Was SARS Right To Establish That ‘Rogue Unit'?

SARS’s so-called rogue unit was not unlawful. That was the finding of retired judge Robert Nugent’s commission of inquiry last year. ‘While the National Strategic Intelligence Act prohibits the covert gathering of certain intelligence, that applies to intelligence concerning threats to the safety of the state, which hardly applies to intelligence relevant to collecting tax,’ reads Judge Nugent’s final report. The judge concludes: ‘I see no reason why SARS was and is not entitled to establish and operate a unit to gather intelligence on the illicit trades, even covertly, within limits.’

But did Judge Nugent get it wrong? Weren’t the establishment and operations of the rogue unit specifically designed to counter the threat to the safety of the state from organised crime that was running riot and sapping countless billions of rands annually from the fiscus? And what were/are those ‘limits’ to what SARS may covertly do? We examine the conundrum.

- Johann Van Loggerenberg

How did they bring down Scarface? In the 1920s, “The Roaring Twenties”, Mafia boss Al Capone ruled over a reign of terror and lawlessness in Chicago that included gambling, prostitution, bootlegging, bribery, narcotics trafficking, robbery, protection rackets, and murder. The police and FBI – their officers often corrupt and on the take – couldn’t touch him, even when he was the prime suspect in the ordered murder of seven rival Mafia bosses in the St Valentine’s Day Massacre.

On 24 October 1931, the crime empire of America’s Public Enemy Number One collapsed when Capone was dispatched for 11 years to Alcatraz, finally nailed by federal Treasury agents for failing to pay his income tax.

So why not use the same tool of tax to combat the global illicit trade, today estimated by the Organisation for Economic Co-operation and Development (OECD) to be running at almost $500 billion annually in counterfeit and pirated goods alone? Forty billion illicit cigarettes are smoked in the Americas and governments in the region are losing an estimated $4.6bn in tax revenue every year due to the illegal tobacco trade.

In South Africa, market research firm Ipsos reported last year that the illegal cigarette trade currently accounts for lost tax revenue running at more than R8bn annually.

From the time Pravin Gordhan was deployed to the SA Revenue Service as assistant commissioner in 1998, the former Umkhonto weSizwe and Operation Vula intelligence boss was determined to plug the loss of these billions to the fiscus. He started with beefing up the SARS intelligence capacity, bringing in as head of Compliance, Risk and Enforcement his old Vula comrade Ivan Pillay. Pillay, in turn, recruited agent RS536, the long-time police spy Johann van Loggerenberg, then attached to the Secret Service.