Johannesburg - The SA Revenue Service (SARS) seems to have misunderstood the nature of the Davis Tax Committee when it dramatically announced that it wanted Judge Dennis Davis to recuse himself just over a week ago.
It also appears that SARS has backed down from its initial threat against Davis, which seems to have had no legal basis.
Davis this week told City Press that SARS was mistaken if it thought the tax committee was legally accountable to them, as opposed to Finance Minister Pravin Gordhan.
“In its statement, SARS says that we, as a tax committee, were appointed under section 11 of the SARS Act,” said Davis.
This section allows for so-called specialist committees that are meant to advise the SARS commissioner – who is currently Tom Moyane – on the tax authority’s operational issues.
SARS’ whole argument is that Davis is, in this sense, “employed” by SARS to advise Moyane.
As such, SARS is within its rights to ask for his removal if the relationship became unworkable, SARS’ executive of employee relations, Luther Lebelo, argued last week.
That is not what the Davis Tax Committee does at all, said Davis.
“It is clear from our terms of reference, published on the committee’s website, that the minister appointed us to advise him on tax policy [not administration].
“In short, section 11 [of the SARS Act] does not apply to us – the committee has no accountability to the commissioner and is only accountable to the minister,” said Davis.
In a lengthy statement issued last Friday morning, SARS attacked Davis for allegedly conspiring with others to undermine SARS’ leadership and trying to instigate a tax revolt, among other things.
The only legal argument in SARS’ statement was that Davis had allegedly violated the SARS Act.
This simply had no application to his committee, said Davis.
In its initial statement, SARS said that it would write to Gordhan to demand that Davis either recuse himself or get dismissed from the tax committee.
SARS also said it was seeking legal advice on whether it could lay a complaint against Davis at the Judicial Service Commission.
SARS could not confirm whether it had done either of these things this week.
“SARS has ventilated its views on the issue in our media statement [last week]. We do not believe that the steps SARS indicated it would take, as outlined in its statement, require further mention in the public domain,” said SARS spokesperson Sandile Memela.
Treasury told City Press this week that it was “not yet in possession of such a letter”, when asked if SARS had followed through on its stated intentions the previous week.
SARS’ public attack on Davis follows a slight amendment to the tax committee’s terms of reference, which now means it will look at a few operational issues at SARS, in addition to the tax policy work it has been doing for three years.
In the middle of last year, Gordhan amended the Davis Tax Committee’s terms of reference to include four issues related to SARS.
These are mostly uncontentious and related to gauging how SARS would implement the committee’s policy recommendations.
The committee is meant to look at how SARS is dealing with taxing rich individuals, how SARS is dealing with base erosion and profit shifting, and how SARS battles so-called illicit financial flows.
The committee was, however, also asked to “advise on an appropriate governance and accountability model for SARS”, according to Gordhan’s budget speech last month.
This might include making recommendations about the independence of the SARS commissioner – the job became a presidential appointment around 2002.
In the same speech, Gordhan said that Treasury “will continue to call on Judge Davis and the tax committee for advice on how best to ensure that SARS remains a robust and effective tax collection agency”.
According to Davis, there has been a lot of unwarranted speculation in the media about what the tax commission is meant to do when it comes to SARS.
“It is correct that last year the minister asked us to look at certain issues of tax administration for the first time,” said Davis.
“The committee was asked to evaluate whether the operating model proposed for SARS by the Katz Commission more than 20 years ago was still relevant.”
Davis had been a member of the Katz Commission, which was the previous major attempt at reviewing the South African tax system. “This resulted in meetings with SARS [last year],” said Davis.
“On these issues it would be helpful to engage with SARS, but on all other issues of tax policy with which we will be busy until the end of the year, our main engagement is with Treasury,” said Davis, suggesting that SARS’ animosity is not fatal to the committee’s work.
One pillar of SARS’ attack has been that Davis “was supported at said conference” by former deputy commissioner of SARS Ivan Pillay and former SARS adviser Yolisa Pikie.
Both spoke at the same event as Davis and were quoted in the City Press article alongside the judge.
“SARS appears to hold as a major grievance that, at the relevant meeting, Pillay and others who had left SARS were present,” said Davis.
“I speak at many meetings on tax policy and I do not ask for guest lists, nor is it a precondition for me [to know] who is present,” said Davis.
“I really don’t know what the others said at the meeting, but in a democracy, people with whom SARS disagrees are entitled to speak,” Davis told City Press.
“After all, SARS is also subject to the constitutional principle of accountability.”Read Fin24's top stories trending on Twitter: