Minister of Finance Tito Mboweni declared that he "fully endorses" the establishment of a unit within the South African Revenue Services (SARS) that is deployed to investigate and gather intelligence on illicit financial flows and granting SARS full "intrusive enforcement capacity" to act against them when necessary.

This was one of the recommendations made by National Treasury to the Nugent Commission of Inquiry into Tax Administration and Governance last year.

The Minister was responding to a question by the spokesperson of the Economic Freedom Fighters (EFF), Mbuyiseni Ndlozi, who wanted to know more about the proposed unit, including what legislative provisions would be required for setting it up and how its work would differ from the work already being done by the intelligence services.

'Enforcement powers that are also intrusive' are a necessity for any tax collection agency.

In his written question, Ndlozi was following up a statement by the National Treasury Deputy Director-General, Ismail Momoniat, made in a meeting of the Standing Committee on Finance held in September 2019, where he said that SARS needs an "intrusive unit to deal with illicit financial flows of money". The EFF spokesperson wanted to know "the details of the nature of the unit that he [Momoniat] was referring to".

Mboweni, in his reply, referred to the submission made by the National Treasury to the Nugent Commission in which calls were made for SARS to have "enforcement powers that are also intrusive". He expressed full support for this proposal, saying that such a unit is a necessity for any tax collection agency.

He replied, "it is necessary for SARS to have intrusive enforcement capacity to deal with such evasion.

"Whilst most taxpayers seek to comply, there are cases of taxpayers who are less cooperative when declaring income or have a clear incentive to withhold key facts about the nature of income-generating activities of the person or business," said Minister Mboweni, stating that this justified the existence of an "intrusive" unit.

The Minister explained that he understood Momoniat to be responding to questions by Ndlozi about SARS's surveillance capacity in general. He suggested in his reply that Ndlozi should have asked Momoniat for further clarification at that meeting.

"I am in agreement with his view on the general requirement for intrusive capacity for a well-functioning revenue-collection authority," the Minister relied. "I am sure the Honourable Member will also agree that SARS must have significant intrusive powers, not only to deal with taxpayers concealing information on income received, but also to counter illegitimate trades (and financial flows) in commodities such as tobacco, liquor and counterfeit goods."

He reminded Ndlozi that SARS is a semi-autonomous revenue authority which has its own internal staff who are accountable to its Commissioner, and it would be the responsibility of the Commissioner to provide any information reported by such a unit within SARS, not the Minister or National Treasury.

Mboweni quoted the Nugent Commission's final report which declared that there is "no reason why SARS was, and is, not entitled to establish and operate a unit to gather intelligence on the illicit trades, even covertly, within limits."

He said he agreed with the Nugent Commission that an investigative unit of this kind would not be unlawful. "Indeed, SARS must not be a toothless tiger when dealing with tax evasion and illegitimate trades and financial flows."

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In his investigation, retired former Judge Robert Nugent said at the time that there nothing unlawful about the existence of an investigation unit within SARS. The talk of a "rogue unit" that emerged when Tom Moyane was head of SARS was, according to Nugent, purposefully used as an excuse to remove senior SARS executives and the tax agency's executive committee when Moyane took over as commissioner at the end of 2014.

Despite the Nugent Commission firmly rejecting the idea that an internal SARS investigative unit posed any security threat, the narrative about a "rogue unit", allegedly formed under the former Minister of Finance, continues to pop up regularly as efforts to disparage former Minister Pravin Gordhan continue.

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Author: Moira Levy