Senior South African Revenue Service (Sars) insiders have accused a group close to tax commissioner Tom Moyane of grabbing control of a key revenue-generating division that deals with large corporations and wealthy individuals.
Central to the restructuring exercise is Moyane’s effective second-in-command and perceived “hatchet man”, Jonas Makwakwa.
This has raised red flags for some because Makwakwa is said to have clashed with now-ousted executives over his engagements with high-profile taxpayers in the past.
Sars, Moyane and Makwakwa did not respond to questions.
AmaBhungane spoke to a number of people close to developments at Sars and the national treasury. They outlined their concerns in detail, but did not wish to be named.
Most believe the restructuring is a deliberate attempt by Moyane’s “new guard” to give themselves undue influence over settlement negotiations running into billions of rands.
One former senior official, who is sympathetic to Moyane, dismissed this “implausible” view. He believed the Sars governance structures would withstand such an assault.
The others say the restructuring has destabilised the service and undermined its ability to meet revenue targets in a tough economic climate, particularly through its plan to break up its highly successful large business centre.
The centre deals with the country’s biggest taxpayers: large corporates and high net-worth individuals. But Moyane wants to farm out its functions to smaller regional centres in a process that seems alarmingly similar to the way in which the South African Police Service destroyed capacity and skills by closing its specialised units.
Shortly after Finance Minister Pravin Gordhan was appointed in December, he instructed Moyane to temporarily halt the restructuring process until he had assessed it.
But Moyane and Makwakwa plunged ahead defiantly, pointing out that former minister Nhlanhla Nene had already approved the plan.
The stability of Sars is understood to be a key issue troubling Gordhan in the run-up to his budget speech next week.
President Jacob Zuma appointed Moyane in September 2014. Sars reports to the finance minister and Zuma had just shuffled Gordhan to a lesser Cabinet post at the time. With Moyane in charge and Gordhan out of the way, a wave of suspensions, resignations and disciplinary charges followed.
Seemingly targeted were senior managers seen to have been loyal to Gordhan during his time as minister and, before that, as Sars commissioner. A series of media leaks about a “rogue unit” at Sars provided the rationale for Moyane’s actions.
Commentators suggested that, under Moyane, Sars faced a political assault designed to bring it to heel to stop potential enforcement action targeting ANC interests, Zuma’s Nkandla upgrades and his friends, the Gupta family.
In January 2015, Moyane ordered a comprehensive review of Sars’s work processes, information technology systems and staff requirements, and appointed Makwakwa to lead the restructuring.
Over 19 years, Makwakwa worked his way up the Sars ladder to the senior post of group executive for audit. In that role, however, amaBhungane’s sources said questions were raised among the Sars executive committee about his engagements with taxpayers. They mentioned two examples.
One was a company called Mpisi Trading 74, an import-export business run by Taiwan-born South African Jen-Chih “Robert” Huang. Mpisi was represented by Zuma lawyer Michael Hulley, and was previously chaired by the president’s nephew Khulubuse.
One of amaBhungane’s sources described how Mpisi allegedly countered a Sars assessment by claiming it had been “harassed” by Makwakwa and Sars.
Makwakwa, it is claimed, met Mnisi on two occasions in the company of another Sars official, and Makwakwa later instructed Sars officials to hand him all cases related to Huang. This raised suspicion among some at Sars.
Joy Meyiwa, Mpisi’s spokesperson, said the company would not respond unless it was provided with “a full set of documents from which you base [your] questions”.
The company noted: “Any suggestion of impropriety … is false. Any allegation of undue or improper political or other influence is false.”
A second example involved Durban businessperson Shawn Mpisane. In 2013 she faced tax fraud charges. But she petitioned then national director of public prosecutions Mxolisi Nxasana, claiming “prosecutorial misconduct”. And in January 2014 the state prosecutor said he had been ordered to withdraw the case.
This month, amaBhungane’s sources said serious questions were raised by Sars’s executive committee over Makwakwa’s role in the failed prosecution.
Specifically, Makwakwa’s engagements with taxpayers was said to have caused him to clash on more than one occasion with former chief of operations Barry Hore and former commissioner Oupa Magashula.
Hore, Magashula and Mpisane refused to comment.
More recently, Makwakwa and Moyane are said to have met Old Mutual after a Sars settlement committee blocked the investment company’s settlement proposal. Three sources said that Makwakwa and Moyane agreed on a “handshake settlement” with the company and, when this was again blocked by the settlement committee, Old Mutual claimed the agreement was binding and pressure was placed on the committee.
There is no evidence to suggest wrongdoing on Old Mutual’s part.
Company spokesperson Ursula van der Westhuizen said it could not comment: “However, we can confirm that we have no outstanding settlement matters with Sars.”
Today, as a result of the Sars restructuring, Makwakwa is all-powerful. He often acts as Sars commissioner during Moyane’s allegedly frequent trips abroad and simultaneously holds the key titles of chief operating officer for customs and information technology, acting chief officer for digital information systems and technology, and chief officer for business and individual taxes.
It is in the latter role that Makwakwa has assumed control of Sars’s largest revenue streams: those flowing from corporates and “high net-worth individuals”.
To date, this was the preserve of the large business centre, which previously operated with a significant degree of autonomy.
According to a recent survey of tax administrations worldwide by the Organisation for Economic Co-operation and Development, the “vast majority” of the world’s tax collectors have established specialised units that focus on the largest taxpayers, which bring in high revenues but present unique and complicated challenges for tax collectors.
Sars’s large business centre, established in 2004, employs more than 300 staff members and brings in about 35% of its revenue. Most of amaBhungane’s sources agreed its chain of decision-making was very robust – meaning it was hard to corrupt taxpayer engagements.
Quietly, however, Moyane and Makwakwa are doing away with the centre. According to amaBhungane’s sources, this was not discussed at executive committee level, and Sars’s various presentations to Parliament’s standing committee on finance – containing vague high-level descriptions – make no mention of the centre. But after tax professionals raised concerns in January, Moyane wrote to large companies. Still thin on detail, he announced that the responsibility for large taxpayers had now been “elevated” to Makwakwa.
Also high among the concerns of amaBhungane’s sources is their perception that, through the restructure, highly experienced officials are being sidelined in favour of people close to Makwakwa and Moyane, said to have little experience in some cases.
They named eight new senior managers, some of whom had worked closely with Makwakwa previously and others who appear to have little relevant experience.
None responded to questions submitted by AmaBhungane through a Sars spokesperson.