Corruption Watch makes submissions to the Nugent Commission of Inquiry into SARS

3 September 2018

Corruption Watch (CW) has made submissions to the commission of inquiry into tax administration and governance at the South African Revenue Service (SARS), led by retired Judge Robert Nugent. The organisation is concerned about the absence of good governance and proper administration at SARS, an institution whose mandate is pivotal in detecting and reporting corruption, fraud, money laundering and other illicit financial flows in South Africa and throughout the region.

CW’s submission to the Nugent inquiry highlight its ongoing efforts to achieve accountability for alleged acts of corruption and other unlawful conduct on the part of the suspended SARS commissioner Tom Moyane and two senior SARS employees, Mashudu Jonas Makwakwa and Kelly-Ann Elskie. The alleged unlawful conduct contained in a Financial Intelligence Centre (FIC) report provided to Moyane in May 2016 resulted in little or no action taken against those implicated. Moyane’s failure to act on the findings of this report, along with his misleading statements about the matter, bring to light his inability to ensure accountability. 

“We remain very concerned that the lack of accountability and transparency in relation to this matter is severely undermining deterrence of corrupt activity at SARS and beyond. Of equal concern is the need to overhaul governance and administration at the entity in order to prevent and deter maladministration and corruption at SARS,” said CW’s head of legal and investigations, Leanne Govindsamy.

The organisation’s submission highlights Moyane’s role in delaying the investigation into Makwakwa and Elskie. He claimed that international law firm Hogan Lovells was investigating allegations contained in the FIC report when, in fact, they were not doing so. Moyane’s contradictory statements, together with the response from the Hawks concerning the investigation into Makwakwa and Elskie, are contained in these submissions.

The submissions also foreground the role of Moyane in disclosing the confidential FIC report to Makwakwa and Elskie and not reporting the matter to the Hawks. As a result, Corruption Watch lodged criminal charges against Moyane for breaching section 34 of the Prevention and Combating of Corrupt Activities Act. Moyane is also in breach of the Financial Intelligence Centre Act in respect of his unlawful disclosure of the FIC report to the implicated employees. Corruption Watch urged the commission to enquire into the status of these criminal charges lodged in 2016, and to consider if such conduct also amounts to a breach of fiduciary duty, which could result in Moyane charged under the Public Finance Management Act.

The role of Hogan Lovells in this matter is also emphasised. As SARS was an existing client of the law firm, they should not have accepted an instruction from their own client in circumstances where they would have had an existing relationship with Moyane, and possibly Makwakwa and Elskie. In addition, they were not acting as forensic auditors or investigators, but as a firm offering legal advice, indicating a clear conflict of interest.

The submissions further highlight Hogan Lovells’ failure to immediately inform Parliament that they were not investigating the FIC allegations, as initially claimed by Moyane, but were instead offering legal advice on issues unrelated to the FIC report. In Parliament, Moyane relied on his referral of the matters to Hogan Lovells to justify not referring the matter himself to the criminal justice authorities.

In its submissions, CW underlines the lack of accountability in respect of Makwakwa and Elskie, and the delays by the criminal justice authorities in finalising this case to enable prosecution. This has serious repercussions for good governance of SARS, and hampers the deterrence of corrupt activity, both inside and outside the organisation.

Corruption Watch also asks the commission to adopt some of the recommendations contained in the Davis Tax Committee Report on Tax Administration, which presents several proposals for the appointment of the SARS commissioner, including a similar process to the appointment of the public protector. A process such as this will promote accountability and transparency, and will ensure a governance structure that promotes the core mandate of SARS, thereby providing greater confidence in the appointment of the SARS commissioner.

- Download CW’s submission to the Nugent Commission of Inquiry, as well as all annexures in a 23mb ZIP file.

- Download a set of infographics that show the full extent of our efforts, together with all correspondence sent and received by CW – part 1  |  part 2.

Issued by Phemelo Khaas, Media Liaison, Corruption Watch, 3 September 2018