Death and Taxes

How SARS made hitmen, drug dealers and tax dodgers pay their dues

Johann van Loggerenberg

• Publisher: Jonathan Ball
• Year: 2018
• ISBN:
  9781868428106
• Topic: Politics & International Relations
• Subtopic: Political Corruption & Misconduct
• Index: Politics & International Relations

Nothing in life is certain, except death and taxes – or so the expression goes. And over the past two decades South African criminals and tax dodgers have come to realise this truth the hard way.

Tax sleuth Johann van Loggerenberg was at the centre of many of SARS' high-profile cases during his time there. As far as SARS is concerned all forms of income are subjected to tax, even if by ill-gotten means. Whether you are a drug dealer from Durban, one of the hitmen who shot Brett Kebble or soccer boss Irvin Khoza, you have to pay your dues!

Van Loggerenberg relates the riveting inside stories of the investigations into businessmen like Dave King, Billy Rautenbach, Barry Tannenbaum and his ponzi scheme, and others. Over the years he got to know all the scams and dirty tricks in the book and he explains these in plain language.

In these investigations the tax authority worked closely with the police, the NPA and the Directorate of Special Operations. However, after a few years SARS became the victim of its own success. In telling the stories of how tax evaders were caught, Van Loggerenberg also shows how the power struggle between different state departments and the phenomenon of state capture in recent years started crippling SARS.

Part 1

Early days

‘Tax evasion, illicit financial flows and transfer pricing are contributors to the tax gap in any country, and the extent to which they’re uncontrolled undermines the fiscal capacity of the various countries.’

– Pravin Gordhan, addressing the Conference on Illicit Financial Flows: Inter-Agency Cooperation and Good Tax Governance in Africa, University of Pretoria, July 2016

1

Tax activists

On 25 August 2016 – the so-called ‘day of the warning statements’ – I found myself sitting on a dodgy chair in a stuffy, gloomy room in Pretoria.

Old tables and chairs, and a dilapidated couch with stuffing sticking out of it, lined the walls of this social room-cum-kitchenette. Yellowing posters with anti-corruption slogans and internal notices were stuck to the walls, some curling up at the edges. An old fridge purred along, and a hot-water urn made a clicking sound as it switched on and off. The windows looked out onto the building next door.

From time to time, people would enter and make themselves a cup of tea or coffee, then walk out again. Some of them I knew well from my time at the South African Revenue Service (SARS) but my attempts at small talk failed repeatedly.

Far away I could hear people singing. One song I recognised clearly was the struggle song ‘Senzeni na?’ (What have we done?).

A few hours before, I, together with former SARS deputy commis­sioner Ivan Pillay and our lawyers, had entered the offices of the Hawks – the Directorate for Priority Crime Investigation, established in 2008 as an independent directorate within the South African Police Service (SAPS) – in Visagie Street. We had a date with what’s known as the Crimes Against the State (CATS) unit of the Hawks, mandated to investigate terrorism, weapons of mass destruction, treason and subversion of our country’s sovereignty.

Pillay was accused of pension fraud and of creating a ‘rogue intelli­gence unit’ at SARS, while I’d supposedly been unlawfully running the so-called rogue unit since 2010 and had involved myself with corrupt payments through a fundraiser for charitable causes. (As revealed in my 2016 book Rogue: The Inside Story of SARS’s Elite Crime-busting Unit, which I co-wrote with Adrian Lackey, all were baseless allegations.)

As we approached the building a crowd awaited us, among whom I immediately recognised human-rights lawyer George Bizos and former constitutional judge and Freedom Under Law civil-rights activist Johann Kriegler. More familiar faces jumped out – those of human-rights activist Francis Antonie of the Helen Suzman Foundation, and Mark Heywood, the founder of Section27, a public-interest law centre promoting human rights. I also recognised Ben Theron and Wayne Duvenage from the Organisation Undoing Tax Abuse (OUTA), some members of Corruption Watch, including David Lewis, and people from other civil-rights groups.

Print, radio and television journalists were all over the place, with flashing cameras and camera crews.

My wife, Nicole, came towards me from the crowd. She took my hand and gave it a tight squeeze. We manoeuvred our way to the front doors, where we were met by an official who took us up to the designated floor where the CATS unit would question not only Pillay and me, but also Finance Minister Pravin Gordhan.

The three of us had been summoned to the Visagie Street headquarters in letters drafted on a Sunday and hand-delivered to our lawyers the following morning. We’d been instructed to appear before CATS on 25 August, for them to take down ‘warning statements’ with regard to their investigation into allegations of a ‘rogue unit’ at SARS, and in Gordhan’s case into his approval of Pillay’s early-retirement package and reappointment at SARS in 2010.

Gordhan, acting on legal advice, had declined to attend. Pillay and I, despite receiving the same legal advice, had decided to go – our situation was different to Gordhan’s, as by then we had left Government.

We were welcomed by a smiling Brigadier Nyameka Xaba, the CATS head. He took us down a corridor to an office, and introduced us to two of his colleagues. They decided to interview Pillay first, and I was shown to the drab coffee room and told to stay put.

I sat there for two hours, waiting to be questioned by people I’d once regarded as fellow civil servants who I thought were also fighting the good fight. And as I sat, I reflected on my 16-year career at SARS and the events that had brought me to this moment in time.

I recalled my very first day at SARS, 17 years before. Back then, SARS had just started its journey from being a mainly administrative institution to a more modern and agile organisation that could serve our new democracy with fresh energy.

Many stories jumped to mind, some of which could provide excellent plotlines for crime thrillers. Most of them made me extremely proud for what we’d been able to achieve with fairly limited resources and an abundance of dedication – even right at the beginning, there were already quite a few big fishes to fry.

Many of the stories I thought of made me smile, although some made me angry and slightly melancholic, especially where our efforts had been thwarted by a lack of cooperation between different state departments or political meddling.

I thought of my former colleagues, some of whom had left SARS, others who’d remained; some had parted ways in less-than-ideal circum­stances, and some had passed away.

Over the years I’d met some truly amazing people at SARS, all part of the vast number of success stories that reflected so well on our country, our Government and our revenue agency.

I resolved that day that no matter what happened, no matter what lay ahead for us, some of the stories would be told, one way or another …

I first joined SARS in late 1998, and a few months later Ivan Pillay, who would go on to become deputy commissioner, was appointed general manager: Special Investigations. We had many planning ses­sions and meetings about different aspects of the institution that then Finance Minister Trevor Manuel, his deputy, Jabu Moleketi, and SARS commissioner Pravin Gordhan and his executive believed were achievable. (Pravin Gordhan joined SARS as deputy commissioner in 1998, and became commissioner in 1999.)

It was customary for Pillay to convene working sessions and meetings on weekends, when we were free from our daily work responsibilities. In some cases, these meetings were formal and related to our work; in others, they were simply broad discussions around strategy and planning. One of these meetings happened to take place at a nursery near Pillay’s home on a Saturday morning. It was here that I first heard the term ‘economic transformation’, when Pillay explained how SARS was playing a pivotal part in the newly formed democratic government.

In his usual soft-spoken manner, pausing often to find the right words, he told us that while political freedom might have been achieved in South Africa in 1994, the struggle was nowhere near over. There was still much to be done, he said, and it would take many years, probably well beyond the lifetime of some of us at that meeting, to achieve genuine economic freedom.

Pillay said the political changes may have brought constitutional order, equality, human rights and political freedom, but that the lives of the black majority hadn’t changed overnight. We should remember that those people who’d lived in South Africa during apartheid, both victims and beneficiaries of the regime, hadn’t just disappeared on the night after the first democratic elections. South African society would feel the structural, psychological and economic effects of apartheid for many years to come.

SARS could help to ensure that South Africa became economically free from having to rely on outside donors and borrowing, Pillay told us, and at the same time become self-sufficient and able to fund the respective programmes Government wanted to implement to develop society. Tax was part of achieving this goal.

The idea that SARS employees were activists in striving for a better South Africa was being established. If SARS achieved its targets, the Government could fund its own initiatives, more grants could be paid to the destitute, more homes, schools, clinics, hospitals and police stations could be built, more state officials could be trained and deployed, municipal services could be expanded, electricity and water could be provided to people who’d never had access to these services, and, as a result, job opportunities and economic growth could be created.

While this is a slight oversimplification of the system and how eco­nomics works, it basically meant that if SARS could collect enough money per year, as required by Government, not only would citizens benefit from it, but our economy would grow and bring us closer to fiscal sovereignty. I think we all understood the importance of this.

While the governmental system had to be modernised and adapted to the times and the needs of all South Africans, neither Pillay nor Gordhan wanted to throw the proverbial baby out with the bathwater when it came to SARS employees. They recognised that many of the ‘old order’ employees had years of technical expertise and experience, and they didn’t want to lose that capacity. In time, they began to identify those who’d embraced the political changes and wanted to contribute to our new democracy. There were instances where heads bumped, and a few dug in their heels and used every trick to frustrate and hamper change at SARS, but the vast majority moved forward to he...