Kieswetter requires ‘greater level of disclosure’ from Bain

South African Revenue Service (Sars) Commissioner Edward Kieswetter says he needs clarity from US-based consulting firm Bain and Company about its role at the revenue services following the public resignation by its local partner. 

Athol Williams, a senior lecturer specialising in Corporate Responsibility and Ethical Leadership at the University of Cape Town, was hired by the firm as a management consultant to help the company clean up its reputation after it was found to have played an instrumental role in Sars’ capture.

Bain was hired in 2015 shortly after former Commissioner Tom Moyane joined Sars and was tasked with restructuring the revenue service’s operating model to improve efficiencies. However this only resulted in weakening critical governance and enforcement units and displacing hundreds of employees. 

Announcing his resignation, Williams said Bain had not been transparent about its full role in the decimation of Sars, a charge which the company denies. 

Read: Sars – Please protect me from yourself

But Kieswetter is not convinced. 

“The evidence suggests that they were aware or, they ought to have been aware, that they had become complicit in a corrupt agenda,” he told Moneyweb on the sidelines of the official launch of the Large Business Centre (LBC) on Wednesday.

“So, when it is claimed by their head of business in South Africa, that the reason he has resigned because Bain didn’t disclose, I think there is something there. What are they not telling us? 

“So as far as I am concerned, I need a greater level of disclosure from them myself,” he said, adding that he would engage Bain on this when he has the opportunity to meet with it. 

Kieswetter said there were three issues Bain had to answer to, the first, being recovering the money that Bain was paid for its services which has already been done. He confirmed that the company had paid back a total of R214 million which includes interest. 

The second involves answering for the damage that they caused to Sars which Kieswetter described as “incalculable”. 

Read: SA faces possible tax revenue shortfall of R50-R98bn

“Answering to that means when asked the question directly they must give frank and honest responses,” he explained 

The third is determining if Bain was willfully and wittingly contracted to damage Sars which would be criminal, Kieswetter says that matter has been handed over to the Hawks and the National Prosecutions Authority. 

Large Business Centre 

One of the casualties of Bain’s restructuring model was the LBC, whose functions were fragmented and “eviscerated to the detriment both of governance and revenue collection,” according to Judge Robert Nugent’s who headed the commission of inquiry that looked into the destruction of the governance and administration of Sars. 

The unit provided specialised end-to-end services to large corporates and high net-worth individuals to ensure compliance amongst these clients. 

 At its peak, the unit accounted for 30% of the revenue which Sars collected but after it was disbanded the relationship between Sars and the clients it previously served deteriorated with industry bodies testifying that the frustration felt by businesses was reflected in declining tax morality. 

Kieswetter said that Bain’s decentralising of the unit had resulted in the loss of 115 specialised auditors in the LBC alone. The picture becomes bleaker when one looks at the whole organisation, he said from 2014 Sars had lost over 3000 employees of which 2200 were resignations. The exodus includes employees with core competencies such as compliance and investigative auditors and customs officials. 

“You can see that during this period the capability of Sars really suffered,” said Kieswetter. 

Rebuilding

The re-established LBC is part of the revenue service’s journey of renewal which is expected to encourage voluntary compliance among corporate South Africans. 

The taxpayer segment which the centre will be servicing includes large businesses with a turnover greater than R1 billion, companies that are listed on the Johannesburg Stock Exchange, financial services and mining companies with a turnover greater than R500 million; mining companies as well as multinational companies irrespective of their turnover.  In addition, the LBC will assist ultra-high-net-worth individuals whose total assets are in exceeded R75 million. 

Read: Tax is an important weapon in clawing back ‘ill-gotten gains

These clients will be allocated tax teams who have specialised knowledge about their business. Those with complex tax portfolios and who operate in multiple jurisdictions will be assisted by these highly skilled teams to ensure that they understand their obligations but also to improve Sars’ efficiency in assessments, audits and dispute resolution processes.

“We want to become the global benchmark again and regain trust amongst taxpayers,” said Kieswetter. 

A lack of trust between taxpayers and Sars led to a decrease in tax morality and a weakened structure also provided an opportunity for non-compliance, these factors coupled with an underperforming economy mean that Sars will not meet the National Treasury’s target for the sixth year in a row.

Kieswetter said Sars was currently working with Treasury to finalise what the extent of the shortfall which will be announced in the mid-term budget policy speech next week.