorded ever larger shortfalls. The targets Moyane actually met had already been revised sharply downwards – and SARS managed to deliver even on those lower targets only because it lucked out or got up to some creative accounting or both.
The April 2015 collections came in R7-billion under February 2014’s original budget projections and the figure would have been much worse if not for an unexpected R8-billion personal income tax windfall related to share incentive schemes. Word is that more than R6-billion of that came from just one individual. Naspers has been mentioned.Then came the 2015/16 fiscal year when tax collections completely fell off a cliff. Treasury revised down revenue targets in October and again in February, to R12-billion below the original estimate. Moyane and co managed to meet the new target – but only because they again lucked out, this time thanks to the collapse in the rand exchange rate following Nenegate. The weak rand made imports more expensive, boosting revenue from customs duties and from import value added tax, both of which came in billions of rand higher than expected.
There were suspicions too that SARS deliberately held back refunds to enable it to hit target – suspicions that were later given substance when the tax ombudsman investigated a tide of complaints about refunds, especially VAT refunds, and found SARS guilty of tardiness, at best. As we now know, when it came to the Guptas’ VAT refunds, SARS wasn’t nearly as tardy.
Revenue targets revised down
But the shortfalls of Moyane’s first two years paled relative to the R30-billion by which Treasury had to revise revenue targets down in 2016/17. This time, SARS managed to come in just above the lower target thanks to a R5.4-billion dividend “windfall” which probably wasn’t a windfall at all: the dividend tax rate had been increased and it appeared that SARS turned a blind eye to companies that backdated their dividend declarations to take advantage before the rate went up.
That meant more for the 2016/17 year at the cost of less for the 2017/18 tax year which ends just 10 days from now. Treasury projected a R50-billion shortfall in October but has since cut this to a mere R48-billion. A better than expected growth rate could see this reduce somewhat but it depends, crucially, on how much of the shortfalls of the past four years have been the fault of a faltering economy – and how much have reflected the worsening shambles at SARS since Moyane took over.Over that period the cumulative total shortfall is almost R100-billion – had even half of that money been added to the public purse, we could have avoided some of the R85-billion in spending cuts and/or R36-billion of tax hikes announced in the latest budget.
Moyane always placed all the blame on the economy but the steep decline at SARS itself has also played a big part, as have declines in tax morality and tax compliance which are themselves a response to the damage to SARS’s credibility and capacity during Moyane’s tenure.
PwC tax director Kyle Mandy did some calculations not long ago that showed less than two thirds of the current year’s expected shortfall could be attributed to lower than expected economic growth – the rest was the product of factors such as an ailing SARS and the deterioration in tax morality and compliance.
SARS itself admitted last year that compliance levels were sliding: SARS’s Randall Carolissen told the 2017 Tax Indaba of a sharp deterioration over the past five years in the number of outstanding tax returns, which had jumped 77% in pay-as-you-earn, 32% in value added tax, and 87% in corporate income tax, with a deterioration too in late filing.
Serious flaws in tax administration
The Davis tax committee, too, found serious flaws in tax administration at SARS though it couldn’t get to the bottom of the fraud and corruption allegations at the agency because Moyane reportedly blocked efforts by the committee to obtain information or witness statements. President Cyril Ramaphosa has yet to establish the commission of inquiry into SARS that the government has promised, but that commission will have powers of subpoena and the full story should emerge, as it no doubt will too at the disciplinary hearing into Moyane himself, who thankfully won’t be presenting on April 1 after all.Said Ramaphosa in his letter to Moyane this week: “Developments at SARS under your leadership have resulted in a deterioration in public confidence in the institution and in public finances being compromised. For the sake of the country and the economy, this situation cannot be allowed to continue, or worsen.”