A South African Revenue Services (Sars) official told the commission of inquiry into tax administration and governance at Sars of how a change in the revenue’s operating model had a severe impact on Sars’ anti-corruption and security unit, which was later renamed to “fraud investigations”.
The unit investigated internal corruption at Sars and the witness, who testified under anonymity, said the changes in the operating model impacted the unit in that it ceased to work on syndicated crimes but rather on cases the witness described as “rats and mice cases” dealing with behavioural issues and fraudulent sick leave notes.
“We moved from investigating syndicated crimes to investigating small sick leave notes fraud, kilometre claims, that was the one impact. The other impact was that the number of [reported] cases to us dropped. So people were just not aware that we still existed in terms of that we were still an anti-corruption internal investigations [unit],” Witness X told the commission.
The witness added that this negatively affected the morale of all the members of the unit.
Suspended Sars boss Tom Moyane in 2014 ordered consulting agency Bain and Company to restructure the revenue service’s operating model.
The model introduced by Bain caused the South African Revenue Services (Sars) to lose billions in tax revenue.
Witness X testified that they had found it strange that in December 2014 Moyane had disbanded the unit even though it had been rated highly by the department of public service and administration in previous peer reviews.
According to the witness, on December 31, 2014, an email was sent out to the different units within Sars outlining the new reporting lines which would be effective from January 2, 2015.
The witness added that the email did state that the changes to the reporting lines were for the interim period pending the overall review of the new operating model within Sars.
The urgency with which the reporting lines were changed was questionable for Witness X because the new operating model would be implemented in due course.
Witness X told the commission that when the new operating model was set in motion, the anti-corruption and security unit was renamed to fraud investigations and then reported to internal auditing.
Witness X said this change had come as a shock, because Bain had been paid “a hell of a lot of money” for bringing in a new operating model which should have focused on best practices for the organisation.
The witness and leaders within her unit made various submissions, which were not authorised, calling for the unit’s independence and for it to report directly to the head of the organisation.
“Crucial in any anti-corruption unit focusing on internal investigations is independence and to be able to investigate anybody without fear or favour,” Witness X testified.
The submissions included changing the unit’s name from fraud investigations because its new name created confusion and the perception that the unit no longer focused on internal corruption but rather criminal cases, which created further confusion due to the existence of a criminal investigations unit within Sars.
Witness X said on November 29, 2016, or around the last week of that month, she and a colleague were called to a meeting where they were informed that the Tobacco Task Team, which included Gobi Makhanya, Yegan Mundie, Deidre Razak and David Pillay, among others, which had been in the office of the commissioner, would be collocated with the fraud investigations unit.
“We were very uncomfortable, we pushed back because just a week before there was a newspaper article talking about this unit and indicating that the unit is investigating cigarette smuggling,” Witness X said.
What was of concern for the witness and her colleague was that in the newspaper article the task team had been labelled the “new rogue unit” and that the fraud investigations unit had suffered a reputational blow following media reports on the first so-called rogue unit.
“The confusion in the media that the assets of the rogue unit were our assets and people within the organisation believed that we were the rogue unit or we are a rogue unit was of concern,” Witness X said.
However, their “pushback” and concerns raised by the witness and her colleague about collocating the task team with the fraud investigations unit fell on deaf ears.
Witness X said this collocation negatively impacted the unit because another key aspect of an anti-corruption unit is trust, which encourages whistle-blowers to come forward.
The commission is chaired by retired judge Robert Nugent.