Concern about president’s ‘unfettered discretion’ to appoint Sars head

The Davis Tax Committee has expressed concern about the President’s unrestricted ability to appoint the commissioner of the South African Revenue Service (Sars).

In one of six reports released to the public on Monday, it recommended that the commissioner should rather be appointed in a similar vein to the Public Protector or by the Minister of Finance directly to improve transparency and accountability.

“It is arguable that by leaving the President with an unfettered discretion to appoint the commissioner, the commissioner would be placed on an equal footing to the Minister of Finance, beholden to the President, and not legally accountable to the minister whose constitutional responsibility it is to prepare and present the budget,” the DTC said in its report on tax administration.

President Jacob Zuma appointed Tom Moyane as Sars commissioner in September 2014 in terms of the Sars Act. Moyane has previously been at loggerheads with former finance minister Pravin Gordhan over operations at Sars, after Moyane allegedly disobeyed orders to terminate a restructuring. A new book by investigative journalist Jacques Pauw – published after the DTC’s report was submitted to the Minister of Finance – claims that Moyane had been assisting Zuma to avoid his tax obligations. Zuma and Moyane deny the allegations.

The DTC’s report comes amid growing concern about tax administration at Sars, after the Medium-Term Budget Policy Statement (MTBPS) showed that tax revenue was likely to fall almost R51 billion short of earlier estimates. Although the under-collection was expected given the slowdown in economic growth, the magnitude thereof has led various commentators to argue that increased tax avoidance, a slippage in compliance levels and tax administration-related issues might also be at play. Sars argues that it has largely been incorrectly blamed for the downward revision.

Finance minister Malusi Gigaba announced on Tuesday that Zuma has approved an inquiry into tax administration and governance at Sars to help assess the factors responsible for the under-collection of revenue.

The DTC said there was no reason why the commissioner should not be appointed in the same fashion as the Public Protector. In terms of the Constitution, the president appoints the Public Protector on recommendation of the National Assembly. Although South Africa’s Constitution does not explicitly provide for such a selection process, the DTC believes it would provide “far greater confidence in the appointment of a commissioner”.

Alternatively, the commissioner should be appointed by the Minister of Finance, it said.

“A system where the commissioner operates outside the strictures of the minister and indeed Cabinet and is only answerable directly to the President is not conducive to a responsive and accountable Sars.”

The DTC also recommended that a board be set up to oversee the operation of Sars with the objective of “promoting the integrity of its conduct as well as to ensure that it implements systems to collect revenue as fairly and efficiently as possible”.

It said the board could be provided with powers of investigation to put it in a position to make meaningful recommendations to the minister in relation to the accountability of Sars and its compliance with its obligations.

“As recommended, the board could be mandated to provide the minister with a shortlist of candidates for the office of commissioner, from whom the minister is obliged to choose.”

Other recommendations made by the DTC include:

• The implementation of a high-net-worth individual (HNWI) unit at Sars that could deal with the tax affairs of this group specifically.
• That a Taxpayer Bill of Rights – enforceable and with legal effect – be developed to protect taxpayers’ rights in their dealings with Sars.
• That the Tax Ombud’s role and powers be widened.

NHI funding

In a separate report on a National Health Insurance (NHI), the DTC said the large degree of uncertainty and lack of understanding of how the NHI would be implemented and operated were of concern.

Against this background, it was too early to make explicit recommendations about a proposed funding mechanism for the NHI, it added.

It warned that the proposed NHI was unlikely to be sustainable unless there was sustained economic growth.

“The magnitudes of the proposed NHI fiscal requirement are so large that they might require trade-offs with other laudable NDP programmes such as expansion of access to post school education or social security reform.”

Brought to you by Moneyweb