Presentation by

L RO SO

New roots to Diversity and Business Innovation……….

South African South African Revenue ServiceRevenue Service

Workshop

2005/6 presentation

Vision & Mission StatementVision

to be a leading and dynamic Public Revenue Service

Missionto Provide an effective, efficient, economical and sustainable Revenue Service to ensure we meet the Economical & Social needs and demands of our Country and People.

National Dept. of Finance Directorate: Revenue Service (SARS)

The South African Revenue Service -challenge

Government

Business SA

Employees

Employers

Scope of this Project

To assist SARS: Increasing the number of eligible tax-payers, To ensure the accuracy & validity of updated tax-payers information

on SARS’ Database, through the implementation of a fully-integrated tax system,

To design, structure and implement strategies which will detect, address and deter non-compliancy of Tax Laws and regulations,

In addition to the above: Colors can also assist SARS with other Cost Saving initiatives which can dramatically influence the Minister’s Budget for other Ministries such as: Provincial & Local Government, Safety & Security, Transport, etc where we have extended knowledge (e.g. Standardizing of systems/application, Job Creation, etc.

Purpose

Fully integrated and automated Tax structure National system (with multi-disciplines as drivers) e.g. SARS,

Registrar of Companies, Dept of Home Affairs, Dept of Labour, Dept of Trade & Industry, Statistics South Africa, Deeds Office, Dept’s of Justice, Safety & Security & Correctional Services, Dept of Transport, Dept of Intelligence,

As much as all Efforts or Input results in an Output, the Output will form the base for the next batch of Input. In modern times where much dependency and reliance has been placed on Technology, without accurate, available and accessible Memory or Data, any or all technology is rendered worthless.

The ISO standards and Cobit practice tools implies that “Efforts and its Results (available data or statistics) is the key to any entity’s success or failure”. All our proposals and working solutions include these business Enablers.

Areas of Focus

Individuals, Micro-businesses, Small & medium enterprises (SME’s), Large Businesses & Charities, Non-Governmental Organizations (NGO’s: incl. Religious

sectors), Non-Profitable Organizations (NPO’s : incl. Religious sectors)

What is the 20/80 vs the 80/20 factor which we refer to?

The 20/80 factor vs the 80/20 factor

It is the norm for most Developed Nations where the expectation of Tax Law compliance and knowledge is rated above average, Much reliance is placed on the Tax-payers (Individual, Business, NGO’, NPO’s and Government departments) to comply with (a) Registration for Tax-purpose, (b) Tax Lodgment obligations & (c) Submitting correct Tax information, timely:

Unfortunately these EXPECTATION has often resulted in huge tax losses due to inaccurate and/or outdated information, tax evasion and tax fraud. Governments and/or National Treasury Departments were forced to invested millions of US$ and Euro’s in Tax Fraud Audits and Risk Policies and instead of managing by EXCEPTION, Managers/Directorates had to constantly try and manage all their processes, at the time: exposing the organization to more and greater Risk.

80/20 Approach We believe that with our Approach, SARS Revenue shall be able to improve

its Information Gathering process substantially. In essence the current approach and system provide SARS with less than

20% of business and Personal Tax validated information. However with the implementation of the 80/20 approach, SARS will have obtained no less than 80% of critical business and personal tax information (certified and validated) prior to the issuance of the “Annual Tax Forms” (business and person).

This Approach will allow Managers to “Manage by EXCEPTION”, by constantly evaluating and improving the 20%, where necessary.

Common issues facing Micro-business & SME’s, re:Tax Compliancy Registration of Taxes: all though most of these businesses are

registered for Tax, they are not often full participants of the Tax system

Poor Record Keeping: often has significant impact on compliancy, thus often fail or default on accurate and timely:-

Lodgment of Statistical reports (monthly, quarterly & annually) & Paying Taxes such as PAYE/SITE, UIF, SDL, VAT, etc. Micro business & SME’s often fail to provide for their tax liabilities

due to a lack of cash-flow and inadequate business planning, thus fall in debt with arrear taxes + fines & penalties, due to non-compliance with Tax Laws and regulations. Some finally end up in Court, while others opt for closure, bankruptcy and insolvency.

Although a great % of Micro businesses and SME’s strive towards fully complying with the Tax Laws, a % of habitual non-compliers is constantly busy exploiting new loop-hole to avoid paying Tax

Prevention is less costlier than Cure”

o Preventative and Corrective Action/measures

o Standard Practice or industry Norms allows us to apply relative or reasonable Preventative measures to protect us from losing control of our business or interest, however as indicated in our ICA model, certain Internal & External factors can/will and shall result in compromising or request for Change Management of our Current/present Risk Management Tool/system or model….hence Change is inevitable

o But these Changes can only take place when applying the necessary Corrective measures which will and/or should determine your new updated Preventative tool, as included into your RMS to ensure business has taken the necessary precautions against any previously recorded exposure/risk.

o See table for illustration

Norm/Standard AS ISCurrent -Practice

TO BE (for Change Request)Best – Practice

ICA (Integrated Control Architecture)

Economical forcesTechnological forces

Political forcesSocial forces

VisionMissionValues

8 Maintain Assets

2Procurement

9R&D

projects 3Marketing

5Sell service

6Workforce

7Maintain systems

10Finance

1Plan/Strategy

4Product/Services

CentralizedResponsibility

Suppliers

Consultingservices

InvestmentsLenders

The Public

Network

Objectives

Goals

Cash outCash in

C

C

C

C

C

C

C

C

C

C

ICA (Integrated Control Architecture)

Business Processes

BPMe

IPMe

5P’s & 3E’s

5P’s & 3E’s

7A’s & 3G’s

Business Performance

Measure

Individual Performance Measure

System Performance

MeasureSPMe

Key Tools for the Assessment of Business, IT & Risk Management

• 3 E’s : Output measurements

• 5M’s: Input

• 5Ps’: Process levels of an Activity

• 7GA’s : Generic Assertions

• 3G’s

• Effectiveness, Efficiency and Economy

• Material, Machinery, Manpower, Method and Measure

• Plan, Prepare, Produce, Pre-delivery and Present

• Validity (Vy), Complete (C), Accuracy (A), Timely (T), Valuation (Vn), Existence (E) and Record (R),

• Guide/path, Guard/protect, Gauge/evaluate

SWOT Finding StatementSWOT Finding Statement

IDENTIFY: What we have & What don’t we have? How do we manage what we have or don’t have ?

1. Method YES NO Adequate Inadequate

2. Material YES NO Adequate Inadequate

3. Manpower YES NO Adequate Inadequate

4. Machinery YES NO Adequate Inadequate

5. Measures YES NO Adequate Inadequate

POLICY &

GOVERNANCE

TO ENSURE COMPLIANCY

WITH NATIONAL

GOVERNMENT & TREASURY

LEGISLATIVE, CORPORATE

GOVERNANCE, PFMA, COBIT, CAATS, AND

OTHER RELEVANT

GUIDELINES.

PROCESSES&

PROCEDURES

ENSURE THAT THE SARS PROCESSES, PROCEDURES, WORK AND DOCUMENT FLOW IS DESIGNED & IMPLEMENT TO ENSURE EFFECTIVE CONTROLS & COMPLIANCE.

CAPACITY BUILDING

ENSURE THAT SARS HAS THE CORRECT MANPOWER, MATERIAL, MACHINERY & METHODS TO PROVIDE AN EFFECTIVE, EFFICIENT & ECONOMICAL SERVICE TO IT’S CUSTOMERS.

INTERNAL SERVICE

LEVEL AGREEMENTS

(SLA’s)

ENSURE THAT ALL RELEVANT PERSONNEL & DEPARTMENTS PROVIDE THE NECESSARY SUPPORT & INFORMATION AT THE RIGHT PLACE, TIME AND FOR THE RIGHT ACTIVITY OR PROJECT.

SERVICE DELIVERY

TO ENSURE EFFECTIVE,

EFFICIENT AND AN

ECONOMICAL INTEGRATED & USER-FRIENDLY

TAX SYSTEM WHICH MEETS THE NEEDS &

REQUIREMENTS FOR EXCELLENT

SERVICE DELIVERY.

PERFORMANCEMANAGEMENT

TO ENSURE THAT MANAGEMENT & STAFF SERVICE DELIVERY IS EFFECTIVELY MEASURED AGAINST THEIR JOB DESCRIPTION, PERFORMANCE CONTRACTS AND SLA’s, FOR COMPETENCIES & WORTH.

OUTPUT/OUTCOMEAN EFFECTIVE FULLY INTEGRATED TAX SYSTEM, TO REDUCE EXCESSIVE LABOUR COST, IMPROVE PRODUCTIVITY AND COLLECTIONS & REAL-TIME INFORMATION

APPROVED BUDGET &STRATEGY

SARSMinister

OfFinance

Finance

NationalGovernmen

t

Information andIT Resources

•effectiveness •people

•efficiency •application systems

•confidentiality •technology

•integrity •facilities

•availability •data

•compliance

•reliability

Information IT Resources