POLITICS

Breaking: Gordhan Orders Probe Into Sars, Dennis Davis To Investigate

The tax service's ability to deal with illicit financial flows, among other issues, will be under the spotlight.

01/12/2016 13:41 SAST | Updated 01/12/2016 22:06 SAST
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The minister and his men... Minister of Finance Pravin Gordhan (centre) has ordered an inquiry into Sars.

Minister of Finance Pravin Gordhan has ordered a major inquiry into the operations of the South African Revenue Service (Sars).

The inquiry, conducted by the Davis Tax Committee (DTC) and headed by Judge Dennis Davis, will look at the closure of a number of enforcement units within Sars, governance and accountability within the organisation and the implementation of previous DTC recommendations, according to a presentation by Davis to Parliament's Standing Committee on Finance on Tuesday.

The inquiry will look at the closure of a number of enforcement units within Sars, governance and accountability within the organisation and the implementation of previous DTC recommendations.

It comes against the backdrop of an apparent breakdown in relations between Gordhan and Tom Moyane, Sars commissioner. Gordhan told Parliament this week he was unable to vouch for information supplied to him by Sars "because of a lack of accountability and cooperation from the Sars top management". Moyane is allegedly targeting Gordhan with Project Lion, an internal Sars investigation into a number of contracts entered into during Gordhan's time as Sars commissioner.

Davis told members of Parliament's Standing Committee on Finance on Tuesday he received specific terms of reference from Gordhan. This entails:

  1. Whether the Sars' governance and accountability model is still relevant in 2016;
  2. If the operational model has the ability to look at and deal with illicit financial flows; and
  3. How Sars has dealt with previous recommendations from the DTC and approved by the minister.

Two sources familiar with the inner workings at treasury told The HuffPost SA the inquiry into Sars' ability to deal with illicit financial flows will be important because a number of enforcement units within Sars have either been closed down or merged since Moyane was appointed commissioner in September 2014. The units that have been closed down include National Projects (a multidisciplinary team), Central Projects (that investigates sensitive cases) and the High-Risk Investigations Unit (HRIU, the so-called rogue unit). Two units, Criminal Investigations and Preliminary Investigations, have been merged.

A number of enforcement units within Sars have either been closed down or merged since Moyane was appointed commissioner in September 2014.

Gordhan established the DTC in 2013 with the express mandate to advise the minister on tax policy. Its terms of reference denote that the DTC should keep abreast of international trends and developments with regards to tax policy, and it should examine the overall tax-base and make recommendations in regards to the mix between direct- and indirect-taxes as well as between local and provincial taxes. It also considers VAT policy, evaluates legislative process and the progressiveness of the tax system.

It is purely advisory in nature and the minister isn't obliged to accept or implement its recommendations. The terms of reference Davis presented to Parliament represents an extension of its existing terms of reference and will be the first time the DTC ventures into the inner-workings of Sars.

The terms of reference Davis presented to Parliament represents an extension of its existing terms of reference and will be the first time the DTC ventures into the inner-workings of Sars.

Davis told MP's the DTC is in regular contact with Sars about tax administration issues and from "time to time" meets with Moyane. Sars has also presented its new operating model to the DTC.

The DTC has already been in contact with members of the the erstwhile Kroon Commission to see whether there are overlaps in mandates. The Kroon Commission was established in February 2015 by then-minister of finance Nhlanhla Nene to investigate claims around the HRIU. It has

David Maynier, Democratic Alliance MP and spokesperson on finance, says he expects the DTC to review Moyane's appointment, his new operating model and the relationship between the minister and the commissioner.

"In the end this amounts to a review of Moyane's leadership and management of Sars by the DTC. That means the DTC risks finding [itself] caught in the middle of the so-called Sars wars."

In the end this amounts to a review of Moyane's leadership and management of Sars by the DTC. That means the DTC risk finding themselves caught in the middle of the so-called Sars Wars.David Maynier, DA MP

Sandile Memela, Sars spokesperson, and Yolisa Tyantsi, Treasury spokesperson, have been asked for comment. This story will be updated as soon as it's received.

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