Edward Kieswetter, commissioner of the South African Revenue Service, says the ban on US-based management consultancy Bain & Co doing business with the government must remain until there is full disclosure about its destructive role in Sars and other state-owned entities.
“The principals of Bain sitting in New York have to accept accountability. They have to come here and make full disclosure of every meeting they had with every high-profile politician, civil servant and businessman, and of the purpose of those meetings,” he says.
“That for me is the minimum requirement. They can apologise as much as they like but what they have to accept is the devastating impact they have had on Sars and South Africa.”
He says he still doesn’t know how Bain knew about the appointment of Tom Moyane as commissioner of Sars 12 months before it happened.
When Kieswetter replaced Moyane in early 2019 he found that the investigative capacity of Sars, which celebrated the 25th anniversary of its formation last week, had been destroyed and tax avoidance was rife.
Since then, non-compliance has been reduced but they’re battling to recruit the specialist skills and obtain the budget they need to get on top of it.
“There’s a real war in the country for top talent and we're competing against private sector industries that can outbid us for these skills.”
We know that the gold refining industry is fraught with criminal syndicates, and there are illegal syndicates in the clothing, textiles and leather goods industries
Sars needs 3,000 more people, including 100 technology specialists and 100 data scientists and data analysts.
He recently revealed how Sars cracked the allegedly illegal cigarette syndicate, Gold Leaf Tobacco Corporation, after a forensic analysis of 60 terabytes of data.
Initially, the plan was to outsource the job, but when their best quote was an unaffordable R100m they put together a team of nine Sars officials who took three years to analyse the data and find evidence that the syndicate was involved in money laundering and could owe up to R3bn in undeclared income tax, VAT and other taxes.
On the back of its evidence Sars secured a court order freezing the assets of the company and its directors, Simon Rudland and Ebrahim Adamjee.
When he speaks to the National Treasury about funding, he tells them: “Imagine if I had 10 such teams how much more we could do.”
“If we want to go faster we’re going to have to scale up a lot faster than we are currently doing.”
There are a lot more illegal syndicates out there, he says, not just in the tobacco industry.
“We know that the gold refining industry is fraught with criminal syndicates, and there are illegal syndicates in the clothing, textiles and leather goods industries.
“We need to be able to scale up at an industrial level if we really want to deal with the problem. At the moment we don’t have the capacity to move as fast as we need to.”
His R11.5bn budget is R4bn a year less than he needs to be equal to the task, but he’s been told the money isn’t there.
“All I can do is make my case over and over again to my colleagues in the Treasury.”
He tells them that with an extra R4bn Sars could bring in “comfortably more than 10 times that”.
Their under-recovery of revenue at the moment is “at least” between R200bn and R300bn, he says.
“This is the money we could collect if we were properly capacitated.”
There isn’t a lower-cost investment the government could make to improve the country's fiscal situation, he says.
Where does he believe state expenditure could be slashed to meet his budgetary needs?
“I believe our approach to allocating government resources must be based on hardcore business cases, in other words business cases that yield the highest return.”
So what does he think about striking Transnet workers getting an extra 6% (his own striking employees got 1.5%) when the Transnet wage bill is already 66% of its budget?
“I think what we do badly in South Africa is translate growth in wages into growth in output. I would double the salary of Transnet workers if they could treble their productivity.
“If we grow our wage bill by 6% a year but our economy is growing at 3% then clearly we are becoming a less efficient society.”
I believe our approach to allocating government resources must be based on hardcore business cases, in other words business cases that yield the highest return
He believes hiking tax rates is the least effective way to increase government revenues.
The best way would be to create productive capacity, which in the case of Sars would improve the efficiency of revenue collection and broaden the tax base.
He downplays the effect of emigration on the tax base, pointing out that 4,000 people emigrated in 2019 and 6,000 in 2022, while over the same period the number of registered tax payers increased to 25.8-million. Even with almost half that number below the tax-paying threshold, tax revenue has grown by 25% in the last year, he says.
A significant part of this increase is due to Sars enforcing the law and chasing down those who consciously try to defraud the fiscus.
“We’re still a long way from declaring victory. The opportunity landscape for compliance revenue is still huge.”
He’s working with the justice and enforcement cluster to formulate “unexplained wealth order” legislation that will make Sars lifestyle audits, which he says have helped bring in R25bn, more aggressive.
“When there appears to be a significant mismatch between declared income and lifestyle we’ll be able to ask people more directly to explain the source and nature of their income.”
He says although many state capture elements have been rooted out of Sars there is still a long way to go.
“We still have people who seek to undermine the fight against corruption, who still are connected to and collude with people who are breaking the law.
“We mustn’t pretend that we, or the NPA or Hawks, are free of corruption.”
This, in addition to limited capacity, is why improved collaboration with the NPA and Hawks has not led to the kind of prosecutions he wants to see.
“We should be moving a lot faster, but the reality is they’re struggling with capacity as a result of state capture and will be for the next five to 10 years.”
Kieswetter was part of then commissioner Pravin Gordhan’s team that built Sars into a world-class entity before leaving in 2010 when he was overlooked for the top job.
He says that before it was destroyed by state capture, Sars was “a demonstration that if we focus on merit rather than political or ideological alignment we can build world class institutions in this country".
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