There was a “massive failure of integrity and governance” at Sars under the leadership of former commissioner Tom Moyane, parliament’s finance committee was told on Wednesday.
MPs were briefed by retired judge Robert Nugent on the findings and recommendations of the commission of inquiry he headed into the state of affairs at Sars.
Nugent said the failure of governance was made possible by weaknesses in the governing legislation for the revenue authority, which did not entrench governance structures in the organisation.
Nugent submitted his interim report to President Cyril Ramaphosa towards the end of September 2018. It recommended the urgent removal of Moyane as commissioner in order to restore revenue collection. This was done and Moyane subsequently failed in several court bids to challenge the president’s decision.
A process is under way to find his replacement.
A key focus of Nugent’s recommendations is the introduction of mechanisms to prevent a recurrence of the breakdown of governance that occurred under Moyane.
Business Day reported on Wednesday that Sars is expected to conduct a forensic review of all contracts deemed by Nugent’s report to have been dodgy, including with Boston-based consultancy Bain & Company for the damaging restructuring of Sars, as well as with IT specialist Gartner.
Together, the contracts were found to have cost the tax agency about R400m.
Nugent pointed to the gaps in the Sars governing legislation that enabled Moyane to dispense with oversight mechanisms soon after taking office, such as the dissolution of the executive committee, which was not mandated by law.
Nugent said Sars was set up as an autonomous body but the danger of this is that there is great potential for an autocratic body. The existing Sars legislation provides for very little control to be exercised over the commissioner.
“The commissioner is in charge of Sars and is answerable to no one,” said Nugent.
“There are very few restrictions and guidelines in the legislation as to what they may or may not do. That can, of course, be a very dangerous situation. The legislation is quite weak over the controls to be exercised over the commissioner.”
An organisation such as Sars, which is involved in revenue collection, needed particularly strong governance structures, he said.
The Nugent report recommended the appointment of a deputy commissioner on the grounds that a crucial element of good governance in an organisation is the oversight role of senior management structures that are able to restrain any abuse of authority.
The South African Revenue Service Act does not make provision for a deputy commissioner, however, “leaving the commissioner of Sars with sole and unfettered authority,” Nugent told the finance committee members.
The report recommends that the act be amended to require that the commissioner appoints an advisory executive committee, which must include the deputy commissioner.
It further recommends that the act be amended to require an annual business plan to be prepared by Sars and approved by the finance minister. It also calls for the appointment of an inspector-general at Sars to investigate matters of governance.