sars budget vote presentation to the portfolio committee on … · 2015. 1. 30. · contents...

SARS Budget Vote Presentation

to the Portfolio Committee on Finance

6 April 2005

ContentsIntroduction

Revenue Collections for 2004/52004/05 Scorecard

The 2005 – 2008 MandateSARS Overall MandatePresident Mbeki’s State of the Nation’s AddressKey Government ChallengesMinister Manuel’s Budget Speech

SARS Intent/ AspirationsChallengesSARS Approach

Compliance ModelCapabilities

2005/6 Key Priority Areas2005/8 Strategic Objectives

Outcomes; Outputs; Actions; Measures and TargetsENE Programmes

SARS Achievements

Revenue Collections exceeded by

R 21 Billion for 2004/05,

Collected R354.9 Billion

Join us in celebrating!!R million R million R million

TaxFebruary 04

estimateProvisional outcome

Variance (surplus/shortfall)

PIT 106,708 111,386 4,678 CIT 69,730 72,105 2,375 VAT 89,500 98,243 8,743 Excise 13,112 13,006 -106 Customs 9,500 13,148 3,648 Fuel Levy 17,409 18,779 1,370 Transfer Duties 5,200 7,115 1,915 Other 22,535 21,082 -1,453 TOTAL 333,694 354,864 21,170

Join us in Celebrating!!R million R million R million

TaxFebruary 05

estimateProvisional outcome

Variance (surplus/shortfall)

PIT 111,436 111,386 -50 CIT 66,411 72,105 5,694 VAT 95,468 98,243 2,776 Excise 12,975 13,006 31 Customs 11,493 13,148 1,655 Fuel Levy 18,800 18,779 -21 Transfer Duties 7,200 7,115 -85 Other 21,478 21,082 -397 TOTAL 345,261 354,864 9,603

Analysis of Surplus (Overrun)SURPLUS (OVERRUN) FOR 2004/05 FOR MAJOR TAXES

-0.52%

59.30%

28.91%

0.33%

17.23%

-0.22%

-5.02%-10%

0%

10%

20%

30%

40%

50%

60%

70%

PIT

CIT

VA

T

Exc

ise

Cus

tom

s

Fuel

Lev

y

Oth

er

PITCITVATExciseCustomsFuel LevyOther

SARS Volumetrics

1,7 Million Import Transactions

1,8 Million SACU Movements

1851 Total Seizures

68, 775 Consignment

stopped

300, 268 PAYE

Employers

4,3 MillionIndividualTaxpayers

14 Million Passengers

moving through Customs

573, 876 VAT

Vendors

1, 4 Million Corporate Taxpayers

998, 221 Export

Transactions

14 Million Returns Processed

14 600 SARSEMPLOYEES

Achievements for 2004/05

Customer• Actively marketed E-Filing and increased subscription by:

• Registrations 41%• Returns 227%• Payments 310%

• Implemented Customs internet subscription facility• Expanded on major call centres and centralised certain tax

offices for customer satisfaction• Introduction of a Call Centre specific Management system• Assessment Service levels from an average 50 % to an

average of 85%• Establishment of LBC

Learning & growth• 1000 auditors have been trained significantly increasing the

skill level• Introduction of Team Leader development programme• Implemented performance based rewards for Senior

Management• Introduced declaration of interest - completed by

Management in order to increase integrity• SARS Academy established in August 2004• 23870 staff members attended courses• Exceeded EE targets by 6%

Process (internal efficiency)• Processed 2,596 million payments in the form of cash and

cheques• Effective document management

•15,6 million documents processed via mailrooms• Improved hit rate on risk profile cases from 52% in the previous

year to 56%. • Reduced revised assessments to 5%• 89,5% of refunds paid out within the time limit • Customs head office is ISO certified – it’s process and

procedures satisfies the SABS ISO 9000 quality standards

Target achieved at R354,9 billion. Financial•Increased registration as follows:

Product Target PerformanceIT 6% 9%VAT 4% 7%PAYE 3% 9%

•Filing Campaign 1 April – 22 July 2004• IT returns received: :

• 2 377 723 (41.89% increase over prior year)• Extensions received:

• 1 021 905 (13.5 % increase over prior year)• New registrations processed:

• 239 614 (19.28% increased over prior year)• Customs priority collections R102.9m – (electronics and footwear)• Anti-smuggling collected R312m – 733 cases

Achievements for 2004/05

But, more still needs to be done …

Tax gap – more revenueTrade control versus facilitation balanceCompliance cultureProcess innovationFocused enforcementBetter skills and management cadre Integrated systems

The SARS 2005 - 2008 Mandate

The SARS 2005 – 2008 Mandate

The SARS mandate for the 2005 – 2008 years is defined in terms of the following:

SARS ActPresident Mbeki’s State of the Nation’s Address

Key Government Challenges

Minister Manuel’s Budget Speech

The 2005 – 2008 Mandate SARS Act

To collect all revenues that are due;To ensure optimal compliance with the legislation;To provide a Customs service that will maximise revenue collection, protect our borders as well as facilitate trade;Advise the Minister of Finance on tax and trade policy

The 2005 – 2008 Mandate

President Mbeki – State of the Nation Address“Our programme for the coming year is premised on

the broad objectives to increase investment in the economy, lower the cost of doing business, improve economic inclusion and provide the skills required by the economy.”

President Mbeki’s State of the Nation Address – February 2005

{Strategic Plan p 9 – 10}

The 2005 – 2008 Mandate Key Government Challenges

Eradicate poverty and underdevelopment, within the context of a thriving and growing First Economy;Successfully transform Second Economy; Achieve higher rates of economic growth and development;Improve the quality of life of all our people (increasing socialexpenditure) , and;Consolidate social cohesion.Interventions to grow the First Economy:

Increase investment in the economyLower the cost of doing business;Improve economic inclusion and provide skills required by the economy

Expanding Public Works ProgrammeHealth, education, social assistance

The 2005 – 2008 Mandate Minister of Finance – Budget Speech

“ Far more needs to be done to attract Investment, intensify education and training, deepen financial markets, open up trade relations and harmonise regulatory and legal environments…….…. We have been mindful that infrastructure spending by municipalities and public enterprises is expected to grow strongly over the years ahead, complemented by rising spending on public assets through public-private partnerships of various kinds”

Minister of Finance , Trevor A Manuel – Budget Speech : February 2005

SARS in 2005 - 2008

SARS’ Aspirations

Impartial, independent, consistent and fair administrationImproved compliance cultureRetain community confidence and reduce administrative burden andbusiness cost to taxpayers/tradersFacilitate legitimate trade, protect the economy and heighten border securityBroaden tax baseEstablish ethics-driven cadre of tax/customs professionalsEntrench a “whole of Government approach”Sustain responsible African partnerships (NEPAD)


Smarter, more visible, more accessible, more responsive SARSSmarter, more visible, more accessible, more responsive SARS

Revenue Challenge : 2005 - 2006

Revenue Challenge : 2005 - 2008

Environment – ChallengesExternal

Complex business environmentBroadening the tax baseIntegrating the second economyExtending culture of complianceProtecting the economy against illicit trade

InternalContinuous business/ process improvementsContinue to embed a service cultureProfessional Management cadreImproving skills

{Strategic Plan p 11 – 12, 17}

Environment – Strengths and opportunities

Global democratisationPolitical assertiveness, good governance and sound economic / fiscal managementHealthy national economyGrowth in revenue collected (2004/05 target exceeded)Improved efficienciesImproved compliance climateImproved services to taxpayers/traders

{Strategic Plan p 10 – 11, 16}

SARS’ Business approachOutward focused approachRisk based audit methodologyCompliance model which balances education, service and enforcementCampaign strategy to raise levels of awarenessIncreased control of smuggling and illicit tradeIncreased operational efficiency – deliver more with the same and measure performance (SARS Performance Scorecard)People developmentSynergy between tax and customsPartnership and accords


SARS Compliance Model

Enfo

rcem

ent

Service

Education

Environmental Knowledge and UnderstandingEffective

Segmentation

Risk Assessment

Customer Awareness

SARS Capabilities

CapabilitiesPeople development

Inculcate team cultureAchieve better employment equityEnhanced people wellbeingDevelop cadre of progressive professional managersBusiness and Technical skills

Information TechnologySystems responsive to complex business environmentsMigration from legacy systems to a more modern platformEmpower and enable frontline

Business Intelligence Data mining

Priority Areas for 2005/06

Key Priority Areas

Empowering Small BusinessAuditsLarge Business CustomsSARS Service CharterTransformation Programme

Strategic Objectives, Outcomes, Outputs, Actions, Measures and Targets

2005 - 2008

Strategic Objectives1. Optimise Revenue Collection

Ensure optimum collection of monies due by developing a thorough understanding of the probable tax base and implementing a focused compliance approach.Accurate forecasting from different segments.Ensure progressive reduction of the debt book.

Output:Monthly revenue targets will be actively managed to ensure sustained revenue flows.Enhance tax base broadening by identifying specific segments and operating sectors.Define and implement strategy to counter manifestations in tax gap.Implement a differentiated debt collection strategy.Continuous improvement of debt management processIncrease effective tax rates for specific sectors.Close specific loopholes and leakages.

Activity:Our intention is to optimise revenue collections by:

Monitoring and responding to economic conditions.

Outcome:


Building legal capacity in order to better develop and interpret tax policy and legislation (understand the impact and yield from changes).Development of a single Tax Administration Act.Develop a mechanism to provide advance private rulings on request.Implement and improve current legislation on reportable arrangements.Refine risk based management of dispute resolution.

Output:Recruitment of additional legal resources to boost existing capacity.Publish draft Public Tax Administration Bill for comment.Implement advance private rulings mechanism in the second part of 2005/06.Analysis of 1st reports received around reportable arrangements legislation.Better selection of cases and management of dispute resolution system.

Activity:To advise on appropriate tax policy and legislative interventions:

Analysis for tax proposals (Costing)Interpretation of tax policy (Laws/ agreements / trade policy / frameworks)Operational policy / Procedure (based on interpretations)Legal support / Case specific

Outcome:


R 7.07 BnR 6.85 BnR 6.75 BnNon-tax revenue collected

10%11%12%Debt as a percentage of total revenue

1.4%1.3%1.3%Cost as a percentage of total revenue

24.6%24.7%24.4%Revenue collected as a percentage of GDP

R 453.7 BnR 414.2 BnR 372.8 BnRevenue Target

2007/20082006/20072005/2006Key Measures

Strategic Objectives 2. Better taxpayer and trader experience

Implement an environment that facilitates small business development:Re-align staffing activities to be more service and enforcement orientated (“community tax-helpers”, field audits, small business assistance).

Output:Assist Small Business by reducing the cost of compliance and tailoring the administrative regime.

– Simplification of registration for Small Business;

– Small Business desk in every office.

– Small Business Centres at appropriate points of need.

– Extending hours of availability in various offices

– Increasing points of presence through the use of:

• Mobile Kiosks at convenient locations

• Caravans• Shared points i.e. in

community centres • Field Assistance workers

deployed in targeted areas

ActivitiesEnhance service processes and responses to queries

Outcome:


Targeted communication, taxpayer education and expectation management.

Targeted communication, taxpayer education and expectation management.

Targeted communication, taxpayer education and expectation management

Output:Assist Small Business by (cont…):

– Implement a VAT retail scheme

– Provision of accounting / planning / payroll software packages

Empowering the front end by moving people from the back office to customer facing areas. Tailor services per segment.

ActivitiesOutcome:


Develop and implement a “channel management” strategy that is based on a thorough understanding of the client base and will provide taxpayers and traders with appropriate choices for interaction:Extend the taxpayer relationship concept to all sectors within the Large Business segment.Increase channel availability by roll-out of field assistance workers and taking services to the taxpayers and traders.Provide more points of presence.Ensure that better information and risk capability is provided for in all sectors and tax types through the Enterprise Data Warehouse and Risk Differentiation Mechanism.

Output:Dedicated channels suited to identified segments.Extend current e-filing to greater functionalities for returns / account status

– CIT– PIT– VAT– PAYE– Customs– Help facility

LBCPublication of LBC Handbook in the second half of 2005/2006.Appointment of additional taxpayer relationship managers.Expand the Large Business capability to provide specialist services across defined industry sectors and geographic regions. Increase LBC regional presence (KZN and WC) Activate new industry sectors within the LBC.

ActivitiesEffective, easily available and efficient channels:

Channel types Tailored service channels for segments

Outcome:


Integrate certain customs functions within the LBC.Extend eFiling services for information sharing purposes as well as integrating data links with Large Business taxpayers and traders.

Better selection of cases and management of dispute resolution system.

Refine risk base management of dispute resolution.

Efficient dispute resolution

Implement the SARS Service Charter and the required systems to measure organisational performance and the behavioural shifts that deliver to charter Service Level Agreements.

Output:

Publish and market SARS Service Charter. Every division within SARS will be held accountable for the adherence to standards set.

Activities

Perform against SARS service charter

Outcome:


18%15%12%Year-on-year percentage reduction in number of complaints

95%90%85% Customer satisfaction survey index

95%90%85% Percentage of achievement against SARS Service Charter

2007/20082006/20072005/2006Key Measures

Strategic Objectives 3. Improved compliance and risk reduction

Improve compliance culture:Communication (including education and awareness) External assurance activities

Outcome:Actively promote the registration and regulation of tax practitioners.Undertake cyclical campaigns e.g. focusing on filing season.Develop and implement education and awareness programmes (enterprise-wide campaigns) to increase voluntary compliance through increased and focused campaigns for selected segmentsIncrease citizen awareness and understanding of rights and obligations regarding taxpaying.

Output:Embed compliance model in SARS (communication, Service and enforcement for segments) Further publication of offenders that were prosecuted to demonstrate the negative consequences of non-compliance.Specific enforcement campaigns that will have a sectoral focus:

– Sweets– Clothing/Footwear/Textile– Cell-phones– Property– Trusts– Tobacco– Alcohol– High Net Worth individuals

Activities:


Outcome: Output:Specific educational / awareness campaigns

– Small Business– Filing season– Focussed High Net-Worth

Individual campaigns – Inform them on service

offerings– International

Benchmarking– Enforcement Activities

Campaigns to address incentive schemes i.e. MIDP.Collaborative industry forums to be established.

Activities:


Assess and mitigate risk:Produce business intelligenceRisk based enforcement

Outcome:Strengthen the internal and external risk identification and assessment capability through continuous environmental scanning and research.Institute contingency planning and mitigating actions to counter and reduce risk.Engage in highly focused enforcement activities aimed at creating maximum impact in segments and sectors where non-compliance is most prevalent. Outcomes of such actions will be punitive by nature e.g. additional taxes and penalties, forfeiture and criminal prosecutions.

Output:Build an Enterprise Data Warehouse to support data mining and an improved risk differentiating mechanism.Perform integrated audits on risk areas and clientsIntroduce transactional audit methodology, where the tax risk for a transaction is determined. Increased focus in Corporate and Employer environmentFocus on notorious high risk transactions e.g. private use of assets, private expenditureEnsure customs integration with audit and investigations capabilityDefine case selection and sampling methodology that is based on

– Coverage– General Risk– Trends

Building an integrated risk rating model taking into consideration:

– Mitigation– Tolerance – Contingency

Activities:


1.5%0.7%1.5%2.5%5.5%

1.5%0.7%1.3%2.0%5.0%

1.15%0.7%1.2%2.0%5.0%

Percentage audit coverage across tax types:CITPIT: Salaried IndividualsPIT: Non-Salaried IndividualsPAYEVAT

80%70%60%Percentage success and risk based audits

R 25 BillionR 25 BillionR 25 BillionEnforcement revenue (banked)

Improvement by 7%

Improvement by 5%

Improvement by 3%

Increase in effective tax rates per selected industry sector

9%9%9% Percentage increase in compliance behaviour (registration, filing and payments)

2007/20082006/20072005/2006Key Measures

Strategic Objectives 4. Enhanced human capacity

Maintain a skills development plan for SARS.

Output:Staff complement with appropriate skills and orientation

Outcome:Will increase staff complement in customs, audit and relationship management.Establish percentage skills gap.Match skills requirement per functional process and related job.The development of progressive and capable managers through specific training for the Operational Management System

Activities


Review and refine processes, practices and support systems to facilitate the implementation of policies to manage human resources.Provision of a recruitment / retention / separation system.Refine and redefine organisational structure, roles, responsibilities and authority to meet the requirements of SARS based on the strategic intent of being outward focused and internally efficient.

Output:Enhance human resource systems and processes:

Outcome:Refine Organisation design and policies.Revision of recruitment / retention / separation processes.Implement Training through the existing SARS Academy.

Activities


Rollout the new Performance Management and Development Systems.

Continue the implementation of the employment equity plan.

Output:

A well established performance management system

Achieve employment equity and workplace diversity

Outcome:

All Senior Managers will have a performance contract in place.

Actively ensure that all employment equity targets are met.

Activities


30%30%30%Percentage improvement in management capability

100%90%40%Implementation of new performance management development system

25%25%Establish % skills gap

Percentage closure of skills gap

100%100%100%Percentage compliance with equity plan

2007/20082006/20072005/2006Key Measures

Strategic Objectives 5. Improved trade administration and border security

Efficient Implementation and management of trade agreements

To implement the general annex to the revised Kyoto Convention.

Output:

Increased ability to detect illicit trade and enhanced anti-smuggling activity


To implement the general annex to the revised Kyoto Convention

Outcome:

Invest in Border security “tools”

– Scanners– X-ray– Sniffer dogs– Tracking Devices


To implement the general annex to the revised Kyoto Convention.

Activities:


Establish a border control framework that includes designated areas under customs control. Develop memoranda of understanding with other stakeholders at ports of entry.Implement visible border policing and proactive deterrence through an enhanced customs presence and deployment of deterrence tools and systems, including an appropriate risk management program.

Output:Visible border control and pro-active deterrence:

Border control frameworkPhysical presence of resources including tools

Outcome:Change regulations that govern customs control areas.

Increase enforcement activities at customs controlled areas

Identify and enter into key stakeholder relationships. Deployment of uniformed personnel at customs areas.Joint Road-block with SAPS / SANDF“Foot-soldier” deployment in key economic areasDeployment of visible policing resources on different basis:

– Permanent presence– Random presence– Advance notification– Cyclical presence– Enforcement raids /

search warrant executions

Activities:


Output:Outcome:Enhanced visibility and enforcement activitiesConduct specific warehouse campaigns (Excise / bonded warehouse / state warehouse)

Activities:


20%15%5%Improvement in infrastructure and equipment (border, warehouse and scanner)

97%95%90%Percentage achievement of turnaround times for trade processes

65%60%55%Percentage success of anti-smuggling activities

10%15%40%

15%10%30%

20%6%20%

Percentage documentation compliance with customs regulation coverage and examination success rate:

Document coverageExaminations Success rates

80%70%50%Percentage implementation of the general annex to the revised Kyoto Convention

2007/20082006/20072005/2006Key Measures

Strategic Objectives 6. Greater operational efficiencies

Optimise organisational throughput through establishing appropriate standards, implementing standardised processes and introducing technological innovations.Refine and redefine organisational structure, roles, responsibilities and authority to meet the requirements of SARS based on the strategic intent of being outward focused and internally efficient.

Output:Implement risk based process design.Set throughput standards for each process.Align current information systems (core systems).Implement capacity planning system in operations.Identify resources /skills required for deployment from the back-office to the front end.Continued roll-out of Siyakha design.

Activities:Optimise throughput:

Standardise ProcessSet StandardsResourceSkills

Outcome:


Implement a Quality control mechanismImplement a Quality assurance mechanism

Output:Implement a Quality control mechanism that would encompass the following:

Inspection planSampling planData collectionData stratificationAnalysisRisk profilingCorrective / preventative actions

Implement a standard quality management system across the enterprise.

Activities:Maintain and enhance quality

Outcome:


Develop and implement an ICT strategy that is aligned to operations. Complete implementation of Siyakha 1 – Process and People.Develop an integrated design and governance framework which facilitates the continuous improvement of SARS via an agreed series of programmes.Provide seamless integration between front office and back office processes by implementing Business Process Management Systems.

Output:Implement process improvement approach.Deliver phase 1 & 2 of debt management process design.Provide capable ICT system with necessary functionalities for extended eFiling.Provide an appropriate architectural framework, including network infrastructure & application systems that are aligned to current and future business needs.Automate selected processes using BPM technology.

Activities:Optimise processes

Outcome:


Development of relevant automated processes with integrated images and third party information.Implement a single registration system which is geared towards becoming increasingly automated.Develop and implement an integrated business solution across legislation, process, people and technology.Ensure integrity throughout the operation, and support for government agencies and clients – single window concept.

Output:Migrate to Generally Recognised Accounting Practice (GRAP) which supports the accrual basis of accounting for administered revenue

Activities:Optimise processes cont…

Outcome:


Fully implement and enhance Operational Management System

Establish an operational Management system

Establish an operational Management system

Reduce operational expenditure on back-office inward looking administrative activities and re-focus savings on enforcement and service related activities

Redefining of operational expenditure budget

Improve cost efficiency/value for money

Output: Activities:Outcome:


65%65%65%Maintaining success rate in the litigation of appeals in the Tax and higher courts in line with international benchmarks

3%4%5%Percentage reworked as a result of own error

95%92%90%Percentage accuracy of assessments

90%85%75%Percentage of outputs delivered within standard throughput time

2007/20082006/20072005/2006Key Measures

Strategic Objectives 7. Promoting good governance

Implement a comprehensive governance framework which addresses all the internal requirements of SARS and the external stakeholder relationship.Implement the appropriate governance controls in terms of committees, approval, verification disclosure, procedures and practices.

Output:

Entrench the governance framework:

Develop governance structuresPolicies and procedures

Outcome:

Enhance current governance framework.

Activities:

Strategic Objectives 7. Promoting good governance

100%100%90%The percentage of Governance Framework implemented across the organisation

2007/20082006/20072005/2006Key Measures

Resource plan

4,954,8324,714,5184,446,449Grand total

570,306542,646511,79111.Technology

361,240343,720324,17610.People Development

61,43458,45555,1319. Policy and legislation

1,014,281964,284897,5888. Transformation

548,986522,360492,6587. Enforcement

59,20556,33353,1306. Promoting Fiscal Citizenship

223,188213,166212,9125. Large Business Centre

628,875598,374564,3504. Service Strategy

25,89524,63923,2383. Trade admin and Border Control

1,143,3691,087,9141,026,0552. Operations management

318,053302,628285,4201. Administration

2007/082006/072005/06MTEF PROGRAM

SARS Performance Scorecard

2005 - 2008

SARS Performance scorecardCustomer• Achieve 85% performance against SARS service

charter• Achieve 85% customer perception survey index• Achieve 12% reduction in number of complaints• Improved trade administration and border security

framework• Implement 50% of Kyoto Convention• Implement small business

programme

Learning & growth• Achieve 100% of employment equity targets• Implement governance framework• Implement new Performance Management

Development System• Implement skills development plan

Process (internal efficiency)• Achieve 55% customs hit rate• Achieve 60% success in risk-profiled cases• Ensure 75% transaction delivered within standard

throughput time• Achieve 90% of throughput time for trade

administration/processes• Achieve 92% accuracy of assessments

• Achieve 100% implementation of operational management

Results (financial)• Meet R372,8 billion revenue

• Achieve 9% increase in compliance behaviour (Registration, filing, payments)

• Achieve 24,4% of GDP collected as revenue• Ensure 1,3% as percentage cost of revenue collected• Ensure debt book reduced to 12% of revenue

Objectives

• Optimise revenue collection• Better customer experience• Improve compliance and risk reduction• Enhanced human capacity• Improved trade administration and

border security• Greater operational efficiencies• Promoting good governance

Report Back 2004/05

SARS Divisional report cards

See attachment 3 in information pack.

Government’s Commitment

“Acting together, we do have the capacity to realise these objectives. And sparing neither effort nor strength, we can and shall build a South Africa that truly belongs to all who live in it, united in our diversity!”

President Mbeki’s State of the Nation Address – February 2005

Thank you for your support

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