Sars slams Mkhwebane’s ‘worrying ignorance’ of the law in review of Pillay pension report

The South African Revenue Service (Sars) has labelled Public Protector Busisiwe Mkhwebane’s findings and remedial actions in a report into the early retirement and re-hiring of former deputy commissioner Ivan Pillay as “incompetent” and “irrational”.

Sars’ application to have Mkhwebane’s report into the Pillay pension issue set aside is the second application seeking to have the same report reviewed, the other having been filed by Public Enterprises Minister Pravin Gordhan.

The court papers were filed in July at the Gauteng High Court in Pretoria. Mkhwebane had until Monday to file responding papers after indicating her intention to oppose the application.

News24 understands a court date has not yet been set, while Gordhan’s review of the report is expected to be heard from April 14 to 16, 2020.

Former Sars commissioner Oupa Magashula is cited as a respondent but has filed a notice of his intention to abide by and support Sars’ bid.

The taxman’s court application is supported by a founding affidavit by Sars commissioner Edward Kieswetter who submits Mkhwebane overstepped her jurisdiction and failed to canvass her intended remedial actions with Sars – a procedural irregularity Kieswetter says is grounds enough on its own to have the whole report set aside.

In May this year, Mkhwebane released her report into the Pillay pension issue and made sweeping findings against Magashula, Gordhan and Sars.

At the time when Pillay’s early retirement was approved, Gordhan was the finance minister.

Mkhwebane found Gordhan’s approval was irregular as Pillay had not truly retired according to the definition of the word, and the whole debacle was as a result of a conspiracy or scheme cooked up by Pillay and Gordhan because there was a “political kinship” between them.

She had failed to substantiate this finding with any facts, Kieswetter argues.

History ignored

In October 2016, then-National Director for Public Prosecutions Shaun Abrahams announced the withdrawal of fraud charges against Gordhan, Magashule and Pillay with regards to the same early pension issue. Abrahams had been appraised of new evidence – an internal Sars memo by lawyer Vlok Symington – which had been obtained by Magashula at the time and withheld from prosecutors.

The Symington memo showed not only that Pillay’s early retirement was legal, but also that legal advice had been sought and given.

Mkhwebane made no mention of the Symington memo or the fact the NPA and Hawks had previously canvassed the Pillay pension issue and reached a conclusion that there was no basis for criminal charges in her report.

Similarly, Kieswetter also does not draw attention to this in his affidavit.

Pillay asked to be allowed to take early retirement in August 2009. Magashula facilitated the request through the office of Gordhan, then the finance minister, who after several iterations of the request and motivations therefore, approved Pillay’s request in August 2010.

Sars paid a penalty to the Government Employees Pension Fund (GEPF) of R1.2 million, and in February 2011, Pillay concluded a new, fixed-term five-year contract under which he would continue as deputy commissioner as approved by Gordhan and recommended by Magashula.

The contract would commence on January 1, 2011, and expire on December 31, 2015.

In 2014, Pillay concluded another contract with Sars that would expire in December 2018. He ended up leaving Sars under the rogue unit cloud in May 2015.

Mkhwebane’s remedial action ordered Sars to put in motion steps to recover the funds paid by Sars to the GEPF – not from Pillay, but from Magashula.

She also ordered that Sars should introduce new policies and practices relating to the early retirement of staff and staff retention.

To be set aside

In his affidavit, Kieswetter submits that Mkhwebane, or the Public Protector, has no jurisdiction to “approve” Sars’ recruitment and early retirement policies as she ordered in her remedial actions.

He further argues that Sars has no powers over the legislation governing the pension rights of government staff as envisaged in Public Service Act of 1994 or the Government Employees’ Pension Law of 1996.

“The minister approved Mr Pillay’s [early] retirement upon Mr Magashula’s recommendation. Mr Pillay was therefore entitled to the pension benefits he obtained, including the payment on his behalf of the penalty by Sars. So long as the minister approved it for a sufficient reason, the retirement arrangement for Mr Pillay was perfectly legal,” Kieswetter’s affidavit reads.

“It will be noticed that … Mr Magashula does not feature much. All he did was recommend to the minister, who then gave his approval. This is important, given the remedial action ordered against Sars that Sars must recoup the penalty from Mr Magashula. Put shortly … Sars has nothing to recover from Mr Magashula. He did not authorise the payment to Mr Pillay. He merely recommended it.”

He further asked that not only should Mkhwebane’s findings be set aside, but also the remedial actions.

Sars was not at any stage during the investigation or drafting of the report approached to provide its version on the findings or intended remedial action, Kieswetter submitted, contending that this is procedurally unfair, and on this ground alone the report should be set aside.

Mkhwebane found in her report that Pillay did not retire in the normal sense and definition of the word – because of his immediate re-hiring.

Kieswetter submits that whether or not Pillay was rehired immediately after the date of his retirement, was “legally irrelevant” – in law, he had retired, but was no longer allowed to be a member of the GEPF as a result of the retirement.

Gordhan’s ministerial approval of the early retirement was perfectly legal, he added.

“What the Public Protector was doing, in the absence of actual evidence, to draw an inference as to why the minister took the decision he did,” Kieswetter’s affidavit reads.

Mkhwebane also took it a step further, stating in her report she was concerned over the effect that “such an arrangement would have on the fiscus if every public servant could access their full pension money and still remain in the payroll of the departments until their actual retirement”.

Kieswetter states this stance revealed “a worrying ignorance in how the law works”.

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