The SA Revenue Service (Sars) is investigating 307 cases of possible tax fraud and other irregularities with a revenue loss of close to R300m involving companies that recently benefited from government personal protective equipment (PPE) procurement under questionable circumstances.
This was disclosed to parliament’s standing committee on public accounts (Scopa) by Sars commissioner Edward Kieswetter during a meeting of the cabinet’s interministerial committee set up to deal with allegations of corruption in PPE procurement worth more than R5bn.
Kieswetter told MPs that Sars had also received a request from the Free State branch of the Special Investigating Unit (SIU) to investigate the tax affairs of 300 companies that benefited from PPE procurement in the province, with 139 already red-flagged for potential tax evasion.
“Some encouraging signs I can share with you, chair, is that we’re looking at about 307 cases with a revenue loss of about R300m, and that would include an array of both civil and criminal areas,” Kieswetter said. “We’ve also just been handed a request from the Free State SIU to help them with 300 PPE cases. We have identified 139 companies for potential tax evasion investigation. Of those, 63%, by our estimation, were not compliant for tax purposes and only 29% were.”
Kieswetter said some of the “shenanigans” included not declaring the income made from PPE contracts.
“Even though they get that from the government, they still choose to cheat government,” revealed the Sars commissioner. “They have outstanding tax returns, they file fraudulent or incorrect tax returns, they obtain tax clearance certificates by fiddling the system and they are not registered for VAT [valued added tax].”
Kieswetter said even companies registered as pubs had benefited from PPE tenders.
“Three companies are under investigation for amounts totalling R165m in contracts from the police. One company is owned by a 30-year-old who has received a contract worth R125m.
“You will be surprised to know many companies were previously registered but they were not in the PPE business. We found providers that are registered as pubs, IT companies, car wash companies, property letting companies, bakeries and event management companies, and they’ve all been successful [in getting PPE contracts], notwithstanding lack of experience in providing PPEs to government.”
MPs also heard that 17 tenders worth R1.2bn had gone to companies owned by politically exposed people.
“If we’re supported by additional resources, we can move even faster. The burden for tax matters is lower than the burden for criminal investigation. We think it’s a low hanging fruit for us to begin to keep these scoundrels busy, but also to begin to recover some monies and ensure the money due to the fiscus that ought to have been paid is indeed paid, or that they are prosecuted.”
Hawks head Lt-Gen Godfrey Lebeya said they were recruiting retired officers to beef up capacity to investigate Covid-19 corruption.
“We’re in the process of recruiting 200 retired or resigned officers on contract as short-term assistance.”
Auditor-general Kimi Makwetu said he was due to release a report next week on his Covid-19 special audit which was done in real time.
“We will share this report in terms of what it says and some of the very disturbing aspects that we’ve already identified, particularly when it comes to the transfer of money between the state and individuals.
“All of us rely on databases, but if those databases are unreliable to start with, it means it opens up space for all sorts of abuse of state resources.
“The idea that we’ll chase after it afterwards is very expensive. It is wrong and drives anxiety unnecessarily in many places. Our report is going to strongly highlight those issues.
“As far as the numbers are concerned, having interrogated the financial systems, it’s also clear that some of this money has not left the corridors of National Treasury, so nobody is going to steal it until the Treasury has given it to somebody.”
Justice minister Ronald Lamola, who chairs the interministerial committee on PPE corruption, said they would establish specialised commercial crimes courts in cities in which they did not exist in North West, Mpumalanga, Limpopo, Northern Cape and Eastern Cape.
Scopa chair Mkhuleko Hlengwa called for the prosecution of those found guilty of stealing Covid-19 money and called for the recovery of the funds
“People are fed up with corruption, and we’re also fed up with it,” he said.