COMMISSION OF INQUIRY INTO TAX ADMINISTRATION AND GOVERNANCE BY SARS
The previous part of the Nugent Commission report can be found here.
CHAPTER 20: A MASSIVE FAILURE OF GOVERNANCE – NEVER AGAIN
 There can be little doubt that the catastrophe at SARS is attributable to a massive failure of elementary principles of governance coupled with pervasive breaches of integrity. It follows that the prevention of a recurrence requires a relook at the relevant legislative provisions relating to the governance at SARS.
 The importance of effective governance at SARS cannot be overstated. It is an essential pillar for the effective and efficient operations of SARS. It’s impact is felt in the overall performance of SARS, including, most importantly, in revenue collection. It also impacts on the budgetary process of SARS as an institution and indeed of the nation. Taxpayer morality is also materially affected by these considerations.
 Elsewhere in this Report attention is drawn to facts which manifest a failure of governance at SARS. The purpose of this Chapter is to analyse the legislative and other actions to be taken to enhance and improve governance at SARS.
 The factors referred to in paragraphs , , , and  below have been identified as being of importance by the OECD in its publication entitled “Tax Administration 2018 – Comparative Information on OECD And Other Advanced and Emerging Economies”. In addition, Mr Pascal Saint-Amans, The Director for The Centre For Tax Policy And Administration at the Organization For Economic Co-Operation And Development (“OECD”) provided most useful input to the Commission on the administration of tax collecting institutions. Mr Saint-Amans has also drawn attention to Chapter 3 of the OECD Tax Administration Series 2017 (based on 2015 data) which sets out some of the different institutional arrangements involving tax administration of countries that are members of the OECD Forum on Tax Administration (“FTA”). The most common institutional models and arrangements are included in those set out in paragraphs , , , and  hereunder.
 The most common institutional models are :-
1. A unified semi-autonomous body. There are two main forms. First, where the tax administration and support functions are the responsibility of a Commissioner or Director General who reports to a Government minister (24 FTA members). Second, where the Commissioner or Director General reports to a Board (10 FTA members). No such Boards appear to have a role in exercising any statutory tax powers nor do they have access to taxpayer specific information.
2. A single directorate or unit within the Ministry of Finance or its equivalent reporting through the Finance Ministry structure (around 13 FTA members).
 Some of the other more material aspects relating to governance of tax administrations to which Mr Saint-Amans draws attention are the following:
1. the Head of State will often have the authority to both appoint and dismiss the Commissioner with various levels of consultation and liaison with senior officials and Ministers of Finance. In many cases, appointments of Commissioners are made on a fixed term basis. Provisions for removal are not usually statutory but more commonly provided for in the terms of the Commissioners’ contracts, including performance requirements. (These may or may not be public.);
2. administrations generally have robust internal controls built into their IT framework to detect and prevent internal fraud, as well as internal audit functions. There are clear HR policies to deal with employee misconduct. (All FTA members have formal internal assurance mechanisms; 48 FTA members have a public service wide code of conduct; and 45 have their own code of conduct);
3. most administrations are subject to a degree of oversight by a public accounts committee (or equivalent) that assesses their results and a budgetary review process that monitors their spending. (49 FTA members have an external auditor.) Results are typically reviewed and verified by a national audit function. Parliamentary committees will also usually have the capacity to review performance against output metrics, as well as more strategic goals.
 The common oversight features of members of The Forum Of Tax Administration of the OECD include the following :-
1. government oversight of the budgetary approval and review process;
2. annual report audited by an independent national audit function. (Almost all FTA members publish an annual report; and 49 have an external auditor);
3. internal accountability and control frameworks with automatic checks to prevent internal fraud;
4. periodic assessments against agreed metrics (e.g. revenue raised, debt levels, number of compliance interventions, customer service levels). (46 FTA members prepare a formal set of service delivery standards; 43 make the set of delivery standards public; 31 publish results;
5. an agreed set of strategic goals and objectives to guide their performance. High level outcome measures and indicators used by revenue bodies generally encompass the following:-
5.1 taxpayers’ satisfaction with the services provided and overall perceptions of the tax administration’s competence as an efficient, fair and effective;
5.2 taxpayers’ compliance;
5.3 taxpayer service delivery, including the use of modern electronic services;
5.4 organisational efficiency; and
5.5 employee engagement and satisfaction.
5.6 The presence of a Board or Executive Committee to review, assess, and challenge strategic direction; and
5.7 independent risk assessment of the accountability and control framework, including both performance and financial reporting, systems of risk oversight and management and system of internal control. (All FTA members have formal internal assurance mechanisms).
 In addition to the aforegoing, Mr Saint-Amans draws attention to the following features of core elements of tax governance of countries that are members of the Forum of Tax Administration of the OECD :-
Appointment and removal of the Commissioner
1. Appointment of the Commissioner is usually a political decision made by relevant Ministers (or Heads of the Executive branch or Heads of State). In some cases there are specific legal limitations to removing a Commissioner from office (such as incapacity to serve or misconduct), while in other cases grounds for dismissal may be set out in the terms of appointment or there may be no limitation (other than judicial review).
2. The integrity of those taking the decisions in most countries and the various checks and balances to ensure that the process is fully fair and transparent is sufficient in most cases to ensure proper outcomes regarding the appointment and removal of Commissioners. Where there is less confidence in the continuing robustness of those checks and balances, jurisdictions may wish to consider the introduction of legal safeguards and robust independent processes governing the appointment and dismissal of Commissioners.
Powers of the Commissioner and accountability
3. Commissioners in a number of countries have extensive powers provided in law or delegated from a Minister to oversee the organisation and day- to-day management of the tax administration. Powers may also be delegated to make certain types of statutory instrument (although not the creation of new taxes).
4. In practice, Commissioners operate through delegating their functions to Deputy Commissioners, senior officials and senior committees. This usually includes decision making as regards strategic direction and the operation of cross cutting functions.
5. The decision making structure for the organisation:-
5.1 can be set out in legislation to a greater or lesser degree; and/or;
5.2 can be set out in policy documents or Memorandums of Understanding which may require, for example, the approval of a Minister, Parliament, or an administration’s Board.
6. Ministerial powers as regards tax administration are often limited by legislation or case law. These limitations will generally be around Ministerial involvement in individual taxpayer assessments. In some cases Ministers will be able to exercise powers where the tax administration is not meeting its objectives or impacting adversely on the public good. These may either be powers to direct the Commissioner or powers to suspend or remove the Commissioner.
There can be a tension here between sufficient powers being available in case the Commissioner is not fulfilling his duties properly and limitations on those powers to ensure that there is no adverse political influence on the administration of tax. Having limitations on the use of Ministerial powers set out in legislation or in a Memorandum of Understanding and/or having external scrutiny of decisions (for example through Parliamentary committees or the judiciary) can provide an extra layer of protection in appropriate circumstances.
Separation of functions: Ministry of Finance and Parliament
7. Functions are usually separated along the following lines :-
tax policy and draft legislation – the Ministry of Finance;
passage of legislation and a range of oversight functions –
administration of tax law, usually with some informal function in advising on tax policy – the tax administration.
8. This division appears to be followed in most countries. The main differences will be in the nature of oversight by the Ministry of Finance and Parliament of the tax administration. This is usually multi-layered with a number of different independent and non-statutory bodies looking at different elements of administration, including budget, value for money, propriety and efficiency. In some cases, this includes an independent statutory agency tasked with identifying possible issues in tax administration separate to tax policy, and reporting to Government with recommendations for improvements. This level of external scrutiny is an important part of the checks and balances ensuring fair, stable and well- run tax administration.
Role and appointment of Boards
9. In the 2017 OECD Tax Administration Series (TAS) publication it was reported that 10 tax administrations operate with a Board, half with a decision-making Board and half with an advisory board.
10. Where there are issues around credibility and confidence in the tax administration, this kind of external governance arrangement may play an important role. In the TAS, tax administrations reported that such bodies :
execute general oversight;
play a role in strategy development and planning;
comment and provide advice on major operational policy reviews; and are involved in the sign-off of formal budgets and business plans.
11. There does not appear to be any consensus on the size of boards but most jurisdictions reported that they usually consist of both Ministry and tax administration officials which public boards include external representatives from various sectors. In some administrations Board decisions are made public.
12. While tax administration functions and duties are set out in legislation, tax administrations will generally set out their objectives for the year ahead (or for a longer period). This will often be agreed by the Ministry of Finance and reported to Parliament and the general public.
13. Many administrations have compulsory ethics training for all employees and require staff to sign an ethics declaration, the breach of which can lead to disciplinary action and dismissal.
14. It is also common practice for senior employees and those in positions of influence (typically those making procurement decisions) to have to make an annual declaration of any interests outside of the tax administration, and to notify their employer of any potential conflicts of interest.
 Prior to dealing with these issues it is appropriate to deal with:-
1. certain background materials including –
the approach of the Katz Commission; and the approach of the Davis Tax Committee;
2. the existing legislative provisions relating to – the structure of SARS; and
the appointment and removal of the Commissioner.
 For the purposes of dealing with these issues the Commission has received valuable submissions, including most importantly from :-
1. the National Treasury through its Deputy Director-General Mr Ismail Momoniat;
2. the Davis Committee through its Chairman Judge Dennis Davis; and
3. the Acting Commissioner Mr Mark Kingon.
 The Commission is of the fervent view that no provisions relating to the governance of SARS should be considered, let alone adopted, which could have the impact of infringing on the autonomy of SARS. It is a non-negotiable proposition that SARS’ autonomy is sacrosanct. This truism was identified as such by the Katz Commission in its First Interim Report (November 1994).
 The sacrosanctity of autonomy at SARS must, however, be reconciled with the reality that the national budget and tax policy is the responsibility of executive government and the management of the country’s finances vests in the Ministry of Finance.
The Approach of the Katz Commission to the Optimum SARS Model
 In Chapter 3 of the Interim Report of the Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa the approach to the modernization of tax administration is fully reasoned. It also draws on comparative literature in other countries including developed and developing.
 The Katz Commission refers at length to the works of Glenn P Jenkins “Modernisation of Tax Administrations: Revenue Boards and Privatisation as Instruments for Change”, in the Bulletin for International Fiscal Documentation, February 1994 : 75-81.
 The fundamental pillar of the Katz Commission recommendations is autonomy and independence for tax administrations. This is reflected in paragraph 3.13.5 of the Katz Commission Report, which reads as follows :-
“3.13.5 Modernisation of tax administration to give effect, inter alia, to the needs for institutional autonomy and a professional personnel corps, requires legal, administrative and organisational reforms which take account of local circumstances. The Commission does not view its task as encompassing detailed proposals on appropriate institutional reforms. The Commission recommends, however, that the following broad principles should inform Government’s restructuring of tax administration in South Africa :
(a) independence of the revenues authorities, including responsibility for their own budgetary allocation and control, administrative policies and objectives, and recruitment, training, remuneration and codes of conduct for personnel;
(b) oversight by statutory boards responsible for Inland Revenue and Customs and Excise, appointed by and answerable to Parliament through the Minister of Finance;
(c) Maintenance of unified Inland Revenue and Customs and Excises departments, with responsibility both to the national and provincial governments for all aspects of tax collection; and
(d) contracting out, where appropriate, of certain administrative functions, such as computer services, warehousing of documentation and customs merchandise, printing and distribution of tax returns and notices, preparation of tax manuals and documentation and collection of minor taxes.”
 The Katz Commission also heavily focused on Jenkins’ submissions in support of autonomy of the tax administration and professionalism in tax administration. Paragraph 3.14.4 of the Katz Commission Report reads as follows –
“13.4.4 An important outcome of administrative reforms in the UK Revenue has been the virtual elimination of late assessments, both of individuals and of companies. Targets are set for processing and recovery work and provide benchmarks against which performance is assessed within divisions and across tax offices. Progress in eliminating backlogs has enabled the Revenue to move on to targeted improvements in customer service and cost efficiency of operations. A deliberate policy of caring for staff through attention to working conditions, training, health screening, equal opportunities promotion and pay and performance management, amongst other measures, has contributed to the reduction in the staff resignation rate from over 6
percent in 1988 to just 2 percent per year in 1993.”
The Approach of the Davis Tax Commission to the Optimum SARS Model
 On 29 July 2016 the Davis Tax Commission the (“Davis Committee”) received certain additional terms including “to enquire whether the governance and accountability model for SARS as set out in the Report of the Katz Commission of Inquiry remains appropriate for South Africa in 2016 and make proposals on an appropriate governance and accountability model.
 On 12 October 2017 the Davis Committee presented a Report on various aspects of tax administration to the Minister of Finance.
 In response to the additional terms of reference referred to in paragraph  above the Davis Committee endorsed the Katz Commission’s recommendations regarding the autonomy and independence of the Revenue Authorities and the approach of the Katz Commission to the structural independence of SARS.
 As regards the appointment of the Commissioner the Davis Committee recommended that :-
1. the Commissioner should be appointed in a manner similar to the appointment of the Public Protector;
2. alternatively, that the Commissioner be appointed by the Minister of Finance. In this regard paragraph 39 of the Davis Committee Report on Tax Administration reads as follows :-
“39 An alternative proposal would be to revert to the position which followed the Katz Commission’s recommendations, namely that the appointment of the Commissioner of Inland Revenue is made by the Minister of Finance. There is adequate justification for this proposal. As noted, the Minister of Finance is constitutionally responsible for the preparation and the presentation of the budget. It is unclear whether the Minister plays any legal role in the accountability of SARS to its mandate, which mandate is critical to the success of any money bill as well as the Budget. It is the Minister who must take responsibility for the performance of government in circumstances where he may be powerless to deal with an obvious problem of tax collection/integrity. A system where the Commissioner operates outside the strictures of the Minister and indeed Cabinet and is only answerable directly to the President is not conducive to a responsive and accountable SARS. This second proposal could be modified to promote a further layer of accountability. The appointment by the Minister of Finance can be made subject to recommendations made by an advisory board. In this connection, the composition of which is described below.”
 The Davis Committee also recommended the creation of a board which would supervise the operation of SARS with the clear objective of promoting the integrity of its conduct as well as to ensure that it implements systems to collect revenue as fairly and efficiently as possible. In this regard paragraph 40 of the Davis Committee’s aforesaid Report reads as follows :-
“40 The Committee strongly recommends the creation of a Board which would supervise the operation of SARS with the clear objective of promoting the integrity of its conduct as well as to ensure that it implement systems to collect revenue as fairly and efficiently as possible. The Board should be constituted by the Minister of Finance and, save for the Commissioner, or his/her delegee, the Deputy Commissioner and the Director General of Finance or his/her delegee, it should be comprised of members who are attached neither to Treasury nor SARS and who may be appointed by the Minister with due regard to representativity, expertise in finance and taxation and the general economy. It could be chaired by a retired judge. The board could be provided with sufficiently strong powers of investigation so that it may be empowered to make meaningful recommendations to the Minister with regard to the question of accountability of SARS and to its compliance with its statutory obligations and own strategic vision and mandate. As recommended, the Board could be mandated to provide the Minister with a shortlist of candidates for the office of Commissioner, from whom the Minister is obliged to choose.”
The Existing Legislative Structure of SARS
 The South African Revenue Service is established as an organ of state within the public administration but as an institution outside the public service, the objective of which is the efficient and effective collection of revenue4.
 Section 4 (1) of the SARS Act clearly states that, to achieve its objective, SARS must :-
1. secure the efficient and effective, and widest possible, enforcement of –
the national legislation listed in schedule 1;
any other legislation concerning the collection of revenue or the control over the import, export, manufacture, movement, storage or use of certain goods that may be assigned to SARS in terms of either legislation or an agreement between SARS and the organ of state or institution concerned;
2. advise the Minister at the Minister’s request on – all matters concerning revenue; and the exercise of any power or the performance of any function assigned to the Minister or any other functionary in the national executive in terms of legislation referred to in paragraph ;
3. SARS must perform its functions in the most cost-effective and efficient manner and in accordance with the values and principles mentioned in section 195 of the Constitution.
[4 Refer to paragraphs 37-40 on pages 17-19 of the Davis Tax Committee Report: September 2017]
The Existing Legislative Provisions Relating to the Appointment and Removal of The Commissioner
 Section 6 of the SARS Act clearly states that the President must appoint the Commissioner, (my emphasis). Accordingly, only the President can remove him from office. Prior to the amendment of the SARS Act, 1997, the Commissioner for SARS was appointed by the Minister of Finance5.
 Section 9 of the SARS Act sets out the Commissioner’s responsibilities as follows :-
“9(1) The Commissioner -
(a) is responsible for the performance by SARS of its functions;
(b) takes all decisions in the exercise by SARS of its powers;
(c) performs any functions and exercises any power assigned to him in terms of any legislation and agreement referred to in section 4(1) (a).
2) As the Chief executive officer, he is responsible for the formation and development of an efficient administration, the organisation and control of staff, the maintenance of discipline; and the effective deployment and utilisation of staff to achieve maximum operational results6.
3) As accounting officer, he is responsible for all income and expenditure for SARS, all revenue collected by SARS, all assets and the discharge of all liabilities of SARS, and the proper and due diligent implementation of the Public Finance Management Act7.
4) The Commissioner must perform the functions of the office as required by this Act.”
[5 Refer to section 6(1) of the SARS Act, 1997
6 Refer to Section 9(2)(a-d) of the Act, 2002]
The Existing Legislative Provisions Relating to the Powers of the Minister of Finance
 In terms of section 7(1), the Minister may designate another SARS employee to act as Commissioner for SARS when the Commissioner is absent or unable to perform his functions of office.
 “(2) The specialist committee responsible for human resources must advise -
(a) the Minister on matters concerning the terms and conditions of employment of any class of employees in the management structure of SARS, as agreed between the Minister and the Commissioner, and
(b) the Commissioner on matters concerning the terms and conditions of employment of all employees of SARS, other than employees contemplated in paragraph (a).”
The Minister may also appoint one or more specialist committees to advise the Commissioner and the Minister on any matter concerning the management of SARS resources, including asset management, human resources and information technology, subject to subsection (2)8.
[7 Refer to Section 9(3)(a-d) of the Act, 2002
8 Refer to Section 11(1) of the Act]
 With regard to employees, the Minister must approve the terms and conditions of employment for any class of employees in the management structure of SARS9.
 While there may have been a rationale for the amendments to the SARS Act, the Commission is of the view that the amendments were made prematurely. The country had just attained its freedom and the Government of national unity was still at its infancy and seemed to be working well. There was mutual cooperation and understanding between the Minister of Finance and the previous Commissioners for SARS up until September 2014. Although the previous Commissioners for SARS were appointed by the President, in terms of the SARS Act, 2002, they fully appreciated the important role which was played by the Finance Ministry in assisting SARS to achieve its objectives thus ensuring that the Finance Ministry also achieves its fiscal objectives10.
 Chapter 3 of the Constitution clearly sets out the principles of cooperative government which is critical if the different spheres of government are to succeed. If SARS and the Finance Ministry had continued to apply these principles, the Commission believes that a number of the unfortunate events and reputational damage which took place at SARS between 2014 and March 2018, which did serious damage to the organisation may not have occurred.
 The Act, in its current form, creates an anomaly in that the appointment of the Commissioner by the President, who is far removed from the day to day operations at SARS and who is not ultimately responsible for tax policies, preparation and presentation of the budget and ensuring that the Government has sufficient money to spend on its programmes is not practical. This cannot be achieved without a real level of accountability by the Commissioner for SARS to the Minister of Finance.
[9 Refer to Section 18(3) of the SARS Act
10 It should be observed that the previous Minister of Finance, Mr Gordhan was appointed by the Minister of Finance in terms of the SARS Act, 1997. However, Commissioner Magashula was appointed by the President in terms of the SARS Act, 2002. The appointment process leading to his appointment was undertaken by the Minister of Finance. This was not the case with Commissioner Moyane as to the level of accountability by the Commissioner to the Minister are set out hereunder.]
Suggestions Made In Respect Of The Possible Appointment Of An Oversight Board
 As mentioned there are a number of foreign jurisdictions that employ an oversight board of independent outsiders as a mechanism for enhancing governance at their tax collecting institutions. This idea of an oversight board was also mentioned in evidence to the Commission as a possible instrument to enhance governance.
 The Commission is not persuaded that an oversight board is indeed a useful instrument. It has a number of serious deficiencies stemming primarily from the fact that SARS does fundamentally, in its structure, purpose and function differ from the conventional company in the private sector. Thus, the analogy of the role and usefulness of a private sector company board, with independent non-executive directors, does not provide a useful point of departure.
 The board of a private sector company has a familiarity with the purpose, function, structure and activities of the company. As such they can provide a useful oversight function over the company’s senior executives. This cannot in reality happen in the case of a board of oversight of SARS where the directors who would populate such board neither have a grasp of the true purpose and functions of SARS nor its crucial involvement as part of the management of the country’s finances. There could also be unintended involvement in tax policy or indeed taxpayer affairs both of which would be highly undesirable.
 In another context in evidence before the Commission the reality of the difference between SARS and a conventional private sector company was forcefully driven home. One of the consultants employed by SARS criticised certain investment decisions of SARS as part of its modernization programme on the basis that such investment did not provide an appropriate return on capital. The response to this is that the criticism of the consultants may or may not have been correct if the sole basis for assessing the investment decision of SARS is whether it meets the conventional criteria in relation to its impact on SARS. However, when it comes to judging the investment decisions of SARS they are required not only to meet the narrow test of their impact on SARS but also the broader test of their impact on the economy. Steps taken, for example, to ease the completion of tax returns or determining whether VAT refunds are due, assist the entire economy and will thus have the added benefit of expanding the tax base.
 Most importantly a board with independent outsiders would not have had the skill, ability or access to have detected and help prevent the serious governance failures that had occurred at SARS. More about this appears in the provisions of this Report which deal with the Appointment of An Inspector General. In this regard the poor performance of the so called Kroon Advisory Board is simply an illustration which supports the Commission’s reticence about the value of boards in enhancing governance at SARS.
 As appears elsewhere in this Report certain enhancements of governance at SARS should more appropriately be provided by :-
1. the Minister of Finance, in certain instances; and
2. the Inspector General, in other respects.
The Office Of The Tax Ombud
 Insofar as concerns the office of the Tax Ombud the Commission has full admiration for the valuable role played by the Tax Ombud. However, its mandate is at present confined broadly to addressing taxpayer rights. The Commission is of the view that this is the appropriate role for the Tax Ombud and that it should not be involved in governance at SARS.
Proposals For The Enhancement of Governance At SARS By The Granting Of Powers To The Minister of Finance
 The participation by the Minister of Finance in certain aspects of the governance of SARS is a reality that must not be viewed as a detraction from the autonomy of SARS. As has already been observed the national budget and tax policy is the responsibility of executive government and the management of the country’s finances vests in the Ministry of Finance. Having regard to this reality it is the Commission’s recommendation that various amendments should be made to the SARS Act to give additional powers to the Minister of Finance. These suggestions would include those set out hereunder.
 First we deal with the appointment of the Commissioner. At present that power of appointment of the Commissioner vests in the President. There are differing views as to whether that power should continue to vest in the President or whether it should be moved to the Minister of Finance. In a sense it might be said to make no difference, since the Minister himself is an appointee of the President. Our view is that the Commissioner of SARS should be appointed by President, after consultation with the Minister of Finance, according to a transparent process. The process should be along the following lines :-
1. the President should of his own volition select, or upon nominations, select a candidate or candidates for appointment;
2. following the selection by the President of the candidate or candidates it should be followed by an open and transparent process for the purposes of providing input to the President, or the Minister, as to the suitability for office of the candidate. This process should be apolitical and the persons providing the input should be selected on their personal merits including impeccable reputation and probity, and not on the basis of being a representative of any organisation;
3. the candidate or candidates of the choice of the President or Minister, as the case may be, should be subjected to interview by an apolitical panel comprising persons of high standing who inspire confidence across the tax-paying spectrum;
4. there should be criteria against which to evaluate the attributes of the candidate or candidates and the members of the panel;
5. as regards the suitability of the persons to be considered as candidates for appointment as Commissioner the criteria against which the candidate or candidates should be evaluated for suitability should be :-
first and foremost, he or she must be, and must be reputed to be, of unblemished integrity;
he or she must have proven experience of managing a large organization at a high level; and
he or she must not be aligned to any constituency, and if so aligned, he or she must renounce that alliance upon appointment.
6. once a candidate is appointed the recommendations of the panel should be made public.
 Secondly, we deal with the power of removal of the Commissioner. The legislation should, for the aforegoing reasons, vest such power in the President. Such power should only be capable of being exercised on grounds specified in the legislation and in accordance with a process also specified in the legislation. In formulating such legislation dealing with the grounds and process for the removal of the Commissioner care should be taken to achieve the correct balance between upholding the autonomy of SARS and the ability to remove an incumbent Commissioner whose continuing incumbency undermines the efficiency and efficacy of SARS and thus the country. There should also be a power of suspension to be exercised by the Minister in appropriate circumstances pending the process of removal.
 Thirdly, as regards the appointment of the Executive Committee (“EXCO”) it is appropriate that the Commissioner should determine the composition of his own EXCO and select the persons who will hold the posts on EXCO. This accords with the general practice in private sector companies. However, an EXCO should be mandatory, and the Deputy Commissioner should be required to be a member of EXCO.
 Fourthly, the determination of the remuneration of the Commissioner and his EXCO should, to the extent that there is any doubt in the existing legislation, make clear that the prior approval of the Minister is a requirement. This is in recognition of the basic principle that a serious conflict of interest exists in the Commissioner, either on his own, or with his EXCO colleagues, determining the remuneration of all or any of them.
 Fifthly, the formulation by the Commissioner of the business plan for SARS should require the approval of the Minister. Similarly, any variation of the approved business plan should require the Minister’s approval.
Proposals For The Enhancement Of Governance At SARS By The Appointment Of An Inspector General
 It is the strong view of the Commission that a fundamentally important part in the enhancement of governance at SARS will be achieved by the appointment of an Inspector General (“IG”) having the responsibilities and powers as set out hereunder. This role properly performed, had it been in place during Mr Monyane’s incumbency, would in all probability have prevented much of the damage and destruction which the Commission has outlined in its interim report.
 The SARS Act should be amended to make provision for the appointment, for a specified period, of an IG along the following lines:-
1. the appointment should be made by the Minister of Finance in accordance with an open and transparent process;
2. the proposed appointee should be required to pass the test of being fit and proper and should have the following qualifications:
a good stature and reputation, preferably a retired judge or senior legal practitioner;
a good knowledge of legal principles and processes; the requisite experience in administrative issues; and
3. the IG should have wide powers to perform the functions envisioned hereunder.
 It is contemplated that the IG would, on a routine basis, conduct enquiries from time to time at all levels of SARS. Such enquiries would ordinarily include conducting interviews with executives and employees to enable the IG to determine the general state of health of SARS and to uncover any particular event, action, or state of affairs that comes to the attention of the IG.
 In addition to the conducting of enquiries on a routine, or ad hoc basis, as initiated by the IG, the IG should also be available to be interviewed by persons inside SARS or outside of SARS, being either individuals or representative bodies such as the Institute of Chartered Accountants. This access to the IG by outsiders should help uncover any malaise that exists at SARS which insiders at SARS might otherwise have closed ranks and suppressed.
 The IG would enjoy powers to perform the functions contemplated above including access to documents and the power of subpoena. Naturally provision would be made to protect taxpayer confidentiality.
 If the IG discovers or uncovers areas of concern the IG would raise these concerns in the first place with the Commissioner. If the Commissioner does not adequately satisfy the IG’s concerns the IG would have the power to escalate the matter to the Minister of Finance. If the Minister of Finance is implicated then the IG must have the power to escalate the matter to the President and if necessary to Parliament.
 The aforegoing must not be regarded as being exhaustive. The proposed legislation suggested by the Commission will take cognizance of the Commission’s objectives as described herein.
Proposals Relating To The Appointment Of A Deputy Commissioner
 It is the considered view of the Commission that it would be advantageous for the SARS Act to be amended to make provision for the appointment of a Deputy Commissioner.
 The process for the appointment and removal of a Deputy Commissioner would be broadly the same as that applicable in the case of the Commissioner.
 The Deputy Commissioner would be a member of EXCO but there would not be a reporting line by any executives to the Deputy Commissioner. The Commissioner would ordinarily delegate functions to the Deputy Commissioner.
 The main advantage of having a Deputy Commissioner is to provide continuity in the event that the Commissioner is unable due to incapacitation or any other reason to perform the functions of the Commissioner. Also, in the event that the Commissioner’s appointment ceases for any reason and a replacement becomes necessary the Deputy Commissioner would be a strong candidate, although not automatic, for the position of Commissioner. This would best achieve continuity and the preservation of institutional knowledge. In addition in certain of the cases where tax legislation confers a discretion in favour of the Commissioner, the involvement of the Deputy Commissioner may be a useful safeguard to ensure the optimum exercise of the Commissioner’s discretion. Another advantage of having a Deputy Commissioner is that it will provide a further filter against the unfettered exercise of power by the Commissioner. The presence of a person of stature on EXCO who cannot be unilaterally dismissed by the Commissioner could temper injudicious, and otherwise unchallenged, conduct by the Commissioner. It is not contemplated that the Deputy Commissioner would strengthen governance in those areas where the enhancement of governance will be the responsibility of the Minister of Finance or IG as outlined elsewhere in this Report.
1. Chapter 3 : The Seizing of SARS
1.1 In paragraph  it is recommended that National Treasury should review the procurement process where multiple contracts are envisaged for a project to prevent the abuse arising from ‘loss leaders’ at the outset.
1.2 In paragraph  it is recommended that the National Director of Public Prosecutions should consider prosecutions in connection with the award of the Bain & Co. contracts.
2. Chapter 4 : The Fabric of the SARS Restructuring
2.1 In paragraph  it is recommended that the Large Business Centre be re- established.
2.2 In paragraph  it is recommended that the Compliance Unit be re-established, and that a high-level Integrity Unit be established.
3. Chapter 5 : Information Technology and the Gartner Contracts
3.1 In paragraph  it is recommended that the new Commissioner of SARS recruit one or more suitably qualified persons from within or outside SARS to be placed in a position to take control of SARS information technology and to develop and implement a strategy to renew development of information technology.
3.2 In paragraph  it is recommended that SARS considers commencing proceedings to set aside the contracts and to recover expenditure incurred that added no value to SARS.
4. Chapter 6 : Resignation of Senior Employees
In paragraph  it is recommended that the new Commissioner of SARS evaluates employees in supernumerary posts and considers their placement in positions in which they are able to add most value to SARS. It is recommended as well that posts in the establishment be evaluated and, where appropriate, active steps be taken to recruit former employees to those posts. It is further recommended that SARS consider possibilities for reparation though not necessarily in pecuniary terms.
5. Chapter 7: The New EXCO
5.1 In paragraph  it is recommended, albeit that it is an operational matter, that the new Commissioner of SARS conduct a performance review of EXCO members appointed by Mr Moyane, taking account of their capacity for senior management, their appreciation of good governance, and their capacity for inspiring public confidence in the integrity of SARS, bearing in mind the matters dealt with in this report.
5.2 In paragraph  it is recommended that the remuneration and benefits of EXCO members who were appointed without ministerial approval of their terms of appointment be reviewed, and be referred to the Minister of Finance to consider whether to grant approval, and that the benefits accorded to members of EXCO be reviewed.
6. Chapter 8 : The Anti - Corruption and Security Unit and Related Events
In paragraph  it is recommended that SARS re-establish capacity to monitor and investigate the illicit trades, in particular the trade in cigarettes, within appropriate governance structures.
7. Chapter 10 : VAT refunds
In paragraph  it is recommended that SARS urgently undertakes an operational investigation for the purpose of correcting systemic obstacles preventing the prompt refunding of VAT that is due.
8. Chapter 11: Litigation
In paragraph  it is recommended that SARS takes steps to recover from the former Commissioner legal costs and expense incurred by SARS for litigation commenced and instructions given as set out in that chapter.
9. Chapter 12: Settlements
In paragraph  it is recommended that the terms of reference of bodies authorised to settle claims be reviewed to ensure and, if necessary, strengthen governance mechanisms.
10. Chapter 13 : Bonuses
In paragraph  it is recommended that section 18(3) of the South African Revenue Service Act be amended to clarify that the terms and conditions of employment of employees in the senior management structures of SARS include remuneration, bonuses, and all other benefits of their employment, and alterations to those terms of employment.
11. Chapter 14 : Taxpayer Affairs
In paragraph  it is recommended that the case selection and audit protocols be reviewed to consider further protocols to ensure proper investigation of tax returns with reference to the ostensible assets of the taxpayer concerned, and that the key performance indicators be reviewed to facilitate such investigations.
12. Chapter 16 : Debt Collection Contracts
In paragraph  it is recommended that debt collection contracts be reviewed, and that the use of debt collection services be reviewed to determine whether they add sufficient value to SARS.
13. Chapter 17: Media Statements
In paragraph  it is recommended that disciplinary action be considered against any executive for publishing the media statements referred to in this paragraph. It is further recommended that any such executive be deprived of any authority he or she might have to speak on behalf of SARS without the approval of the Commissioner.
14. Chapter 18: SARS and Other State Institutions
In paragraph  it is recommended that SARS take steps to restore the cordial relations that formerly existed with other state institutions including the National Prosecuting Authority, the Financial Intelligence Centre, the Auditor-General and the National Treasury, and develop protocols for interaction with the National Treasury.
15.Chapter 19: International Relations
In paragraph  it is recommended that steps be taken to restore cordial relations with the OECD.
16.Chapter 20: A Massive Failure of Integrity and Governance – Never Again.
16.1 In paragraph  it is stated that a board is not a useful instrument and should not be adopted.
16.2 In paragraph  it is recommended that the appropriate role for the Office of the Tax Ombud should remain the addressing of taxpayer rights and that it should not be involved in governance at SARS.
16.3 In paragraph  it is recommended that the SARS Act be amended to provide for the appointment of the Commissioner of SARS by the President, after consultation with the Minister of Finance, in accordance with a transparent process, which it is recommended should be along the following lines:
16.3.1 The President should, of his own volition, or after a call for nominations, at his discretion, select one or more suitable candidates for appointment.
16.3.2 The candidate or candidates should
22.214.171.124 be, and be reputed to be, of unblemished integrity;
126.96.36.199 have proven experience of managing a large organization at a high level;
188.8.131.52 not be aligned to any constituency, and if so aligned, should renounce that alliance upon appointment.
16.3.3 The candidate or candidates for appointment should submit to a private interview by a panel of four or more members selected by the President. The function of the panel is to evaluate the candidate or candidates against the criteria above and make motivated non-prescriptive recommendations to the President.
16.3.4 Members of the panel should be apolitical and not answerable to any constituency, and should be persons of high standing who are able to inspire confidence across the tax-paying spectrum.
16.3.5 The panel must, upon its evaluation, make motivated non-prescriptive recommendations to the President on the suitability or otherwise for appointment of the candidate or candidates. If the recommendation is against the appointment of a particular candidate, it is the prerogative of the President to reject the recommendation and appoint the candidate nonetheless, or to select an alternative candidate or candidates to repeat the process.
16.3.6 Upon appointment of a candidate, the recommendations of the panel, in whichever direction, should be made public.
16.4 In paragraph  it is recommended that provision should be made in the SARS Act for the removal of the Commissioner of SARS by the President on specified grounds, through a process that is transparent. In formulating the grounds for removal care should be taken to achieve the correct balance between upholding the autonomy of SARS and the ability to remove an incumbent Commissioner whose continuing incumbency undermines the efficiency and efficacy of SARS and thus the country. Provision should also be made for the suspension of the Commissioner pending proceedings for removal.
16.5 In paragraph  it is recommended that the SARS Act be amended to require the Commissioner of SARS to appoint an advisory Executive Committee that must include the Deputy Commissioner.
16.6 In paragraph  it is recommended that the SARS Act be amended to require an annual business plan to be prepared by SARS and approved by the Minister of Finance and that any amendments thereto also require the approval of the Minister.
16.7 In paragraph  it is recommended that the SARS Act be amended to make provision for the appointment of an Inspector-General of SARS, for renewable periods of five years, with powers comparable to those of a Commission of Inquiry, according to a process broadly similar to the process for the appointment of the Commissioner of SARS. The functions of the Inspector- General should be to investigate matters of governance, on his own account or on complaint, for the purpose of enabling corrective action to be taken. He or she should also be available to be interviewed by persons inside SARS or outside of SARS, being either individuals or representative bodies such as the Institute of Chartered Accountants.
16.8 In paragraph  it is recommended that provision be made in the SARS Act for the appointment of a Deputy Commissioner of SARS by the President, after consultation with the Minister of Finance, with no management line functions, according to a process that is broadly similar to the process for the appointment of the Commissioner, and for the removal of the Deputy Commissioner by the President on specified grounds, and in accordance with a transparent process.
The original PDF of the report + annexures can be found at the links below:
Issued by the Presidency, 14 December 2018