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KPMG report restarts Sars war

Oct 04 2015 20:00
Abram Mashego

Johannesburg - The investigation into allegations of irregularities and misconduct within the SA Revenue Service (Sars) by audit firm KPMG has made a number of damning findings against its former acting head Ivan Pillay, his predecessor Oupa Magashula, and former executive Johann van Loggerenberg. 

The draft findings, contained in a memorandum to KPMG written by Sars’ lawyers, which was leaked to City Press, also says that former Sars commissioner and subsequent finance minister Pravin Gordhan should be “made to account” for the extension of Pillay’s contract in 2011, three years before it expired. 

However, serious questions have been raised by both Gordhan and representatives of Pillay and Van Loggerenberg, who said they know nothing of the report’s contents and were never called to make representations to KPMG. 

Yesterday, Gordhan told City Press: “I cannot respond to reports of documents I have not seen, or that have not been given to me.” 

In a statement sent to City Press yesterday, Pillay said: “I am not the only person who has been denied an opportunity of defence against charges. To my knowledge, not one of the former Sars officials mentioned in the KPMG report ... have been called upon or been given any opportunity, either by Sars or by KPMG, to make representations or submissions to defend themselves. 

“The alleged findings you refer to can therefore have no standing or merit in law.” 

The draft findings in the leaked report – which two highly placed sources both within and close to Sars told City Press have been included in the final KPMG document – include that: 

. Sars “established and administered a covert and rogue intelligence unit” in contravention of the law. The unit, it says, was established by Pillay when Gordhan was Sars commissioner, and reported to him. The unit allegedly illegally monitored and intercepted communication, and illegally bought equipment to do so. 

In his response, Pillay denied having sanctioned “illegal activities or misconduct during my tenure at Sars. I will defend any allegation in a properly constituted legal forum whenever I am presented with such an opportunity.” 

. Van Loggerenberg’s charity Wachizungu received ­donations from “Sars officials, taxpayers who were the subject of previous and ongoing Sars investigations, (and) service providers of Sars” which was “irregular, extraordinary, and not in accordance with good governance”. The report also states that he “unlawfully interfered in the tax audit” of his former girlfriend, Pretoria lawyer Belinda Walter, and that he disclosed confidential taxpayer information to her. 

In a statement sent to City Press yesterday, Van Loggerenberg said: “Wachizungu is not my charity. It never ­received donations ... from tax payers that Sars was investigating, nor from any Sars service providers,” he wrote. 

“I deny having unlawfully interfered in Ms Walter’s tax audit. I dealt with this in detail in my affidavit to the Sikhakhane panel. It is unfortunate that the Sikhakhane panel appears to have never considered my submission. 

“I deny having illegally disclosed taxpayer information. I dealt with this in my affidavit to the Sikhakhane panel.” 

. Pillay unlawfully authorised a former minister’s interest reduction for the tax period between 1999 to 2006. This, the report says, was “done unlawfully and influenced by partisan political considerations” and should be investigated. The minister, whose name is known to City Press, has strongly denied the allegations. 

In response to questions City Press sent last month, ­Pillay’s former adviser Yolisa Pikie said: “For the period under review – 1999 to 2006 – Mr Pillay was not a commissioner and, as such, had no power to cancel or reduce interest for any taxpayer.” 

. Pillay and Van Loggerenberg engaged in “potentially irregular and potentially unlawful conduct when they ­attended a meeting arranged by the late Jackie Selebi and Glenn Agliotti on behalf of a taxpayer ... for purposes of intervening in a dispute between two taxpayers who were the subject of an ongoing investigation by Sars and the National Prosecuting Authority [NPA].” 

The meeting, the report states, was held at the taxpayer’s house and Pillay and Van Loggerenberg “disregarded or interfered with an ongoing investigation conducted by a Sars official.” 

Thereafter, the report alleges, Van Loggerenberg testified at Selebi’s trial that he had not met Agliotti. 

In his response, Van Loggerenberg denied intervening in a tax dispute resulting in one of the parties’ tax problems “going away”. He also denied lying under oath in the Selebi trial. “I submitted an affidavit to the NPA at the time dealing with the nature and extent of the particular event. Mr Agliotti was not a participant in the discussion at all. This allegation is not new and dates back many years.” 

. The report recommends that criminal proceedings be considered against Pillay and Magashula for extending Pillay’s contract from three to five years. 

In response to questions, Pikie said that an “extension of an employment contract is not an unusual or extraordinary event or transaction unless you can demonstrate that it was done fraudulently”. Magashula was not available for comment. 

. The report also recommends that Pillay be made to repay R106 446 420 spent on the creation of the so-called rogue unit, and that Sars should consider retrenching the remaining members of the unit. 

However, the auditors appear to have found no evidence to support the claim that Sars ever owned a brothel. 

“But some members of the unit engaged the services of prostitutes during their leisure time,” the report states. 

In his statement, Pillay said the “alleged findings” of the report “directly contradicts” a judgment by the Labour Court in December last year, “which ruled in my favour regarding the establishment and functioning of investigative units within Sars since 2007”. 

In a statement in May, Gordhan said he “never approved any illegal activities” as commissioner of Sars and the ­“establishment of an additional unit within the enforcement division was entirely legal. Any suggestion to the contrary is rejected emphatically.” 

Sars spokesperson Luther Lebelo said he would not comment on the contents of a leaked report.

kpmg  |  sars  |  oupa magashula  |  ivan pillay  |  pravin godhan  |  tax  |  sa economy
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