South African tech firm suffers R20 million tax return hack

A Sandton-based ICT firm that lost its tax return of R20 million to a South African Revenue Services (Sars) e-filing hack is yet to have its case investigated by Sars after more than a year, the Sunday Times reports.

An independent investigator told the Times that these hacks are achieved by changing the banking details used to file for a tax return, which requires high-level involvement from the person or entity, such as director-level access.

Alternatively, the banking details could have been changed by a Sars employee, which is something the revenue collector has been hesitant to investigate allegations of, according to the investigator.

The report did not identify the company. However, it did reveal that the company sent Sars a summons for damages suffered due to its failure to act.

This has occurred in the past when Mol Pro Consulting, a construction company accused of tax fraud, claimed that the allegations against it were caused by a former SARS employee hacking its e-filing account and manipulating its books.

The charges against Mol Pro — previously praised for its work by Cyril Ramaphosa in 2017 — claim that it defrauded SARS out of R116 million, forcing the company to shut down operations and revoke its tax clearance.

An internal SARS investigation into Mol Pro’s claims found that a former SARS employee took over Mol Pro’s books in 2019 and altered its filings all the way back to 2010.

This individual is linked to the profiles of over twenty other companies, including another company being pursued for tax fraud.

Even with this knowledge, the SARS criminal investigations unit and the NPA continue to pursue charges against Mol Pro and its directors.

“SARS’s criminal investigations have been weaponised to target and destroy our multi-award-winning business and have us jailed with no due process,” company director Khothatso Moletsane said.

“A faceless agent at SARS criminal investigations who has never met us has fraudulently generated charges and had us arrested three times in the past five years.”

Because of such instances of suspected corruption within Sars, the finance minister has granted permission for the office of the tax ombud (OTO) to investigate the revenue service’s inability to assist fraud victims.

The ombud held a public workshop in June to engage with taxpayers and tax practitioners to gain direct information about the hacking of e-filing profiles.

This was done to request the finance minister’s approval to conduct a systemic review of Sars, according to OTO’s senior manager for legal services and systemic investigations, Gert van Heerden.

“Sars has been notified of the approval by the minister and, as with the previous systemic reviews conducted during 2017 and 2018, Sars will give its full cooperation during the process,” van Heerden said.

Citing a former government employee knowledgeable of Sars’s inner workings, the Sunday Times reported that although the organisation improved its performance under Kieswetter, the years of state capture degraded Sars’ enforcement ability, resulting in a lack of fear of the organisation.

The source pointed out that Sars’ had a respectable enforcement capacity and a strong modernisation incentive before the state capture period.

However, they argued that the former was deliberately destroyed, and the modernisation disappeared when the executives leading it decided to leave.