A sad resignation in South Africa

I’ve been mostly away from blogging for a few weeks, and this week I hope to catch up on the things I missed. I gather that the OECD may have published some kind of report…but that is for another day.

I was sad to read a couple of weeks ago that the Commissioner of the South African Revenue Service, Oupa Magashula, has had to resign. According to the country’s City Press, he was “at the centre of a jobs-for-pals scandal involving a convicted drug dealer.”

I encountered Magashula a few times, usually when he was chairing the OECD tax and development task force. He had a great way of bringing out differences of opinion between stakeholders, but without creating conflict. I particularly enjoyed his comment to a business representative at a drinks reception, who was telling us all that companies don’t want to avoid tax, they just want stability. “Come on, I know how businesses work,” he said, “I’ve worked at SABMiller.”

But the resignation and the way it came about has a couple of sad implications for the tax and development agenda. The first is that Magashula was such a public figurehead, not just as the head of a much-admired tax authority, but also as chair both of the African Tax Administration Forum (ATAF) and of the OECD’s tax and development task force. When International Tax Review wanted to recognise ATAF among its annual 50 biggest influencers, it was to Magashula that they naturally turned.

Hopefully the resignation will allow other senior figures from smaller developing countries to gain the same profile, and help South Africa-based ATAF to emphasise that it is a continent-wide initiative. But, in the short term, the loss of a well-known champion is a setback for the tax and development community.

The second sad thing about the scandal is that it implicates the most senior official in a tax authority that has become a model for others to follow. What did for Magashula was a recording of his phone conversation with his friend the businessman (and apparently convicted drug dealer) Timmy Marimuthu and a young woman working at KPMG, to whom he offered a job. As Business Day reports it,

Mr Marimuthu had been the target of a SARS investigation and when he obtained a copy of the discussion between Mr Magashula and the woman, he bragged that he was “untouchable” as he had “the SARS boss in his pocket”.

This is precisely the wrong kind of example to set for tax authorities seeking to improve the integrity of their administration.

It was also sad to read the way that Magashula urged the woman to take the job:

You’re still young by the sounds of it. You can never go wrong in coming to spend time in Sars. You can leverage that. When you grow up to be a very big adviser and consultant, you will know how Sars works, you will know how the laws work and you will know how the processes work in Sars.

It’s a common complaint from tax officials in developing countries (and even in the UK) that when their colleagues are poached by the private sector, they lose their institutional knowledge and human resources, while the people doing the tax planning gain knowledge of the authority’s weak points. Whatever the background to this conversation, it was sad to hear the African continent’s top tax inspector encouraging the kind of career move that his officials bemoaned.

There have already been questions about the past history of Magashula’s acting replacement. For tax morale in South Africa, as well as for all our efforts to support developing countries as they try to raise more tax revenue, it’s important that SARS demonstrates that it can recover from a scandal like this.