Tax compliance at the South African Revenue Service was dealt a severe blow after implementing now-suspended commissioner Tom Moyane’s new operating model‚ shrinking the capacity of critical divisions at the revenue collector and putting staff under pressure.

This was according to executive for enforcement audits Fareed Khan‚ who delivered his testimony at Judge Robert Nugent’s commission of inquiry into tax administration and governance issues at Sars on Thursday morning.

Khan described a previously successful approach to tax compliance which was scrapped under the new model.

“We audited everybody as if they were unwilling to comply. The differentiated approach was to establish a compliance verification process. The second leg would have been a limited scope audit which was essentially aimed at those taxpayers who were willing but probably unable to comply. The last one was the investigative audits‚ for those taxpayers engaging in aggressive tax planning. That was the strategy in terms of the differentiated tax approach‚” he said.

“In 2015‚ we got to the point where we were auditing two million taxpayers per year. The journey ended before the ultimate objective could be achieved. Where we got to was to a point where we were pre-populating 50% of the income tax return for income tax payers. I personally believe that‚ had the journey not stopped‚ we would have been there‚ to a full 100% [tax compliance].”

He said the compliance division was largely shrunk in the new operating model and he described how staff he managed regularly lodged complaints with the CCMA over exhaustive working hours.

“We have tried our best to maintain the operations but what the numbers are not talking to are the things we didn’t do. I don’t believe this is an operating model; I believe this is a structure and an organogram. We saw this new model as a simple reshuffling of chairs‚ with some chairs taken away and some chairs added. There was no vision that we were made aware of‚” he said.

“There was a decrease in the yield and the number of cases they dealt with … an indication of how the new operating model disempowered them.”

The commission quoted emails between Khan and former Sars chief operations officer Jonas Makwakwa‚ who headed the steering committee for Moyane’s new operating model. On various occasions‚ Khan had warned Makwakwa of the negative implications of the model.

In an email to Makwakwa last March‚ Khan outlined seven issues that had crippled processes at the institution.

“What gave rise to this was that it appeared to us from the questions and the comments being made from [Makwakwa] that he didn’t fully appreciate that it was a result of the design or structure presented to us. He was questioning why we had taken an operational decision to do centralising audits. We had an operating strategy that mitigated some of the risks from the structure‚” Khan said.

He said the new operating model cut the number of senior managers for compliance‚ and when Khan’s team took a decision to centralise audits to mitigate any further negative effects‚ Makwakwa criticised them for a lack of management and capacity.

“My criticism is not on individuals but on the operational set up‚ which I can see is hampering smooth operation of the business‚” Makwakwa is said to have written in his response to the email.