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Nugent inquiry hears how Sars bosses allegedly manipulated tax calculations

The commission is investigating tax administration and governance since the appointment of Tom Moyane in 2014.

Picture: Supplied

PRETORIA – The Nugent Commission of Inquiry has heard how South African Revenue Services (Sars) management changed the measurement definitions in calculations related to tax compliance, in order to misrepresent the level of people paying their taxes.

This led to the Auditor-General making adverse findings last year that Sars had overstated personal as well as corporate income tax compliance, and that it had breached legislative requirements on how to determine compliance.

The commission is investigating tax administration and governance since the appointment of Tom Moyane in 2014.

Former head of tax compliance Dr Thabelo Ramovhele says definitions were changed to make compliance look better that it actually was.

“When the economic active entity was introducing it as a definition, it pushed the CIT compliance around 14%, from around 12%. But we knew that this is misrepresentation.”

Commissioner Michael Katz posed the questions which the commission needs to find the answers to.

“Why was the regulation amended at all, to achieve what? That was done to protect all these non-compliant taxpayers.”

The commission is withholding the identity of the official who changed the definitions at this stage.

COMPLIANCE PROGRAMME

Malovhele said between 2007 and 2013, he was responsible for developing a compliance programme until the restructure was announced.

“The was a list of the old function, new functions and functions that were withdrawn and I immediately realised that the research function is missing.”

He said he warned the executive of the dangers.

“We are talking a lot more about revenue collection but there is no discussion about compliance. And from the work that I’m doing, I see compliance slipping. It is just a matter of time [before] revenue starts to fall off.”

Malovhele said despite revenue declining and a decision last year to reconstitute the compliance unit, Sars still has no compliance unit.

HALF-TRUTHS

Ramovhele last year told the commission that Parliament needed Sars to produce a compliance strategy. However, under Moyane’s reconstruction process, the compliance unit had been dismantled.

He said as a quick measure the executive committee extended the use of the previous compliance programme drafted in 2014.

Commissioner Mabongi Masilo questioned this.

“What you’re telling us is that someone at Sars knowingly lied to Parliament about the compliance programme?”

Ramovhele responded: “I wouldn’t use the word ‘lie’ but we told Parliament half-truths.”

Three Sars executives are scheduled to testify on Wednesday.

(Edited by Leeto M Khoza)