President Cyril Ramaphosa will proceed with a commission of inquiry into the South African Revenue Service (Sars), after the tax agency's commissioner Tom Moyane was suspended.

Presidency spokesperson Khusela Diko said in an SMS to Fin24 on Tuesday that the commission would be "broader" than the disciplinary proceedings against Moyane.

The Presidency told Fin24 on Tuesday afternoon that it was working on the terms of reference for the commission of inquiry. Details are not ready to be announced yet.

Parliament's standing committee on finance, meanwhile, said in a statement on Tuesday that it welcomed the decision to suspend Moyane, adding that a disciplinary inquiry into his conduct should be "fair, swift and decisive".

The former head of Sars was suspended by President Cyril Ramaphosa on Monday evening pending the institution of disciplinary proceedings.

In a scathing letter to the former tax agency head, dated March 19 and seen by Fin24, Ramaphosa told Moyane that developments at the revenue agency under his leadership had resulted in a “deterioration in public confidence in the institution and in public finances being compromised”.

Moyane had earlier on Monday written a letter to Ramaphosa saying that he would approach the courts for an urgent interdict if he were suspended or dismissed. 

It is not yet clear whether he has, in fact, done so. 

A commission of inquiry into tax administration and governance at Sars was first announced by former President Jacob Zuma in November 2017. Zuma agreed to the investigation after former finance minister Malusi Gigaba expressed concern about the tax shortfall. Gigaba, in his February budget speech, had announced a R48.2bn revenue shortfall for the 2017/2018 financial year.

Ramaphosa then mentioned the inquiry in his maiden State of the Nation Address in February. 

'A proper investigation' 

Judge Dennis Davis, chairperson of the Davis Tax Committee (DTC), agreed on Tuesday that the issues plaguing Sars would not be cleared up by removing Moyane.

“We need a proper investigation. The commission is not about Moyane. We’ve got widespread perceptions that Sars isn’t working as it should. We need to understand whether these perceptions are grounded in reality,” Davis told Fin24 by phone.

Davis, who was in May 2017 accused by Moyane of “attacking” the revenue agency, leading to a breakdown in trust, said the president was legally entitled to remove Moyane. All he needed to show are rational grounds.

Davis said the DTC in 2017 recommended to Treasury that the legislation related to the appointment of a Sars commissioner be changed to include greater oversight, but this would unlikely be in place for the next appointment.

The DTC advised that a number of options be considered to appoint the commissioner, including a supervisory board or a parliamentary committee, instead of the prerogative belonging solely to the president.

The Sars Act was amended in 2002 and moved the responsibility of appointing the Sars commissioner to the president from the minister of finance.

Davis said this was to elevate the position of the Sars head, but had unintended consequences as the minister of finance was unable to exercise oversight over Sars.

“Effectively the commissioner was at the level of a cabinet minister. The committee (DTC) said this was illogical as the [finance] minister is dependent on revenue to make his budget.”

Zuma went against the established practice of consulting the finance minister in 2014, when he appointed Moyane, a previous correctional services commissioner, to head up Sars.

Gordhan expressed his frustration several times during his second stint as finance minister between 2016 and 2017 about Moyane, who he claimed had damaged the ability of Sars to collect revenue.

Sars veteran Mark Kingon has been appointed acting commissioner, which Davis said will be for a period of 90 days. During this time, he presumes, there will be disciplinary processes against Moyane.

If he is removed, an advertisement would need to be placed for Moyane's successor and Ramaphosa would have to act “rationally” in appointing the next Sars head, Davis said.

Gigaba said in his February budget speech that processes were underway to consider the recommendations by the DTC.

Davis, meanwhile, believes legislation amending the process of appointing a Sars commissioner could be introduced later this year.

According to a Bloomberg report on Tuesday, former deputy minister of Finance Mcebisi Jonas is being considered for the top job at Sars.

Calls and SMSes to his cellphone went unanswered. 

The issue of tax refunds

Ramaphosa flagged the issue of Value Added Tax (VAT) in his letter on Monday night, saying Moyane had brought Sars into “serious disrepute” with his handling of the issue.

Tax Ombudsman Judge Bernard Ngoepe said in his report in 2017, following numerous complaints by taxpayers, that Sars systems allowed it to “unduly delay the payment of verified refunds to taxpayers in certain circumstances” and that the issue had become systemic.

Speaking to Fin24 on Tuesday, Ngoepe said that Moyane “in all fairness, had written to him and said they’d be doing their best to address these shortcomings'".

”I have no reasons to believe that these concerns weren’t being addressed [by Sars]," Ngoepe said.