The finance minister’s old bailiwick is awash with factionalism, writes Craig Dodds.
There’s a quirky passage in the middle of the Sikhakhane Report on the conduct of ex-Sars official Johan van Loggerenberg, in which former US president Lyndon Johnson is quoted as he muses on the trials of milking a cow and its relevance to the work of intelligence operatives.
Johnson recounts how, in his Texan childhood, he had once completed the arduous task of milking Bessie the cow, only for her to swing her “sh*t-smeared tail through the bucket of milk”.
This, he reflects, is the effect “intelligence guys” have on any government programme, no matter how noble its intentions – “they swing a sh*t-smeared tail through it”.
As the former Sars commissioner largely responsible for building its reputation as a world-class tax administration system and now (once again) as the political head to whom it reports, Pravin Gordhan would no doubt sympathise with Johnson’s sentiments.
The once pristine-seeming bucket has been well and truly tainted after two years of relentless unwelcome publicity, starting with Van Loggerenberg’s affair with a State Security Agency informant who also worked for the tobacco industry and up to, most recently, Gordhan’s standoff with Sars commissioner Tom Moyane over the latter’s plans for a comprehensive shake-up of the service.
The last thing Gordhan would want as he tries to restore faith in the government’s management of the economy is public misgivings about the agency responsible for collecting the money it spends.
Yet there are strong grounds for misgivings, no matter which of two seemingly mutually exclusive narratives about Sars ultimately proves to be correct.
Trust in the transparency and fairness of tax administration is a key plank of tax compliance: most people pay because they accept they are assessed on the basis of clear rules, applied without favour.
Also, they assume they will be caught if they cheat.
Remove this belief and attempts to buck the system will inevitably increase, leading to losses in revenue and more having to be spent on investigation and enforcement.
That Sars consistently increased revenue collection even through the global recession can be directly attributed to high levels of voluntary compliance, without which the fiscus would have been in even more serious trouble than it is.
The task of cleaning up the mess is urgent then, as revenue is expected to come under pressure from an economy teetering on the edge of recession - yet the means to achieve this are far from obvious.
While one narrative – that a “rogue” intelligence unit which illegally intercepted communications and spied on politicians had been set up unlawfully and operated without proper supervision – has been widely publicised, the alternative has received scant attention, yet its implications are even more profound.
In a lengthy submission to Parliament’s standing committee on finance and joint standing committee on intelligence last year, former Sars spokesman Adrian Lackay documented (and offered to provide evidence for) a list of startling allegations contradicting the “rogue” unit story.
While that narrative had its roots in the affair between Van Loggerenberg and SSA informant Belinda Walter, Lackay suggested, it had since been elaborated to incorporate the claims about an unlawful covert unit and ultimately to draw in former acting Sars commissioner Ivan Pillay and Gordhan himself, among others, as various “protagonists” seized on the opportunity created by the scandal to attack the integrity of the service.
These protagonists included disaffected former Sars employees (one of whom, Michael Peega, had been fired for involvement in rhino poaching), elements in the State Security Agency and police crime intelligence who were close to the tobacco industry and Sars officials who had “axes to grind” with Pillay and Van Loggerenberg.
“I believe that a by-product of this sequence of affairs is that there are now multiple agendas being advanced by multiple groupings in different ways, sometimes in tandem or concert sometimes not, sometimes individually so and sometimes in collusion,” Lackay wrote.
“The lack of reaching a conclusion on the true facts has harmed and continues to harm Sars as an institution, its public credibility and ultimately the fiscal prospects of the country.”
The possibility of a war within the state with Sars as the battleground, involving intelligence operatives in cahoots with tobacco smugglers and bent cops, one would have thought, should have galvanised a full-scale public inquiry, but it has not.
Some allegations were referred by Minister for State Security David Mahlobo to the then-inspector-general of intelligence, Faith Radebe, but her term expired in March and the post has yet to be filled amid a standoff between the ANC and opposition parties over the nomination of a candidate.
According to Lackay, Sars employees who sought to tell the truth about the “rogue unit” were “bullied, threatened, suspended and their tenure at Sars made unbearable” and Moyane had made him issue statements he later discovered to be false. There have been three investigations into the Van Loggerenberg rogue unit story, but only selected excerpts have emerged via leaks to the media.
It also emerged this week the latest – a KPMG probe whose “final” report formed the basis of a Sunday Times front-page story suggesting Gordhan should be investigated to determine whether or not he knew about the unlawful operations of the unit, was not only incomplete, but based entirely on documentary evidence, with no interviews of affected individuals.
This corroborates Gordhan, Pillay and Van Loggerenberg’s claim that they were never given an opportunity to respond to the purported findings against them.
Distancing his firm from the leaks, KPMG chief executive Trevor Hoole said on Monday its report had clearly explained the “limitations imposed on our assignment”.
All of this leaves the public with more questions than answers and no way of determining who is telling the truth.
On the one hand, there is the claim that Sars spied on taxpayers and bugged their communications outside of the law.
If correct, this could place in jeopardy any judgments in favour of Sars based on the fruits of such unlawful investigations.
On the other, is the claim shady elements in the state intelligence structures and criminal underworld have succeeded in dealing the revenue service a mortal blow by planting damaging stories in the media with the help of senior Sars officials.
Neither version would allow citizens to sleep peacefully.
Now Gordhan is in the tricky position of having to repair the damage to the reputation of Sars despite having been drawn into the scandal himself. Another internal investigation, or one commissioned by him, would lack the independence required to avoid concerns of a potential whitewash.
Meanwhile, Pillay and Van Loggerenberg have called, through their attorney, for a judicial commission of inquiry - a recommendation also made by the Sikhakhane panel.
But only the president has the power to appoint such a commission and if he chooses not to, Gordhan will be left with the bucket of soiled milk. Extracting the excrement will be a fraught task, but it will have to be done.
Saturday Argus