COMMISSION OF INQUIRY INTO TAX ADMINISTRATION AND GOVERNANCE BY SARS
HEREWITH THE FINAL REPORT OF THE COMMISSION OF INQUIRY.
JUDGE R NUGENT COMMISSIONER
DATE: 11 DECEMBER 2018
THE TERMS OF REFERENCE
COMMISSION’S PRIMARY CONCLUSIONS
PART I BACKGROUND
Chapter 1 Introduction
Chapter 2 The State of SARS Before and After Chapter 3 The Seizing of SARS
THE RESTRUCTURING OF SARS
Chapter 4 The Fabric of the SARS Restructuring
Chapter 5 Information Technology and the Gartner Contracts Chapter 6 The Resignation of Senior Employees.
Chapter 7 The New EXCO
Chapter 8 The Anti-Corruption Unit and Related Events
PART III SPECIFIC ISSUES
Chapter 9 Revenue Collection
Chapter 10 VAT Refunds
Chapter 11 Litigation
Chapter 12 Settlements
Chapter 13 Bonuses
Chapter 14 Taxpayer Affairs
Chapter 15 Reports of the Auditor-General Chapter 16 Debt Collection Contracts Chapter 17 Media Statements
Chapter 18 SARS and Other State Institutions Chapter 19 International Relations
PART IV REMEDIAL MEASURES
Chapter 20 A Massive Failure of Governance and Integrity – Never Again.
PART V RECOMMENDATIONS
THE TERMS OF REFERENCE
COMMISSION’S PRIMARY CONCLUSIONS
 The former Minister of Finance, Mr Gigaba, who first decided a commission of inquiry should be established in connection with SARS, gave evidence before the Commission. He said he had formed the view that an inquiry was required because the integrity of SARS was being questioned, domestically and abroad. He concluded that a process was needed to look into the affairs of SARS, from which recommendations could emerge addressing issues of governance and integrity that were of concern to investors, the rating agencies, the international financial institutions, and the taxpaying public.
 The preamble to the terms of reference (Appendix 1) affirms that purpose when it records that ‘reports in the public domain that potentially undermine taxpayer morality need to be assessed for their veracity, and possible corrective measures need to be implemented to maintain taxpayer morality and confidence’ and that ‘the public must have confidence that SARS is managed to the highest standard of ethics, integrity and efficiency’.
 The extensive terms of reference identify events that have been reported in the public domain that potentially have that effect. If those events have indeed occurred, they are manifestations of the erosion of integrity and governance at SARS. But inquiry into whether there are manifestations of a disease is only the entry point to diagnosing the disease. Once it has been diagnosed then in how many ways it has manifested itself becomes secondary.
 The conclusion we reach at the end of this inquiry is that there has been a massive failure of integrity and governance at SARS, and all else follows from that. What SARS was, and what it has become, is sufficient proof in itself that integrity and governance failed on a massive scale.
 I reported in my interim report that that was brought about by at least reckless mismanagement on the part of Mr Moyane. We have heard much evidence since then. What has become clear is that what occurred at SARS was inevitable the moment Mr Moyane set foot in SARS. He arrived without integrity and then dismantled the elements of governance one by one. This was more than mere mismanagement. It was seizing control of SARS as if it was his to have.
 There are many elements to good governance. Principally, in any organisation, it is the oversight role of senior management structures, that are able to put a brake on abuse of authority, but senior management was driven out or marginalised at SARS, and we have seen no evidence that senior management appointed by Mr Moyane was anything but compliant. In a tax collecting agency, oversight at every step in the tax collecting process is also vital, but the development of its sophisticated information technology, which has inbuilt checks, was summarily stopped, and the organisational structure of SARS, that provided oversight, was pulled apart. Dissent was stamped out by instilling distrust and fear. Accountability to other state authorities was defied. Capacity for investigating corruption was disabled. On the eve of his suspension Mr Moyane was about to dismantle governance over the settlement of major tax disputes.
 To report on each question posed by the extensive terms of reference in isolation would trivialise what has happened at SARS. I have reported instead in broader terms on what happened at SARS over the period under inquiry. Within that will be found as many answers to the questions posed by the terms of reference as we have found. But when integrity and governance has failed, as happened at SARS, it has probably manifested itself in many ways that are yet to be found.
 The hallmark of good governance in an institution is the existence of a culture of healthy dissent. Mr Moyane substituted instead a culture of fear and intimidation. What is most needed, and what is being looked for by employees at SARS, is an end to its present debilitating uncertainty, through a new Commissioner with integrity and managerial capacity, to restore that culture of healthy dissent.
CHAPTER 1: INTRODUCTION
THE ESTABLISHMENT OF THE COMMISSION
 The Commission of Inquiry into Tax Administration and Governance by the South African Revenue Service (SARS) was constituted on 24 May 2018 under Proclamation 17 of 2018, with Terms of Reference contained in the Schedule to the Proclamation. I was appointed Commissioner, and Mr Michael Katz, Mr Vuyo Kahla and Adv Mabongi Masilo were appointed to assist the Commission. Where the findings in this report are founded on evidence given at public hearings, which they attended, I use the plural, but some findings are founded on documents alone, to which they did not all have insight, in which cases I use the singular. Their knowledge and sound guidance and advice has been invaluable.
 The Commission is indebted to the acting Commissioner of SARS, Mr Mark Kingon, for affording resources to the Commission that enabled it to commence its inquiries without undue delay, and for the positive, and always responsive, contribution he has made to assisting the Commission.
 Premises leased by SARS, but separate from its own operational premises, were made available to us by the acting Commissioner at 2nd Floor Hilton House, Brooklyn Bridge, 570 Fehrsen Street, Pretoria. The Acting Commissioner also made available to the Commission the assistance of two senior legal officials, Dr Giorgio Radesich and Mr Wayne Broughton, to liaise between the Commission and SARS, a staff member to assist in its administration, Ms Beatrix de Villiers, and a staff member with knowledge of its information technology systems, Ms Carol van Wyk. Other personnel have assisted the Commission from time to time and, although not named, have not been overlooked. Ms Nonhlanhla Mkhwebane was seconded by the Department of Justice and Constitutional Development to act as Secretary to the Commission. They portrayed the exemplary dedication to public service we encountered amongst the numerous public officials we encountered in the course of the inquiry, and the Commission is deeply indebted to them all for their assistance.
 The Commission appointed as its counsel, to present and examine evidence, Adv Carol Steinberg, Adv Lunga Siyo and Adv Frances Hobden. The work assigned to them was demanding and pressured, at times they were subjected to invective, but all was weathered with equanimity. Their professionalism in every respect was in the best traditions of the Bar as I knew it.
THE NATURE OF THE INQUIRY
 Misconceptions that arise in relation to various aspects of a commission of inquiry have their source in likening it and its processes to those of a court of law. A commission of inquiry is not an adjudicative body. It is what the language conveys, which is a body conferred with authority to make inquiry, and then to report to the President what its inquiries have shown, and to inquire, in ordinary language, is to ‘search into, seek knowledge concerning, investigate, examine’. That means its process is proactively inquisitorial, in which the commission seeks out information for itself, unlike a court in adversarial litigation that is reactive to material others place before it.
 That a date is set for a commission to submit its final report, by which is meant its last report, does not mean it must await that date before making any findings or recommendations. It means only that that is the last date by which it must do so. If a commission is satisfied that it has inquired sufficiently to make its findings before that date, then so much the better. Nor must it report its findings and make its recommendations all at once. It is common for a commission of inquiry to submit interim reports and recommendations on discrete issues as the inquiry proceeds, if that is justified by the inquiries it has made at that point. An interim report, once more as the ordinary language conveys, is no more than a report made between two events, the first being the commencement of the inquiry, and the second being the submission of its last report. Similarly, a recommendation that is made at that point is no more than a recommendation that is made, in time, between those two events. It is no less definitive than if it had been made in the last report.
THE COURSE OF THE INQUIRY
 The work of a commission of inquiry does not commence when it holds its first public hearings. Indeed, depending upon the nature of the inquiry, there might not be any public hearings at all. Its work commences as soon as practicable after it has been established. In this case the Commission commenced its work by initiating its inquiries immediately it was appointed.
 SARS is a large and complex institution that is bewildering when it is first confronted. What was required at the outset was to become familiar with the structure and operation of SARS through explanation from those who are familiar with its complexities. I am grateful to those who, at the outset, patiently undertook the unenviable task of instructing me on the structure and operations of SARS.
 Interviews were also conducted with employees and former employees who could be expected to have information relevant to the inquiry, relevant documents were identified and scrutinised, institutions referred to in the terms of reference were consulted, and submissions were invited from employees and the public at large. The Commission’s inquiries have been directed primarily at operations at the Head Office of SARS, but limited interviews were also held at its branches in Cape Town and Durban.
 Submissions were invited from the public and from all employees of SARS, in confidence if need be. Submissions were invited direct from Business Unity South Africa, Black Management Forum, SA Institute of Chartered Accountants, Confederation of SA Trade Unions, SA Federation of Trade Unions, Black Business Council and the SA Institute of Tax Practitioners. Written and oral submissions were received from the SA Institute of Chartered Accountants, the SA Institute of Tax Practitioners, and the SA Association of Freight Forwarders, and further oral submissions were presented by the SA Professional Accountants Association, and the Fair Trade Independent Tobacco Association. Written submissions were received as well from other organisations and individuals.
 Submissions were required to be furnished no later than 31 August 2018. Some were furnished after that date but have nonetheless been taken account of in reaching our conclusions. It is not intended in this report to refer expressly to all the written submissions that were received, all of which have been scrutinised, nor to present all the oral evidence that has been heard. What is more informative than the detail of evidence in most cases is the weight of the evidence and on some issues its weight has been overwhelming.
 The Commission was required to submit an interim report no later than 30 September 2018. That report was duly submitted. In that report we unanimously recommended to the President, after having afforded Mr Moyane an opportunity to make submissions on the issue, which he spurned, that on the evidence we had received thus far, he should be removed from office, without delay, and be replaced by a new Commissioner of SARS. That was a definitive and final finding, made in the course of the inquiry, on the uncontested evidence we had heard. The evidence we have heard since then has only added weight to the recommendation.
 The regulations governing the conduct of the inquiry, published under Proclamation R18 in Regulation Gazette 10839 of 15 June 2018, allow the Commission to receive evidence in the form of oral evidence, affidavits, and documents alone. In the course of the inquiry many documents were sought from and produced by SARS and in some cases third parties, interviews were conducted with a number of employees of SARS in anticipation of them giving oral evidence or deposing to affidavits, and numerous affidavits and written submissions were received.
 The Commission was considerably hampered at the outset by fear amongst employees of SARS of reprisals and victimisation if they were seen to be co-operating with the Commission, which was symptomatic of what has occurred at SARS. A significant number of employees of SARS who were identified as possibly having information relevant to the inquiry were fearful of disclosure, other than under conditions of confidentiality, and in some cases were fearful even of being seen at the premises of the Commission, for fear of repercussions if the former Commissioner of SARS, who was then under suspension, were again to assume office, or from senior management of SARS. While some such employees were willing to present evidence openly, notwithstanding anxiety on their part, others refused point blank to do so. Written submissions, letters and affidavits from employees were also received either anonymously or under conditions of confidentiality for the same reason. While the Commission has powers of compulsion they were not exercised in such cases, both because evidence given reluctantly is unlikely to be full and frank, and also out of consideration for the persons concerned.
 Some months into the inquiry there was a noticeable shift in the attitude of employees and the atmosphere in which the inquiry was conducted, with many more coming forward more willingly to proffer evidence. We attribute that to a number of factors. Partly it was an increasing anger amongst employees at the revelations of what was done to SARS and themselves during the period under inquiry. Partly it was an increasing appreciation that someone was finally listening to what they had to say. Partly it was an increasing awareness that if they wanted things to change they must take the risk of speaking out. And partly it was an increasing confidence that the work of the Commission might indeed bring about change. A palpable shift occurred when the former Commissioner of SARS was removed from office, after which information flowed in readily, making the last month almost as demanding as all the time that had preceded it, which was a manifestation of the fear and anxiety that existed when the inquiry commenced.
 We consider the inquiry will be considerably compromised if the Commission is deprived of material information only because those in possession of the information were fearful of disclosing it. In those circumstances the Commission has taken account in reaching its findings of material furnished in confidence, though not anonymously, but has relied on information received in that way only where it is satisfied that there is sufficient verification in one form or another. By and large the findings in this report are founded upon information that was open to scrutiny in the public hearings.
 Oral evidence was heard in public from time to time, as and when it was appropriate. Such hearings were held on 26 – 29 June, 21 – 24 August, 29 – 31 August, 25 – 28 September, and 15 – 23 October (excluding the weekend). In the course of those hearings the evidence of 64 witnesses was heard.
 The Commission is authorised by the Regulations governing the inquiry to compel the production of documents and affidavits, and to compel appearance before the Commission for the purpose of giving evidence and being examined. The Commission has resorted to exercising that authority sparingly, for two reasons.
 The first is that, as I have indicated, evidence given under compulsion is seldom full and frank, and it is usually more fruitful to seek information from those who furnish it voluntarily. Secondly, attempting to extract information under compulsion, where there is a propensity to conceal the truth, can be ponderous and time-consuming and is usually unproductive in the absence of a factual matrix that has been established in advance. There was voluntary evidence in respect of many of the issues dealt with in this report and access to documents provided a compendious source of information that made the hearing of oral evidence more efficient. Other issues that still warrant inquiry would probably call for greater reliance on compulsion.
 Directives to appear before the Commission were nonetheless issued in some cases. In one case the person concerned, Mr Massone of Bain & Co, claimed illness and returned to his home in Italy before the date for his appearance.
 In another case an attorney, Mr Maphakela of the firm Mashiane, Moodley & Monama Inc, refused to comply with the directive, albeit that matters the Commission wished to inquire into were matters arising from instructions he had received from SARS, proffering instead affidavits with which he said the Commission should be content.
 The Commission is entitled to receive evidence orally, and it is entitled to receive it on affidavit, but it is not for a witness to decide upon the form in which the Commission must receive it. Nor is the Commission obliged to accept what purports to be evidence that is foisted upon it. I attach little weight, if any weight at all, to an affidavit presented by a person who refuses to be questioned on what he or she has said, and his affidavits have been treated accordingly. His unlawful refusal has been referred to the National Director of Public Prosecutions and to the relevant branch of the Law Society.
 The Tax Administration Act 28 of 2011 restricts the disclosure of ‘taxpayer information’, which is generally to be held in secret, but may be disclosed by a senior official of SARS to various bodies, including a Commission of Inquiry. In various respects the terms of reference require the Commission to inquire into and make findings on matters concerning taxpayers’ affairs. So far as the examination of taxpayers’ affairs was required, that examination was conducted by me alone, in some cases accompanied by Adv Steinberg and with the attendance of the acting Commissioner of SARS and one of his colleagues to assist with explanation, and in other cases assisted by other authorised employees of SARS. So far as this report contains information of that nature we consider it prudent that the identity of the taxpayers concerned should not be disclosed in this report, other than in one case in which the identity of the taxpayer company has already been notoriously reported in the media.
 I emphasise that absence of proof of a state of affairs is not equivalent to proof of the absence of that state of affairs. Where it is reported that evidence has not been found of a state of affairs it does not signify that the state of affairs does not exist. It signifies only that evidence of that state of affairs has not come to the knowledge of the Commission in the course of the inquiry, but the possibility remains that such evidence might yet come to light. The findings made in this report must accordingly be seen with that in mind.
ABUSE OF THE PROCESS OF THE INQUIRY
 No one who asked for the opportunity to give relevant evidence unconditionally was refused that opportunity, and all documents submitted to the Commission were perused. But the inquiry is not a platform for anybody to say whatever they like. It is a place to furnish evidence that is relevant to the inquiry, and no more than that.
 Mr Luther Lebelo, Group Executive for Employee Relations at SARS, approached the Commission on more than one occasion, and I afforded him considerable time. He asked to give evidence and it was agreed that he could do so. He said, too, that he wanted to furnish documents to the Commission in support of his evidence, and in due course he delivered documents in five lever arch files to the offices of the Commission. It turned out that the documents had been compiled by Mr Maphakela.
 As it turned out, what Mr Lebelo wanted was a platform to ventilate what he says was wrongdoing on the part of Mr Pillay, Mr Richer and Mr van Loggerenberg, which I come to presently, on the pretext of demonstrating that there were grounds for disciplinary steps that were taken against them.
 Mr Lebelo duly gave evidence twice at public hearings. Interspersed with that he submitted an affidavit. The common thread through all he said before, and submitted to, the Commission, was his wish to demonstrate that there was evidence that the persons I have mentioned were guilty of the wrongdoing he alleged.
 At the outset of his oral evidence he said that by giving evidence he would be compelled to ‘continue to do what I hated for the last four years which is to keep on saying these things I am going to say today which does not only hurt the integrity of the people that we are talking about but it hurts also their families and their futures’. He felt compelled to do so, he said, because the alternative was that ‘the stigma of being a suspension hit and a purger will continue for the rest of my life’.
 Fortunately, we were able to spare Mr Lebelo the pain of hurting those people once again, and of hurting their families. It was not necessary to take up the time of the Commission by reading out aloud what he contended was proof of wrongdoing on the part of the persons concerned, which is what Mr Lebelo had in mind doing. Mr Lebelo was told on more than one occasion that we accept that counsel who drafted the charge sheets against them would not have drafted charges had he not believed, on the material placed before him at the time, that there was a case to meet, which was the ostensible purpose of reading the documents out aloud.
 Whether the cases brought against them would have been met is not the concern of this Commission. There are forums for putting people on trial and the Commission is not one of them. Moreover, clearing Mr Lebelo of ‘the stigma of being a suspension hit and a purger’ is not the purpose of this inquiry. If Mr Lebelo considers he bears such a stigma it is best he approaches those whom he considers to have attached that stigma and clears it up with them.
 That notwithstanding, Mr Lebelo persisted. In response to an invitation from the Commission to furnish submissions on why certain findings affecting him should not be made, he forwarded to the Commission an affidavit of some 135 pages, excluding its voluminous annexures, almost of all which was devoted to airing yet again what he claimed to be proof of wrongdoing on the part of Mr Pillay, Mr Richer and Mr van Loggerenberg, which he appears to have disseminated to a section of the media. He complained as well that an affidavit he had earlier submitted to the Commission had not been placed on the Commission’s website.
 Certainly his affidavits and his documents have not been placed on the website of the Commission, nor will they be. The website of the Commission was established to facilitate access to evidence that is material to its findings. It is not a medium for disseminating whatever might be dumped at its door. If Mr Lebelo wants to disseminate his material, which is not confidential, he is perfectly free to do so, but the Commission will not disseminate it for him,
 The Commission does not accept whatever might be foisted upon it. It has invited anyone to place evidence before it, and has considered everything that has been submitted, but that does not mean everything placed before it is material evidence. It accepts what is material to the inquiry, which Mr Lebelo’s documents and affidavits are in large part not, as he was told so many times, and it is for the Commission, not Mr Lebelo, to determine what is material. So far as his affidavits contain relevant material, the relevant parts have been considered and taken account of, but the Commission will not be party to disseminating what is no more than malice.
 I might add that Mr Lebelo is not the only one who has sought to use the inquiry as a platform to advance his or her own cause. Others have also walked into the offices of the Commission with their documents, or imposed them on the Commission electronically, on various subjects they want disseminated to the world, and their material has been treated just the same.
 I need also add that early in the inquiry Mr van Loggerenberg submitted a lengthy affidavit dealing with, and exonerating himself of, the allegations that had been made against him. In the same way Mr van Loggerenberg was told the allegations are not material to the inquiry, and he quite properly did not persist.
 There is a related matter I ought to dispose of briefly. Mr Lebelo’s documents were gathered together by Mr Maphakela, whose firm had represented SARS in the disciplinary proceedings, apparently at a charge to SARS of about R1 million, later reduced to about R750 000. It appears from his invoice that much of his time had been taken up with attempting to ‘link’ the contents of the documents to alleged transgressions of the persons concerned. In due course Mr Maphakela wrote to Mr Lebelo on 22 August 2018, and sent a copy to me – I am not quite sure why – purporting to prove, from extracts from the documents, the alleged transgressions. Mr Maphakela also said that SARS must be given a ‘platform’ to provide its ‘version of events around 2014, particularly as to what led to the initiation of disciplinary proceedings against Mr Pillay including his suspension.’ He said his suspicion that the Commission had decided to ‘avoid the allegations’ was ‘based on the ongoing lobbing [sic] to bring Mr Pillay back into the SARS’.
 Mr Maphakela was also invited to furnish submissions on why certain findings should not be made concerning his instructions, particularly on what authority he purported to speak for SARS, and he, too, responded with an affidavit. Amongst other things he said the Commission is not authorised by its terms of reference to make such findings, which is not correct. Nonetheless, it appears from his affidavit that the acting Commissioner has already taken the matter up, and no doubt he will also consider whether Mr Lebelo’s conduct is befitting a senior employee of SARS, in which case no findings or recommendations are required.
 The acting Commissioner rightly renounced the letter as not representing the views of SARS. We have been told that Mr Lebelo’s delegated authority to dismiss employees has also been removed. We are gratified by both. It is time that dignity and decency return to SARS.
Attempts to Resuscitate the ‘Rogue Unit’
 We have become acutely aware as the inquiry has progressed that the Commission has been sought to be drawn into an onslaught upon those who managed SARS before Mr Moyane arrived, founded upon allegations once peddled by the Sunday Times to a beguiled public for a year and more, about a ‘rogue’ unit that was alleged to have existed within SARS, which is what Mr Lebelo’s documents were all about. An inkling that that was in store appeared soon after the Commission was established and it became increasingly apparent as the inquiry progressed.
 The Sunday Times withdrew its allegations and apologised some two years later, but meanwhile, a vast amount of taxpayers’ money was splurged by SARS to trawl through documents going as far back as eleven years, in search of evidence of wrongdoing; the allegations were fuelled by leakages of information; and lest the public should be minded to forget, the allegations have been opportunistically repeated, even in an official SARS media release I come to later in this report.
 When revenue collection is compromised the consequences are one or more of three. Government programmes must be curtailed, or taxes must be raised, or money must be borrowed, all of which prejudice the country. That is what this Commission is about, and it will not be diverted from inquiring into what is wrong at SARS, and how it can be righted, by attempts to use it for other ends. If there was wrongdoing on the part of those who managed SARS before the period with which we are concerned, then the proper course is for it to be reported to the authorities. The Sunday Times did great damage to SARS and the people of South Africa and the Commission will not now pick up where it left off.
 I think we should not overlook the lesson a former member of the Large Business Centre, Ms Gosai, said should be learnt from what commenced happening at SARS four years ago, for which other evidence provides weighty support:
‘I think what has happened to SARS should never be allowed to happen again. I think a lot of people have suffered. It’s left the organisation, and I’m using the words of people that I still speak to that are still within the organisation today, it’s left them broken, It’s broken people and it’s broken the organisation and people need healing, that’s the word I’ve been told. That people need to heal from this. People who were technicians, who were just interested in working for the higher purpose, and delivering and just enjoying their jobs and I was one of those people, we got caught up in a political narrative that we shouldn’t have been part of in the first place. And I think it’s a lesson for us that we should never be here again because the only people who have suffered is the country, the people of South Africa.’
THE RESPONSE TO THE COMMISSION OF THE FORMER COMMISSIONER OF SARS
 The former Commissioner of SARS, Mr Tom Moyane, kept away from the Commission from inception, appearing on one occasion only, and then only to disparage and attempt to derail the inquiry, which has continued relentlessly since then. It is clear that Mr Moyane does not have, and never has had, any intention of accounting for what occurred during his tenure at SARS, or of confronting the evidence the Commission has received.
 Mr Moyane was pertinently notified each time public hearings were held but neither he nor any representative on his behalf was ever present, except on the occasion I have mentioned. Indeed, on that occasion he protested at evidence being heard in his absence, but then left the hearing before the next witness was called. He was pertinently asked whether he wished to respond to evidence that had been given in public, much of which was damning of his management of SARS, but he declined. Prior to the submission of the interim report he was afforded the opportunity to make submissions on why it should not be recommended that he be removed from office, which he spurned. Instead he remained in the shadows, defiantly spewing invective at the Commission, through his own mouth and through that of his attorney. His conduct throughout the inquiry fortifies our view that he is and was not fit to be Commissioner of SARS. The correspondence between the Commission and Mr Moyane’s attorney in that regard is Appendix 2.
 Another senior employee of SARS was Mr Jonas Makwakwa, whose name cropped up from time to time in the evidence. He wrote to the Commission saying the truth was not being told, and he wanted to give evidence, but through his attorney he ‘demanded’ first that a long list of documents be produced. I am not impressed by people who proclaim a wish to have their say, but only conditionally. Mr Makwakwa’s attorney was told that his evidence would be welcomed by the Commission, to be presented in the way required by the Commission of all witnesses who gave evidence, but his attorney insisted the Commission first meet her ‘demands’. The correspondence between the Commission and Mr Makwakwa’s attorney is Appendix 3.
THE RESPONSE TO THE COMMISSION OF SENIOR MANAGEMENT
 SARS is a large institution. It has about 14 000 employees, spread throughout the country. Its processes and structures are also complex. Such an institution calls for leadership with exceptional managerial experience and skill. SARS is also a prize for those who are bent on corruption. Almost all the revenue of the state passes through its hands and they speak at SARS in millions and billions. It cannot be said too strongly and too often that SARS demands leadership of the highest integrity and character, deeply conscious of their duty to account for their management of SARS.
 I said in the Commission’s interim report that when conditions at such an institution reach such an ebb that it becomes a matter of serious public concern, warranting the establishment of a commission of inquiry, it is to be expected that its leadership will be conscious of that public concern, and will be anxious to engage with the Commission to account for what has occurred, and to right what is wrong. That is not what we have had in this case.
 I stressed in my interim report that the replacement of the Commissioner of SARS would not be a panacea, but only the first necessary measure without which there would be no possibility of setting SARS on a course of recovery. I also expressed some concern in the interim report regarding senior management of SARS during Mr Moyane’s tenure, who had seemingly sat back complacently while the reputation of SARS was being tarnished and its personnel demoralised.
 I also pointed out that early in the inquiry I attended a meeting of the SARS Executive Committee (EXCO), comprising its Chief Officers, where I urged them to engage with the Commission. Not one member of EXCO at the time relevant to this inquiry came forward to acknowledge any responsibility for what occurred at SARS. Some approached the Commission, and then gave evidence, but only to exculpate themselves. It was those lower in the structure who spoke for the organisation and not for themselves.
 I and those appointed to assist me have no doubt that our earlier recommendation that the former Commissioner be removed from office was right. One cannot have a Commissioner of SARS who will not answer for his management, but instead hurls insults, to protect his salary to the detriment of the country and of SARS. But a new Commissioner needs as well to ask whether he or she has the quality of senior leadership in support, which he or she will need to restore the integrity and capability of this large and complex organisation that is SARS. That those qualities exist lower down is, in general, quite clear. In the course of the inquiry we have encountered many fine public servants who know their proper role at SARS.
 We have found that inquiring into one matter has often exposed yet another that also warrants inquiry. We have recommended in this report that an Inspector-General of SARS be appointed, with investigative powers, to step in if there are signs of governance failing again. If that recommendation is accepted, the President might wish in the interim to consider re-constituting the Commission, in this or some other form, with altered terms of reference, to inquire into other matters of failed governance that could assist a new Commissioner to rehabilitate SARS.
 We are aware that the acting Commissioner has taken and continues to take steps to rectify many of the matters that have given us concern, for which he is to be commended, but there are limits on what can be achieved in the present state of uncertainty, which needs now to be brought to an end.
CHAPTER 2: THE STATE OF SARS - BEFORE AND AFTER
 The period under inquiry by the Commission spans the four fiscal years 1 April 2014 to 31 March 2018. Over that period what was once an admired institution became one that has evoked sufficient concern to warrant a commission of inquiry. This is what SARS was then, and what it became.
THE STATE OF SARS AT 1 APRIL 2014.
 The various tax and customs authorities that were in existence at the end of the apartheid era, including those that existed in the so-called homelands, were combined to establish SARS in 1997. The first Commissioner of SARS was Mr Pravin Gordhan. He was succeeded in May 2009 by Mr Oupa Magashula until he resigned in July 2013, whereupon Mr Ivan Pillay acted as Commissioner, until the appointment of Mr Moyane with effect from 27 September 2014.
 At the commencement of the period to which this inquiry relates SARS was on a trajectory that had earned it accolades domestically and abroad. According to Dr Randall Carolissen, whose evidence we deal with also in other parts of this report, a review of SARS in 2014 by the International Monetary Fund, benchmarked against its Tax Administration Diagnostic Tool (TADAT), showed that in most categories SARS was world class, conforming to good international practice in 15 of 27 indicators, and only one rung below good international practice in all but one of the remaining 12 indicators. A copy of his written submission, to which he spoke in oral evidence is Appendix 4. It was also respected by the Organisation for Economic Co-operation and Development, and was held up in this country as a model public institution.
 It was then operating under a model formulated early in its existence by Mr Gordhan and his team, directed at reversing non-compliance with tax laws, inherited partly from its history. That model was founded on three legs – education, service, and only then enforcement – and the organisation was structured to meet that objective.
 One initiative to that end was the introduction of information technology – a programme referred to as modernisation – to replace the paper-based operations of SARS, thereby accelerating the processing of tax collection, freeing human resources for more productive tasks, and enabling SARS to accumulate data for analysis and understanding of taxpayer behaviour and the tax gap. Another was the creation of the Large Business Centre, designed to provide ‘one stop’ service to large corporate taxpayers, from which about 30% of revenue is collected. SARS also had effective measures in place to counter the illicit trades that are capable of depriving the State of billions.
 But in any organisation the morale of the workforce is key and in that respect SARS also excelled. If one speaks to anyone who worked at SARS before Mr Moyane took office one is bound to hear the phrase ‘the higher purpose’, and one finds it in the evidence of all witnesses in that category. It is a phrase that was coined and instilled in employees during the period Mr Gordhan was Commissioner of SARS, and was perpetuated by his successor Mr Magashula, and by Mr Pillay.
 It was instilled in them that they were not mere employees, but were in the service of a higher purpose, which was the building of democratic South Africa. They were public servants in the real sense of the words. Witness after witness spoke of the pride they felt working for SARS. We heard it said that skilled professionals left lucrative positions to join SARS because they wanted to participate in that higher purpose. We heard it said that the environment was stimulating and innovative, that debate was open and rigorous, that employees were willing to work long hours without extra remuneration when that was required, because they shared a commitment to that higher purpose of service to their country.
 Some of that will be found in the evidence of Ms Seremane, who joined SARS in 2009 as the executive for integrity promotion, and was dismissed, when asked what prompted her to join SARS:
‘Well I think it's the brand, SARS, the reputation SARS but certainly it was the drive to actually contribute to the country realising that we have such a good institution that performs and [was] playing such a critical role in the country and I wanted to be part of that to contribute in the country’.
 Here is how the environment at SARS was described by Mr Ndlangalavu, who has been at SARS since 2001:
‘There was vibrancy, ma'am. People wanted to join the unit and the excitement and joy and SARS people I still want to believe even now are proud to work for SARS. I am a proud SARS official despite the challenges’
 When asked what made him proud he said:
‘Having been part of forming SARS and having been part of seeing transformation in a real sense. Yes, it’s true that when we were forming SARS, when we were transforming SARS, we were not aware of what we were doing. Only later in the later years when we were getting requests from other government departments to come and make presentations to them, or requests from other African countries to come and say can we come and learn [from] you, or to go and make presentations to SIAT in South America or OECD requesting us to come and make a presentation on how we’re doing tax education, we realised that there was something that we were doing that was special. We were not aware what we were doing. At the centre of it was passion, was commitment, was integrity, all done with humility’
 There is the evidence of Ms Mthebule, a trained lawyer who joined SARS in 2008: ‘To summarise, I would say I had lots of fun. It has always been a place, I mean, I’m not talking about the recent years, when we joined. You know cohesion that existed among colleagues, having leadership of a certain quality. People you felt you could look up to and learn from. I was a happy employee. Moreover, at that stage Minister Gordhan was talking about that term he liked, higher purpose.
You know we knew we could earn better salaries outside. It’s a fact but you worked for SARS because you felt you’re contributing something to your country. You’re not there to work for yourself or for your family only. So I felt I’m a proud employee. I had support from colleagues, from bosses. I wasn’t scared of approaching anybody. That’s the kind of environment we had. I even took out some of my own personal time to spend here at work and push work because the division that I joined was still, you know, a little bit shaken. There was more work to be put in so I didn’t even mind putting extra hours for no extra pay’.
 That is the environment at 1 April 2014 we heard described many times, both in the evidence, and by those who were interviewed who were afraid to give evidence in the open.
 No doubt that was not universally the case. We have heard from some, though only in written submissions, most often submitted anonymously, that management was dictatorial. Some have said that racial transformation fell short. We have heard that power within the organisation was excessively concentrated. There were also shortcomings in the operations. While there is undoubtedly some truth in all of that, the overwhelming thread that runs through the accounts presented to us, is the vibrant and dedicated environment I have described.
 But no organisation can stand still if it is to prosper, and the SARS Annual Performance Plan for 2014/15, prepared while Mr Pillay was acting Commissioner, announced that the SARS operating model had been reviewed and changes were to be implemented, to be completed by 31 March 2015. Details of the proposed changes appear from a letter by Mr Pillay to the Deputy Minister of Finance on 11 June 2014, which is Appendix 5. Two primary features emerge from the description of the review that was to be undertaken.
 First, the proposed changes followed the essential principles upon which the operating model had been based, and were directed at developing, refining and improving the effectiveness of the structure, rather than a major revision. Secondly, the review and proposed changes had followed upon consultation with interested persons, and debate within EXCO. None of that was like the ostensible review that occurred.
THE STATE OF SARS ON 31 MARCH 2018
 What I have described is a far cry from the environment that existed at 31 March 2018. I reported earlier that the air at SARS reeks of intrigue, fear, suspicion and distrust. We heard of it in evidence, and we encountered it ourselves. Mr Ndlangalavu recounted how, early in his tenure, Mr Moyane had a plethora of CCTV cameras installed, such that employees felt themselves under constant surveillance, so much so that some employees took to covering the camera lenses on their computers with tape, lest they be watched while they went about their work, fearful of any perceived misdemeanour that might result in disciplinary proceedings.
 The trajectory of modernisation, that had been in the making for a decade, was summarily stopped when Mr Moyane arrived, with not so much as a word to the person who had been instrumental in creating it, and now only adjustments and adaptations are made to the systems from time to time, while the systems themselves degenerate as technology advances. The current Chief Officer of Digital Information Services and Technology (DIST), Ms Mmamathe Makhekhe-Mokhuane, spoke in her evidence of nothing more being done than to ‘keep the lights on’, which is hardly surprising when there has been only one strategy meeting in the fifteen months she has been in office.
 I also reported in my interim report that the organisational structure of SARS has been remodelled such that fragmentation of functions inhibits co-ordinated action over various disciplines, to the benefit of delinquent taxpayers and the disadvantage of major taxpayers who try to comply. The Large Business Centre (LBC) as it had existed was eviscerated to the detriment both of governance and revenue collection. The restructuring of the organisation displaced some 200 managerial employees from their jobs, many of whom ended up in positions that had no content or even job description, and in exasperation skilled professionals left. Others remain in supernumerary posts with their skills and experience going to waste. Customs was adversely affected, as we deal with in another part of this report. Measures to counter criminality were rendered ineffective and those who trade illicitly in commodities like cigarettes operate with little constraint. Relations between the Commissioner of SARS and other state institutions – the National Treasury, the Auditor-General, the Davis Tax Advisory Committee, the Financial Intelligence Centre – are icy, if there is any relationship at all, and SARS has lost its former high status amongst international bodies.
 When an organisation that was world class ends up four years later like that, it cannot but mean that the integrity and governance of the organisation has failed. Where the terms of reference require the Commission to inquire into the influence of institutional factors on SARS’ performance of its duties the answer is very clear. The failure of integrity and governance at SARS, soundly evidenced alone by the change over four years, has certainly compromised the performance of its core function of collecting tax, to the detriment of the country at large.
The next part of the Nugent Commission report follows here: