South African Revenue Service commissioner Edward Kieswetter says he is “disappointed” that the National Prosecuting Authority is not making more progress with the information that Sars has given it.
“I hope that the NPA, like Sars, gets their act together so that we can see more taxpayers in orange overalls, behind bars.”
He says he can understand the public's frustration that so few high-profile prosecutions have come out of the Zondo commission, which has implicated many senior politicians and government officials in state capture.
“I can understand that the public want to see more high-profile taxpayers being brought to book.”
What the increasingly frustrated public want to know is why Sars can't do to them what the US tax authorities did to crime boss Al Capone, who was jailed for tax evasion.
“We don't prosecute taxpayers or citizens. We administer revenue matters. When we conduct criminal investigations we hand over those files to the NPA,” says Kieswetter.
He rejects the perception that Sars hasn't been proactive enough in pursuing high-profile politicians and officials for tax evasion.
“We didn't wait for the Zondo reports to come out. We've had tax inquiries following evidence led at the Zondo commission. We've arrested, and the NPA is currently prosecuting because of our work, a director and a former Gupta associate on the failed Estina dairy farm project.
“Prosecutors tend to err on the conservative, because they have one shot. If they mess it up then all of you are going to spit venom at them for losing in court.”
He says no-one wants to see high-profile tax offenders in jail more than he does.
But Sars's commitment to go after the most high-profile and politically well-connected offenders has been questioned following its refusal to hand over former president Jacob Zuma's tax returns, as ordered by high court judge Norman Davis four months ago.
The Financial Mail and amaBhungane lodged the case in 2019 under the Promotion of Access to Information Act, arguing that there was “serious and credible” evidence that Zuma had not been tax compliant during his years as president, and a clear public interest in his tax records being released.
Sars fought this, arguing that the Tax Administration Act obliged it to keep taxpayer information secret.
Davis ruled that the clauses in the act that stipulate this are unconstitutional.
“This was an unfortunate and bad judgment, and we have taken it on review,” says Kieswetter.
Sars argued that the disclosure of taxpayer information could have far-reaching implications for its ability to collect revenue.
A minority of our staff are still from the old era where intimidation and bullying and being unprofessional was not called out. But I push back on this narrative that the taxpayer is always the innocent and bullied individual and Sars is always the bully
— Sars commissioner Edward Kieswetter
Davis found there'd be no detrimental consequences for tax collection if Zuma's tax records were released.
“We disagree,” says Kieswetter.
Isn't it in the public interest to know if Zuma paid tax on the bagfuls of cash that, according to evidence at the Zondo commission, he received from Bosasa while president?
“Who determines what the scope of that public interest is?” says Kieswetter.
Sars was roasted in a recent judgment by the tax court, which found it had bullied, abused and lied to a corporate taxpayer.
Registered tax law practitioners say this is by no means an isolated case.
Kieswetter, a member of Pravin Gordhan's successful Sars team who left in 2010 after being overlooked for the top job but was brought back in 2019 to fix it after the state capture years, denies this but concedes that the process of professionalising Sars has a long way to go.
“A minority of our staff are still from the old era where intimidation and bullying and being unprofessional was not called out. But I push back on this narrative that the taxpayer is always the innocent and bullied individual and Sars is always the bully.”
Sars is “not at the level of competence or professionalism I would accept as the gold standard but the majority are highly professional and highly competent”.
In a post-budget presentation he said too much credit for huge tax overruns was going to the commodities boom and not enough to the performance of Sars.
Why did the South African Institute of Chartered Accountants tell parliament last week that taxpayers are “experiencing huge frustrations” with Sars?
“The percentage of taxpayers who find an experience frustrating or unacceptable because of a lack of professionalism or competence on our part is a reducing minority,” he says.
Why do MPs say they are getting a “steady increase” in complaints about Sars?
“We're definitely picking up more issues of potential risk to Sars and I'm trying to understand why,” says Kieswetter. “It may be because we're a lot more focused. What taxpayers call aggressive and bullying behaviour may be because they're experiencing a more effective Sars.”
One area of significant and growing discontent among taxpayers is the number of claims for home office expenses that are being denied.
Kieswetter told parliament last week that Sars disallowed R1.8bn of the R2.9bn of claims made for home office expenses to date in the 2021/2022 tax year.
In the current tax year, Sars has received more than 76,000 returns in which individual taxpayers claimed home office expenses.
“The definition of a home office used to be pretty standard and pretty clear, and Sars hardly ever in the past had issues with home office deductions,” he says. “Now all of a sudden you have Covid. The law in this regard is going to have to play catch-up to a dynamic that was unplanned and unexpected, but landed on us because of Covid.”
He says Sars now understands, “with the wisdom of hindsight”, that a lot more people have a hybrid work situation, which increasingly is going to be the new normal.
“What we have to do in double-quick time is allow the law to catch up, and change our administrative tax forms and instruments to take account of the new norm.”
Until then, Sars has to apply the law as it is, no matter how it feels about it.
“But while reality has changed, a lot of people are just taking chances to abuse the provision in the law and make impermissible deductions,” he says. “If I allow that, and another R2bn to be paid out in refunds, I'll get crucified. We have to balance risk to the fiscus with service to the taxpayer.”
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