If Sars fails, democracy fails

September 19th, 2019

By Kgomotso Ramotsho

South African Revenue Service (Sars) Commissioner, Edward Kieswetter, said the success of Sars is integrally linked to the well-being of South Africa’s democracy and if Sars fails, democracy fails. Mr Kieswetter was the keynote speaker at the Annual Tax Indaba in Johannesburg held from 26 to 30 August. He added at Sars they are clear that while the organisation’s mandate is to collect taxes, they serve a much higher purpose, to which revenue is simply a means.

Mr Kieswetter told delegates they represented a minority of South Africans. ‘Regardless of where we find ourselves, we should consider ourselves extremely privileged,’ Mr Kieswetter added. He pointed out that privilege can be a blessing and a curse, and that privilege is a blessing when it is shared but privilege – more often than not – can be insensitive to the plight of millions who are significantly less fortunate.

Mr Kieswetter said he was referring to the old couple in the township for who – despite 25 years of democracy – not much has changed and to that same couple who, when receiving an extra R 50 in the social grant payment makes a massive difference. He added that he referred to a significant portion of the 12 million school going children, who still lacked basic amenities, which enables decent learning to take place for example, thousands of young innocent children are threatened daily because of exposure to pit toilets. Mr Kieswetter noted that it is because of these examples that Sars collects revenue, and for the revenue to achieve a higher purpose.

Mr Kieswetter pointed out that Sars exists to enable government to build a capable democratic state, which fosters sustainable economic growth and social development in the interest and well-being of all South Africans. He said that a strong capable state is needed to combat the stubborn prevalence of poverty, address inequality and unemployment. He added that the task of meeting these development goals and providing a better life for all South Africans, is that government, business and civil society must work together.

Mr Kieswetter said fiscal integrity is fundamental to building a capable and developmental state. He pointed out that a well-functioning revenue authority that can provide the financial resources required to provide public goods and services, without incurring indebtedness that is growing out of control, is needed. However, he added that the current economic environment of low economic growth, the lagging of job creation, slow investment in enabling infrastructure, including a number of struggling state-owned enterprises, does not augur well for tax and customer revenue collection.

Mr Kieswetter said it causes him pain when there are people who perpetuate a ‘denialist narrative’ about the fact that Sars suffered a significant blow since 2014. He added what is even more distressing is that there are still those who continue to undermine the efforts to rebuild Sars. He pointed out that the Sars he left about a decade ago is different to the Sars he returned to. ‘We still had a long way to go around 2010, but even then, we were respected and admired locally and abroad. We became a benchmark for many of the revenue authorities around the world,’ Mr Kieswetter said. He pointed out that Sars was committed then to a clear transformation journey.

Mr Kieswetter added that Sars has been caught up in State Capture and added that he has had a ringside seat over the past few months and knows of the exact extent of the damage suffered. He pointed out that the damage was incalculable and will sadly remain with Sars for years to come. Mr Kieswetter noted that the report of the Nugent Commission (Commission of inquiry into tax administration and governance by Sars) tells the tragic story of a series of events, events that were deliberate and done with corrupt intent. The report stated that between 2014 and 2018, Sars was a target of deliberate capture for narrow, self-serving and corrupt intent.

Mr Kieswetter pointed out that corruption led to a number of observations, such as –

  • a breakdown in governance and integrity;
  • a hollowing out of core capability,
  • a drain of skills;
  • a slowdown in modernisation;
  • a decline in international standing;
  • a significant decline in taxpayer compliance;
  • an understandable loss of public trust and confidence; and
  • a consequent decline in revenue collection.

Mr Kieswetter said he could confirm that the situation was as the Nugent Commission described it. He added that he spent quite a bit of his time – during the first three months of his return – visiting Sars’ large offices and engaging with 90% of employees. ‘What I have experienced is heart-rendering. Looking into the eyes of the [employees] when I visit them, they speak about their experiences and hurt. It is painful to witness the extent of the trauma in the organisation. Not only did we see an exit of skills in the organisation, but a sad decline in staff morale and breakdown of trust in leadership. This has had a measurable impact on our performance,’ Mr Kieswetter said.

Mr Kieswetter said while there are thousands of hardworking women and men who have continued to go the extra mile to serve the public, Sars has experienced a loss of skills in many areas of leadership aspects. He added that Sars has addressed a number of senior employees who have simply been marginalised and still have several hundred cases to review where employees may have been unfairly disciplined or placed on suspension. He said that the rebuilding of Sars has begun, even though it is going to be hard work.

Mr Kieswetter pointed out that it will take a few years of persistent effort to rebuild Sars, effort by the staff, but also effort by those in the broader part of the tax system, such as tax practitioners. ‘While we have re-opened the Large Business Centre and established the capacity to respond to the Illicit Economy unit, the Compliance Unit, the Integrity Unit, there are many areas where we will be capacity and capability deficient for some time to come,’ Mr Kieswetter added.

Mr Kieswetter said that the current environment of constraints in resources at Sars does not help either. He pointed out that Sars is currently engaging with National Treasury to ensure that the financial resources it needs over the next five years can be accommodated. He added that in the area of leadership at Sars, he is currently in the process of reviewing the performance of senior executives, as recommended by the Nugent Report. He said he is working on building trust and confidence in Sars.

Mr Kieswetter pointed out that central to the success and effective administration of the Sars mandate is the confidence that the public has in Sars. ‘We accept this, when public trust has waned, which is currently the case. Taxpayers feel morally justified to withhold or manipulate their taxes. I caution against any talk of a tax revolt as has been suggested by some,’ Mr Kieswetter said. He pointed out that such talk places the country on a slippery slope that further undermines the building of a capable state and a well-functioning democracy.

Mr Kieswetter added that no country can truly build prosperity if it does not have a well-functioning revenue authority, if it does not respect the rule of law and foster high levels of fiscal compliance. He said at Sars they accept the burden of rebuilding and transforming their organisation, adding that society should hold public office bearers to account when it comes to spending the hard-earned tax it should be done wisely and efficiently. He pointed out that this can be done when the extended community of tax and audit professionals serve the tax eco-system with the utmost integrity. He said the tax community can achieve so much more for society when they hold themselves to the highest standard of civil compliance.

Mr Kieswetter ended off his address by stating: ‘Let us commit to be better stewards of the resources entrusted to us in whatever role we are privileged to play. Let us do it that we can bequeath a better country to the next generation, than the one we have inherited.’

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.