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1 LEADING THE WAY IN TRANSFORMATION: THE SARS SUCCESS STORY! Pravin Gordhan Commissioner: SA Revenue Service Presentation by PRAVIN GORDHAN Commissioner of SARS to The 2nd BANKSETA International Conference 2004 SARS Mandate 3 The SARS Mandate The organisation is tasked to efficiently and effectively collect - • all national taxes, duties and levies imposed in different pieces of taxation legislation • all revenue that may be collected in terms of any other legislation, as is agreed between SARS and the organ of State or Institution SARS is also responsible for the control over the import, export, manufacture, movement, storage or use of certain goods The organisation is also responsible to the provide advice to the Ministers of Finance and Trade and Industry to on all revenue and customs matters The Economy 1984-1993 1994-2003 Growth a mere 1% a year Growth around 3% a year Investment shrinks 2,9% a year Investment expands 4.7% a year Inflation averages 14,3% Inflation down to <6% Deficit up to 9.3% in 1993 Deficit down to around 3% Fin account net outflows of R46,1 bn Fin account, net inflows of R169,6 bn Unprecedented ratings upgrades Investment boycott 4 Basic needs and social services 1.6 million houses built 700 new primary health clinics built Electricity to 4 million homes 4.5 million children benefit from primary school nutrition programme Grant beneficiaries increased: 2.9 million to 7.4 million 5 SARS Profile 6 The SARS profile Collects approximately 90% of the government’s revenue, in excess of R300 billion in direct and indirect taxation Administers 22 tax types Deals with over 5 million taxpayers/ taxpaying entities Operates from over 100 sites nationwide Employs over 14 000 staff Administration costs <1.5% of revenue collected (developed countries 2%; developing countries 4-5%) SARS VOLUMETRICS 1,4 Million SACU Movements 1,7 Million Import transactions 1,4 Million Export transactions 1,3million Corporate Taxpayers 536 281 Vat vendors 136 000 3 000 Bonded Warehouses 14 000 SARS Employees Registered Traders/Operators 7 4 Million Individual taxpayers 1 451 Manufacturers of excisable products & 4 licensed distributors 3 000 Rebate Manufacturers 274 764 PAYE Employers REVENUE PERFORMANCE R 'billion 1998/9 1999/0 2000/1 2001/2 8 2002/3 2003/4 Target 179.2 193.9 213.6 236.8 268.5 310.0 Collections 184.8 201.4 220.3 252.3 282.2 302.4 5.6 7.5 6.7 15.5 13.7 (7.6) Above/under target Total additional collections (10 year period) 50.4 SARS Performance Stable tax regime Fiscal stability Increased revenue yield (exceeding revenue targets) Significant tax relief (R73 billion) Broadening the tax base Improved service 9 OUR LEGACY 10 11 separate departments within the Department of Finance. Declining performance against revenue targets Unwieldy organisation structures, many layers of management Procedures were highly bureaucratic, manual and clerical in nature Weak and outdated physical infrastructure Wholly inadequate technology infrastructure – disparate line of business systems Low staff morale with minimal representivity, limited career opportunities and lower than market related remuneration Prevalence of internal fraud and corruption OUR LEGACY…The SA Climate The South African compliance climate reflected Low tax literacy vs high tax complexity Low tax morality Negative perception of the tax system and administration Weak protection of our borders against illicit trade Preferential tax treatment • Certain sectors • Greater ability to distort tax burdens among the affluent 11 PRINCIPLES OF A GOOD TAX AND CUSTOM ADMINISTRATION (OECD) 12 A good tax and customs administration should…. 1. Apply tax laws in a fair, reliable and transparent manner 2. Outline and communicate to taxpayers their rights and obligations as well as the available complain procedures and redress mechanisms 3. Treat enquiries, requests and appeals from taxpayers in an accurate and timely fashion 4. Provide an accurate and dependable information service 5. Ensure that compliance costs are kept to a minimum 6. Where appropriate give taxpayers’ opportunities to comment on changes to administrative policies and procedures 7. Use taxpayer information only to the extent permitted by laws that limit their use to tax officials except under compelling circumstances EVOLUTION OF SARS Introduced modern employment practices Standard job descriptions and job specifications Career paths Competitive remuneration New collaborative approach with Unions Redefined strategic direction of SARS Vision Mission Values Taxpayer Charter Code of Conduct Compliance Model 13 EVOLUTION OF SARS Refocused efforts on enforcement Increased audit capacity Introduced new tools and techniques Rolled out national campaigns addressing high risk areas Siyakha “We are Building” Transformation programme launched Commenced with organisation wide diagnosis Implementation of pilot in Kwa-Zulu Natal region Established centers (Taxpayer Service; Assessment; Enforcement; Customs) 14 EVOLUTION OF SARS 15 Appointment of a new, representative management team Provision of modernised infrastructure Streamlined and standardised business processes – supported by new policies, procedures and skills Provided a dedicated frontline environment for taxpayers Focused, high visibility enforcement interventions addressing high risk industry sectors and taxpayers SIYAKHA PROGRESS Successful implementation in Kwa-Zulu Natal and Western Cape (CBD) Ongoing transformation in Western Cape and Gauteng 9 additional offices being converted to the Future mode of operation. This platform has enabled us to identify further process improvements which are being implemented Concentration of assessment activities resulted in improved turnaround times Over 2400 staff have been trained in service and functional expertise To date, over 3000 staff have either been appointed in new positions or absorbed in terms of the Siyakha protocol Employment Equity has been improved To date more than 20 SARS locations (excise, tax and customs) have been improved 16 SARS LBC 17 • Launch of SARS Large Business Center - 2 September ‘04 • The LBC Business Model: Developing enhanced Relationships with our corporate taxpayers based on intimate knowledge derived from industry sector specialization Dedicated Sector Managers supported by Taxpayer Relationship Managers for each of the following sectors respectively: • Financial Services • Mining • Manufacturing • Information, Communication & Technology • Retail • Primary (Agriculture, Forestry Logging) • Construction • General & Diverse Holdings LBC Service Model A Convenient one stop service for Providing world-class operational excellence with one-stop - single point of entry for all tax types and effective Administration & Resolution processes cost effective filing and processing of all tax submissions, as well as the efficient management of accounts, registration of new taxpayers or changes in taxpayer status 18 Noteworthy achievements 19 Consistently exceeded revenue targets despite undergoing organisation wide transformation Successfully introduced challenging legislative changes eg. RBT, CGT Shifted the compliance culture in SA through targeted, visible enforcement Expanded the business to take on new tax products eg. UIF and SDL Made initial strides in entrenching a service culture Provided dedicated service areas Established a SARS Service Monitoring Office Released a draft Taxpayer Charter which will entrench service standards Introduced an online customer feedback system to gauge service satisfaction Implemented dispute resolution procedures for speedier resolution of administrative issues AT A GLANCE…10 years of delivery BEFORE AFTER Low Revenue Significantly increased revenue collections Weak customs Inefficient processes 20 Visible and more efficient customs Ineffective enforcement More efficient, streamlined and integrated processes Poor compliance Visible and more efficient enforcement Poor technology Increased compliance culture Low skills Enhanced and stable technology platform Enhanced focus on development of technical and management skills A REALITY CHECK 21 Change is ongoing We’ve achieved a lot…but there are still many challenges that remain Challenges we are facing Revenue administration as a suitable response to the dualistic nature of the South African economy • Widen the net to include both economies; reduce the tax gap Building fiscal citizenship to ensure a climate of sustained compliance Achieving a robust administrative machinery that supports revenue growth in a highly effective and efficient technology enabled organisation Further transforming the organisational culture to reflect greater professionalism, service and integrity THE NEXT WAVE OF TRANSFORMATION A vision for 2010 Individuals Business SMEs and large corporates Key shifts Inward administrative view to outward taxpayer view Reactive to proactive engagement Manual to automated Compliance strategy Institutional transformation 22 ANTICIPATED OUTCOMES Smarter SARS More efficient Electronically enabled Visible SARS Touching all segments Tax officers in the field Increasing access to taxpaying community Responsive SARS Better Service Swift detection and deterrence of non-compliance Learning organisation – leadership and technical capability These outcomes translate into sustained compliance and delivery on revenue targets 23 RECIPE FOR OUR SUCCESS… Overall fiscal reform – tax policy and tax administration changes in tandem Political support of Minister of Finance Administrative autonomy brings greater flexibility and control Creat e a vision for the future Transformational passionate leadership – actively driving change and instituting a new way 24 RECIPE FOR OUR SUCCESS… Create a critical mass of change drivers Evolutionary change but revolutionary thinking – sustain the change. Implement change in manageable chunks Willingness to engage with all stakeholders and across all functional areas of the business to achieve a holistic robust solution Integrated process view and enhanced business knowledge 25 Thank You