1 leading the way in transformation: the sars success story! pravin gordhan commissioner: sa revenue...
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1
LEADING THE WAY IN TRANSFORMATION: THE SARS SUCCESS STORY!
Pravin GordhanCommissioner: SA Revenue Service
The 2nd BANKSETA International Conference
2004
Presentation by
PRAVIN GORDHAN
Commissioner of SARS
to
3SARS MandateThe 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
4The Economy
1984-1993
Growth a mere 1% a year
Investment shrinks 2,9% a year
Inflation averages 14,3%
Deficit up to 9.3% in 1993
Fin account net outflows of R46,1 bn
Investment boycott
1994-2003
Growth around 3% a year
Investment expands 4.7% a year
Inflation down to <6%
Deficit down to around 3%
Fin account, net inflows of R169,6 bn
Unprecedented ratings upgrades
5Basic 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
6SARS Profile
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%)
7
1,7 MillionImport
transactions
1,4 MillionExport
transactions
3 000Bonded
Warehouses
3 000Rebate Manufacturers
14 000 SARS Employees
136 000Registered
Traders/Operators
1 451Manufacturers of
excisable products & 4 licensed distributors
1,4 MillionSACU Movements
SARS VOLUMETRICS
4 MillionIndividual taxpayers
1,3millionCorporate Taxpayers
536 281Vat vendors
274 764PAYE Employers
8REVENUE PERFORMANCE
R 'billion 1998/9 1999/0 2000/1 2001/2 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
Above/under target 5.6 7.5 6.7 15.5 13.7 (7.6)
Total additional collections (10 year period) 50.4
9SARS Performance
Stable tax regime
Fiscal stability
Increased revenue yield (exceeding revenue targets)
Significant tax relief (R73 billion)
Broadening the tax base
Improved service
10OUR LEGACY11 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
11OUR LEGACY…The SA ClimateThe 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
12
PRINCIPLES OF A GOOD TAX AND CUSTOM ADMINISTRATION (OECD)
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
13EVOLUTION 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
14EVOLUTION OF SARSRefocused 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)
15EVOLUTION OF SARS
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
16SIYAKHA 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 implementedConcentration of assessment activities resulted in improved turnaround timesOver 2400 staff have been trained in service and functional expertiseTo 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
17SARS LBC • Launch of SARS Large Business Center - 2 September ‘04
• The LBC Business Model:
Developing enhancedRelationships with our corporate taxpayers based on intimate knowledge derived fromindustry 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
18LBC Service Model
Providing world-class operational excellence with one-stop - single point of entry for all tax types and effective Administration & Resolution processes
A Convenient one stop service for
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
19Noteworthy achievementsConsistently exceeded revenue targets despite undergoing organisation wide transformationSuccessfully introduced challenging legislative changes eg. RBT, CGTShifted the compliance culture in SA through targeted, visible enforcementExpanded the business to take on new tax products eg. UIF and SDLMade 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
20
AT A GLANCE…10 years of delivery
BEFORE
Low Revenue
Weak customs
Inefficient processes
Ineffective enforcement
Poor compliance
Poor technology
Low skills
AFTER
Significantly increased revenue collections
Visible and more efficient customs
More efficient, streamlined and integrated processes
Visible and more efficient enforcement
Increased compliance culture
Enhanced and stable technology platform
Enhanced focus on development of technical and management skills
21A REALITY CHECKChange 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
22
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 strategyInstitutional transformation
23ANTICIPATED OUTCOMESSmarter 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
24RECIPE 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
Create a vision for the future
Transformational passionate leadership – actively driving change and instituting a new way
25
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
RECIPE FOR OUR SUCCESS…
Thank You
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