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LEADING THE WAY IN TRANSFORMATION: THE SARS SUCCESS STORY! Pravin Gordhan Commissioner: SA Revenue Service. The 2nd BANKSETA International Conference 2004. Presentation by PRAVIN GORDHAN Commissioner of SARS to. SARS Mandate. The SARS Mandate - PowerPoint PPT Presentation
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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
1984-1993Growth a mere 1% a yearInvestment shrinks 2,9% a yearInflation averages 14,3%Deficit up to 9.3% in 1993Fin account net outflows of R46,1
bnInvestment boycott
1994-2003Growth around 3% a yearInvestment expands 4.7% a yearInflation down to <6%Deficit down to around 3%Fin account, net inflows of R169,6
bnUnprecedented ratings upgrades
5Basic needs and social services
1.6 million houses built700 new primary health clinics builtElectricity to 4 million homes4.5 million children benefit from primary school nutrition programmeGrant beneficiaries increased: 2.9 million to 7.4 million
6SARS ProfileThe SARS profileCollects approximately 90% of the government’s revenue, in excess of R300 billion in direct and indirect taxationAdministers 22 tax typesDeals with over 5 million taxpayers/ taxpaying entitiesOperates from over 100 sites nationwideEmploys over 14 000 staffAdministration costs <1.5% of revenue collected (developed countries 2%; developing countries 4-5%)
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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 PerformanceStable 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 targetsUnwieldy organisation structures, many layers of managementProcedures were highly bureaucratic, manual and clerical in natureWeak and outdated physical infrastructureWholly inadequate technology infrastructure – disparate line of business systemsLow staff morale with minimal representivity, limited career opportunities and lower than market related remunerationPrevalence 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
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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 manner2. Outline and communicate to taxpayers their rights and obligations as well as the available complain procedures and redress mechanisms3. Treat enquiries, requests and appeals from taxpayers in an accurate and timely fashion4. Provide an accurate and dependable information service5. Ensure that compliance costs are kept to a minimum6. Where appropriate give taxpayers’ opportunities to comment on changes to administrative policies and procedures7. 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 PROGRESSSuccessful 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
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AT A GLANCE…10 years of delivery
BEFORELow RevenueWeak customsInefficient processesIneffective enforcementPoor compliancePoor technologyLow skills
AFTERSignificantly increased revenue collectionsVisible and more efficient customsMore efficient, streamlined and integrated processesVisible and more efficient enforcementIncreased compliance cultureEnhanced and stable technology platformEnhanced 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
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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
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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