South African Treasury Said to Shed Tax Officials Over Low Pay

By Renee Bonorchis, Franz Wild and Rene Vollgraaff

The team formulating tax law for South Africa’s Treasury has been depleted by departures over the last 18 months because of better career opportunities and pay elsewhere, according to four people with knowledge of the situation.
At least nine members of the Treasury’s legal tax design unit left for jobs in accounting and law firms where they were able to earn as much as 40 percent more, three of the people said. They declined to be identified as the information hasn’t been made public.
The departures have left the Treasury short of skills in the tax team, slowing progress on new legislation, two of the people said. Some of the drafting of tax law has gone to the South African Revenue Service, creating a conflict of interest as it’s giving the tax
collector influence over setting policy, they said.
“It’s the depth of skills that we have built in the treasury that is sought after,” Finance Minister Nhlanhla Nene said in reply to a question from a reporter after a speech at Bloomberg’s London office two days ago. “We still have a very solid team in the tax-policy space. At the moment, we’re actually not weak at all in the tax division.”
Nene declined to be more specific. The departures are a normal development, which don’t seriously affect the tax team’s ability to do its work, according to a fourth person with knowledge of the matter, who declined to be identified because he wasn’t part of the team.

Company Commitments

Treasury spokespeople Jabulani Sikhakhane and Phumza Macanda didn’t immediately respond to messages left on their mobile phones.
Nene, who was appointed to the position in May, is due to announce the mid-term budget on Oct. 22. While economic growth has slowed, tax collection has exceeded budget estimates in the past three years. The Treasury plans to introduce measures including a carbon tax.
Some of those who left did so because of the departure of Keith Engel, the former head of the tax design team who left for Ernst & Young in March 2013, according to the people.
Since Engel’s departure, Treasury has struggled to build a tax team which is able to make and adhere to commitments with companies, according to Nazrien Kader, head of tax at Deloitte & Touche in South Africa.
“The time lag between the time discussions take place and decisions are taken is wearing us out,” Kader said. “We do have a concern about how Treasury will keep up.”
Engel didn’t answer his mobile phone today and didn’t immediately respond to a text message or an e-mail seeking comment.