NEWS
10/03/2017 12:34 GMT | Updated 10/03/2017 15:51 GMT

Sars vs Judge Dennis Davis: What Lies Beneath

Minister of Finance Pravin Gordhan last year mandated the Davis Tax Committee to look at Sars from top to bottom. Tom Moyane won't stand for it.

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Judge Dennis Davis

ANALYSIS

The South African Revenue Service (Sars) launched an extraordinary attack on Judge Dennis Davis on Friday, saying it has lost "all confidence (in) and respect" for the jurist from the Western Cape High Court.

What makes this attack all the more remarkable — apart from the obvious dangers of in effect attacking an eminent member of the independent judiciary — is the fact that Davis is chairperson of the Davis Tax Committee (DTC).

The DTC's mandate was recently quietly expanded by Pravin Gordhan, the Minister of Finance, from being limited to advice around tax policy, to investigating whether the Sars "operating model" is adequate.

This from Huffington Post South Africa in December:

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."

And:

According to Davis, Gordhan has given "specific terms of reference" to the DTC to investigate whether or not the Sars accountability and governance model, developed by the Katz Commission in the mid-1990's and upon which Sars' model and independence was constructed, is still relevant "in 2016".

It is furthermore supposed to consider how the current operating model has dealt with the various recommendations from the DTC and accepted by the minister.

Lastly, and tellingly, the DTC must look at whether the current operating model — which was overhauled by Moyane after he was appointed commissioner in September 2014 — can deal with illicit financial flows.

Decoded and translated, this means Davis and his colleagues will look at Sars from top to bottom. The DTC is going to interrogate Sars' internal structures and processes to determine whether it is working effectively and to assess if it is functioning optimally to ensure effective and transparent tax collection.

Thus, Davis has a mandate from Gordhan — Sars commissioner Tom Moyane's avowed enemy — to investigate whether the receiver, from top to bottom, is working and functioning like it should.

And we know from various leaks from within Sars, the very public confrontation between Gordhan and Moyane, the exodus of competent staff and the dismantling of specialist units within Sars that it is not humming along, but spluttering.

HuffPost wrote in December:

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.

This malaise is manifesting in National Treasury expecting a R30 billion shortfall in revenue collection — an issue Gordhan and Treasury pertinently addressed during the recent tabling of the budget.

This form our coverage of the budget last month:

Pravin Gordhan has said he can't trust information given to National Treasury by the South African Revenue Service (Sars) — he's now been to see Sars head Tom Moyane four times in four weeks.

During a press conference on Thursday, ahead of his seventh budget speech, Gordhan — almost literally exuding a shimmering confidence in himself and in his team — said: "Yes, I am concerned by the shape of revenue collection.

Gordhan told the National Assembly that government — Sars — will collect R30 billion less than projected last year, calling it "the largest under-performance since the 2009 recession".

But — and how can we be so cynical? — on Friday the Mail&Guardian published a fascinating story with details about how Sars is allegedly attempting to fudge the numbers ahead of the announcement of the revenue collection figures in April (they've denied it).

Could it be that Sars wants to create a diversion?

Friday's statement is a shot across Gordhan's bow: Moyane will not accept Davis' meddling in Sars' affairs. Someone is going to have to relent. And we know Gordhan and Treasury aren't in the business of backing down.