Portfolio Committee 2001 Presentation to the Portfolio Committee on Finance Date: 11 May 2001 Presented by: Pravin Gordhan

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2001

Presentation to the Portfolio Committee on

Finance

Date: 11 May 2001Presented by: Pravin Gordhan

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2001 Contents

SARS Plans 2000/01 Tax Revenue Transformation

SARS Achievements 2000/01 Tax / Trade policy implementation Operational targets Transformation Support Services

SARS Budget SARS Focus for 2001/02

Strategic Plan Operational Objectives / KPI’s Measurement Implementation of Transformation

Divisional Plans

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SARS Plans for 2000/01

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2001 Plans for 2000/01

Implementation of Tax proposals Residence Base Taxation CGT Airport Tax Other

Revenue & Customs Targets R215b vs R219.6b

Transformation Design of Siyakha / Business Architecture

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SARS Achievements for 2000/01

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2001 What has been achieved: IMPLEMENTING TAX

POLICY ?

Implemented radical tax policy changes

Taxation Laws Amendment Act 2000

Foreign Dividends

Revised regime for Public Benefit Organisations

Air passenger Tax on International Travel

Closing of tax loopholes

Restraint of trade payments

Employment companies and trusts

Revenue Laws Amendment Act 2000

Residence Basis Taxation

Enabling legislation for AGOA

Proposed draft Capital Gains Tax Bill

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2001 What has been achieved: REVENUE TARGET?

0

25,000,000

50,000,000

75,000,000

100,000,000

125,000,000

150,000,000

175,000,000

200,000,000

225,000,000

1995/96 1996/97 1997/98 1998/99 1999/00 2000/01

Printed estimate Revised estimate Actual collections

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3,000,000

3,700,000

4,400,000

5,100,000

5,800,000

6,500,000

7,200,000

7,900,000

1995/96 1996/97 1997/98 1998/99 1999/00 2000/01

Printed estimate Actual collections

What has been achieved: CUSTOM DUTY?

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2001 What has been achieved: REVENUE?

TAX REVENUE COLLECTED AGAINST GDP

0

200,000

400,000

600,000

800,000

1,000,000

95/96 96/97 97/98 98/99 99/00 00/01

Collected

GDP

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2001 What has been achieved: COMPLIANCE?

Audits Policy

Finalise new policy and approach Integrated risk based audits in teams 25% of audits are risk- based

Planning Set targets Measure achievements and cost Cost benefit Analysis

Assessments R6,370,160,874 increased form R5 for 99/2000 PAYE questions: Collected R34m from one taxpayer. Transfer pricing – investigating transactions to value of R1

billion.

Training

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Industry Investigations Food Wholesaler (JSE)

Vat Fraud – Negotiated settlement of R128m

Electronics Industry Customs and VAT invasion: New co-operative approach to

industry. 9 arrests R50m recovered

Motor vehicle imports Customs evasion Assessment R15.6 m Seizure by asset forfeiture – R60m SARS official sentence 6 years

Financial Industry Investigating undeclared income – R100m

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Criminal Investigations 107 cases. 27 Convictions 121 years imprisonment

Internal Corruption Dismissals 57 Conviction 5 Approach

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2001 What has been achieved: CUSTOMS?

Bills of entries processing Inspections

Stoppages Post clearance

Detection of illegal imports Implementation trade agreements

EU SADC AGOA agreements

Drug seizures Total value of R1,241 billion

Teaming piloted

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Established three dedicated Rapid process areas to reduce backlogs in processing of income tax returns

Reduced assessment backlogs from 850 584 to 230 000 by end of financial year - now Zero backlog

What has been achieved: OPERATIONS?

Unprocessed returns in top 10 offices @ 15/09/2000Normal inflow of returns up to 30/03/2001

850 5841 485 401

Returns processed 2 345 9852 115 985

Balance unprocessed on 30/03/2001 230 000

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Improve control on outstanding debt

Implement the Bulk data capturing processes which improved quality of returns captured on the NITS system.

Initial operational problems with NITS overcome Service desks established in larger customs &

revenue offices

What has been achieved: OPERATIONS?

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2001 What has been achieved: OPERATIONS?

RETURNS UNASSESSEDINDIVIDUALS

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

1997

1998

1999

2000

2001

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Sought and obtained ministerial and cabinet approval Redesigned critical business processes for both revenue and

customs Established project teams which developed detailed

implementation plans Aligned the organisational structures with redesigned

business processes Developed a taxpayer service strategy Started the development of key performance indicators for

each business processes

What has been achieved: TRANSFORMATION?

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Accounting policy GAAP vs GRAP

Own Accounts Strong expenditure and cash resources control Accounting polices and procedures - December 2000 Fixed assets register implemented - Feb 2001. Bank account and supplier reconciliations now prepared monthly for the first time in 3 years

Administered Revenue Reconciliation of net cash received per accounting records and the individual Taxpayer

records in the core systems. Own Accounts/Administered Revenue

PFMA implementation plan developed for progressive implementation by April 2003 1st Phase of an integrated financial management system (Accounting module) implemented 2

April 2001

What has been achieved: FINANCE?

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2001 What has been achieved: TS?

New Income Tax System Stabilised

Bulk Data Capture An improved Bulk Data Capture system.

Implementation of Tax Proposals Air Passenger Tax for International Departures A Diesel Rebate system CGT

Manifest system for Customs The new manifest system for Customs

Integrated Financial Management System and Data Warehouse. Implementation is underway.

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HRMS system implemented

8 500 employees positioned on Career ladders

Agreement reached with trade unions on restructuring.

New job grades verified for all employees.

Partnership formed with ACCA and university tax departments to build auditor capacity.

Performance management system developed.

What has been achieved: HR?

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Employee representivity improved.

What has been achieved: HR?

0%

10%

20%

30%

40%

50%

March '98 March '99 March '00 March '01

PERCENTAGE OF BLACK EMPLOYEES AT VARIOUS ORGANISATIONAL LEVELS

General staff

Supervisory staff

Management staff

All staff

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2001 What has been achieved: INTERNAL AUDIT?

One year and 3 year audit plan. Introduced a risk based audit approach, new audit

manual and methodology, and identified training requirements for audit staff.

Conducted focussed audits including requests that added value e.g. Review of high risk areas within Siyakha, and input into the draft prevention plan.

Identified high level risks that SARS is exposed to. Combined audit efforts between SARS internal

audit and the AG on all audits to be performed by the AG.

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2001 Budget Allocations 2001/02

Operational Budget

Personnel Exp

Admin Exp

Inventories

Accommodation

Prof & Spec Serv

Misc Exp

Capital

Total

MTEF Allocation

% of Revenue

Revenue Collected 219 732 000 000

2000/01

1.15%

2 529 114 000

2 529 114 000

132 801 661

3 003 231

180 703 830

294 611 101

68 818 247

316 441 420

1 532 734 510

234 000 000 000

2001/02

1.14%

2 673 181 000

2 673 181 000

69 807 477

7 10 8 000

220 229 107

143 836 989

100 777 979

499 900 871

1 631 520 577

2002/03

0.00%

2 944 296 000

2 874 044 373

132 894 881

7 108 000

209 416 963

166 262 740

92 248 549

564 749 287

1 701 363 953

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2001 Budget Allocation: SARS TOTAL

Classification2000/01Budget

2001/02Budget

Increase /(Decrease)

Communication 6,743,844 20,755,428 208

Finance 463,243,893 381,112,371 -18

Internal Audit 9,188,898 15,972,244 74

Human Resources 127,158,657 158,743,232 25

Operations 1,242,310,559 1,246,483,611 0

Technology Services 248,347,153 246,836,017 -1

Business Systems DesignCenter

0 50,260,331 100

Law Administration 45,045,029 54,862,620 22

Office of the Commissioner 27,417,193 23,935,113 -13

Compliance 61,768,710 111,677,239 81

Customs 155,999,064 262,542,794 68

Siyakha 0 100,000,000 100

Total 2,387,223,000 2,673,181,000 12

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2001

Strategic Plan

Objectives & KPI’s

Implementation of Transformation

Tax / policy proposals

Measurement

Focus for 2001/02

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2001

Strategic Plan

Focus for 2001/02: STRATEGIC PLAN

Strategicdirection

Business Plan

Divisional Objective

Outputs & KPI’s

Office Objectives

Office Outputs & KPI’s

Individual Outputs & KPI’sBranch Level

Organisational Level

Divisional Level

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2001

Our Strategic goals

Focus for 2001/02: STRATEGIC PLAN

Optimising Revenue Yield

Transforming our people and culture.

Consistently providing service and education to our stakeholders

Responsible enforcement

Promoting regional and international co-operation

Promoting good governance

Ensuring consistency, uniformity and accuracy in the application of laws

Transforming our processes and technologies

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2001 Focus for 2001/02

PERFORMANCE MEASUREMENT

DIMENSIONS

Taxpayer Satisfaction

Employee Satisfaction

External Stakeholder Satisfaction

Revenue Collection

Financial ManagementOrganisational

Change & Transformation

Ministerial Initiatives

Risk Management & Enforcement

Objectives & KPI’s

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2001

Draft PBO Activities list

Tax incentives

Strategic Investment allowance

Small manufacturing companies

Diesel fuel refund - Farmers, Mining, Forestry

Review tax on banks

Unemployment Insurance contributions

Siyakha amendments

Focus for 2001/02: IMPLEMENTING TAX POLICY

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2001 Focus for 2001/02: IMPLEMENTING TAX POLICY

Classification 2000/01MTEF

Baseline

2001/02MTEF

Baseline

Increase /(Decrease)

%

Personnel Expenditure 30,189,327 33,589,888 11

- Base Amount 29,989,327 33,339,892 2

- New Salary improvements 0 0 0

- Carry through cost 0 0 0

- Consultation fees 200,000 249,996 24

AdministrativeExpenditure

2,476,264 3,545,917 43

Inventories 1,417,280 1,463,691 3

Accommodation 4,000 465,929 11,548

Prof and Spec Serv. 10,844,158 15,087,395 39

MiscellaneousExpenditure

0 0 0

Capital 114,000 709,800 523

Total 45,045,029 54,862,620 22

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2001 Focus for 2001/02: Transformation

Gauteng East Processing Center Compliance Office Taxpayer Service Centers

Gauteng West Processing Center Compliance Office Taxpayer Service Centers

Durban Processing Center Compliance Office Taxpayer Service Centers

Cape Town Processing Center Compliance Office Taxpayer Service Centers

Port Elizabeth Processing Center Compliance Office Taxpayer Service Centers

Bloemfontein Processing Center Compliance Office Taxpayer Service Centers

Tendering Process 3 Months

9/01 12/01 3/02 6/02 9/02 12/02 3/03 6/036/010

Nov 2002

May 2002

National Roll Out

Sep 2002

Mar 2003

Oct 2001

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2001

FMO functions

Processing Centre Compliance CentreTaxpayer Service

Centre Assessments

Return control

Check return

BDC

Pre-assessment

Refund checking

Payments Remittance

BDC Input

File Control New Registrations

Registration Maintenance

File Management

Mail room

Assessment Maintenance

Account Maintenance

Audit Desk Audit

Field Audit

Collections Field Collectors

Account Maintenance (Collections focus only)

Admin support (tracing)

Attorneys

Criminal Investigations

Client Service Simple queries

Complex queries

Cash Hall

Call Centre (location to be finalised)

Focus for 2001/02: Transformation

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2001 Focus for 2001/02: Transformation

Classification2000/01MTEF

Baseline

2001/02MTEF

Baseline

2002/03MTEF

Baseline

Personnel Expenditure 0 43,531,901 100

- Base Amount 0 19,394,131 100



- Consultation fees 0 24,137,770 100


0 20,225,224 100

Inventories 0 8,878,612 100

Accommodation 0 13,428,399 100

Prof and Spec Serv. 0 10,812,144 0


0 0 0

Capital 0 3,123,720 100

Total 0 100,000,000 100

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2001 Focus for 2001/02: CUSTOMS

Raise examination to 5% Accreditation of low risk custom traders Implement electronic submission of declarations

to cover 60 - 80 % of top clients Conduct 8 customs Mobile Unit office inspections

in high risk parts Align procedures with revised Kyoto Covention Raise capacity through

350 additional staff Improved training & management development

programs Basic operational facilities

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Roll-out teaming Complete risk-based implementation Passenger

Control system Conclude mutual assistance Agreements with:

Transnet; Post Office Ltd. Customs Administrations of neighboring trading partners

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Baseline

2001/02MTEF

Baseline

Increase/(Decrease)

%Personnel Expenditure 129,901,087 197,770,175 52

- Base Amount 129,901,087 197,768,175 52



- Consultation fees 0 2,000 100


9,538,247 20,321,737 113

Inventories 3,436,200 9,120,188 165

Accommodation 5,366,409 15,951,318 197



0 0

Capital 3,499,429 13,283,440 280

Total 155,999,064 262,542,794 68

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2001 Focus for 2001/02: REVENUE

Account clean-up to ensure correct accounts to taxpayers

Introduce quality control over measures to ensure correct assessments

Develop simplified Income Tax Returns Dedicated Taxpayer Service areas at all Branches Analyse developments in the economy to find

opportunity for additional revenue collection

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2001 Focus for 2001/02: REVENUE


Baseline

2001/02MTEF

Baseline

Increase/(Decrease)


- Base Amount 908,200,864 920,954,084 1



- Consultation fees 2,075,285 5,194,270 150


112,890,781 148,888,764 32

Inventories 56,854,733 60,500,307 6

Accommodation 80,135,938 78,622,882 -2

Prof and Spec Serv. 28,906,930 20,876,422 -28


46,246 0 -100

Capital 53,199,782 11,446,882 -78

Total 1,242,310,559 1,246,483,611 0

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2001 Focus for 2001/02: COMPLIANCE

Audit Policy

Manual Risk Profiling implemented Automated risk profiling system

Planning Audit plans for 2001/2002 developed

Assessments Target 8 billion

Siyakha Roll-out of pilot

Training Various courses developed

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Industry Investigations Industry areas identified

Criminal Investigations Increased number of cases Revenue target set

Debt Collections New Target set Expand outbound Call centre New legal capacity

Tax Base broadening New approach developed

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Baseline

2001/02MTEF

Baseline

Increase/(Decrease)


- Base Amount 48,443,133 74,387,909 54


- Carry through cost 0

- Consultation fees 0 236,004 100


3,196,351 14,413,399 351

Inventories 849,340 2,010,132 137

Accommodation 2,091,283 3,706,414 77

Prof and Spec Serv. 246,190 7,705,803 3,030


2,951,985 5,000,000 69

Capital 3,990,428 4,217,578 6

Total 61,768,710 111,677,239 81

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2001 Focus for 2001/02: FINANCE

Own Accounts Strengthening & enforcing proper financial record keeping &

maintaining & enforcing strong expenditure.

Administered Revenue Finalising GRAP reporting (cash accounting) at Feb 2001 with a

migration plan for progressive implementation to GAAP

Own Accounts/Administered Revenue Provide (develop/enhance) appropriate financial management

information to facilitate decision-making. Execution of PFMA implementation plan. Strengthening liaison and working relationship with AG Improving financial literacy in SARS

Procurement Providing a procurement service that is sound, cost efficient and

timeous. Ensuring that the changing business facilities needs are timeously

and economically catered for.

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2001 Focus for 2001/02: FINANCE


Baseline

2001/02MTEF

Baseline

Increase/(Decrease)

%Personnel Expenditure 25,836,710 25,169,463 -3

- Base Amount 21,555,310 22,370,769 4



- Consultation fees 4,281,400 2,798,694 -35


177,279,067 258,248,550 46

Inventories 2,270,368 1,256,445 -45

Accommodation 206,427,774 20,240,020 -90



0 2,108,000 100

Capital 1,111,099 549,821 -51

Total 463,243,893 381,112,371 -18

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2001 Focus for 2001/02: HR

Facilitate Siyakha staff redeployments Produce policy and procedure manual Launch SARS College Rationalise employee health insurance Implement employee assistance programme Develop succession plan

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2001 Focus for 2001/02: HR


Baseline

2001/02MTEF

Baseline

Increase/(Decrease)


- Base Amount 115,518,992 123,167,301 7





2,572,853 7,507,622 192

Inventories 1,027,200 10,073,840 881

Accommodation 41,000 10,708,400 26,018

Prof and Spec Serv. 89,000 189,200 113


0 0 0

Capital 5,880,548 2,848,868 -52

Total 127,158,657 158,743,232 25

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2001 Focus for 2001/02: TS

Technology architecture A technology architecture needs to be finalised with a

proper migration plan

Implementation of Capital Gain Tax Future developments on NITS

Further development of NITS functionality: external interfaces year end functionality

Single Registration Number Infrastructure networks

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2001 Focus for 2001/02: TS


Baseline

2001/02MTEF

Baseline

Increase/(Decrease)


- Base Amount 4,641,988 4,904,284 6





2,178,398 2,196,428 1

Inventories 1,581,910 2,126,332 34

Accommodation 91,317 -100



0

Capital 57,651,173 31,037,494 -46

Total 248,347,153 246,836,017 -1

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2001 Focus for 2001/02: COMMUNICATION

Tax payer education campaign Tax literacy campaign Product placement of material on popular soap operas Campaign on Income Tax Returns, Provisional Tax Capital Gains Tax Implementation Campaign

Tax Stakeholder’s workshop Materials development – publications, leaflets, pamphlets and

brochures Training and development of staff Internal communications

Re-launch Internal News letter Review website, Intranet – Corporate Image

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2001 Focus for 2001/02: COMMUNICATION


Baseline

2001/02MTEF

Baseline

Increase/(Decrease)

%

Personnel Expenditure 3,476,495 2,980,981 -14

- Base Amount 3,126,495 2,884,643 -8



- Consultation fees 350,000 96,338 -72


2,156,351 15,114,119 601

Inventories 860,000 2,244,992 161

Accommodation 90,000 236,000 162

Prof and Spec Serv. 25,999 37,992 46


0 0 0

Capital 134,999 141,344 5

Total 6,743,844 20,755,428 208

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2001 Focus for 2001/02: INTERNAL AUDIT

Overall Risk Management Strategy – process and the tool to be purchased.

Continuously review the corporate governance. Ensure compliance with PFMA for all its

processes and systems. Close internal control gaps using combined audit

teams to identify risks and controls. Perform audits as in the 1 year plan – Risk Audit

and Control Adequacy Review.

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2001 Focus for 2001/02: INTERNAL AUDIT


Baseline

2001/02MTEF

Baseline

Increase/(Decrease)


- Base Amount 6,942,899 12,135,508 75



- Consultation fees 450,000 500,000 11

Administrative Expenditure 739,099 3,014,145 308

Inventories 122,300 94,020 -23

Accommodation 5,500 68,000 1,136

Prof and Spec Serv. 61,000 49,500 -19

Miscellaneous Expenditure 0 0 0

Capital 868,100 111,071 -87

Total 9,188,898 15,972,244 74

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2001

THANK YOU FOR YOUR SUPPORT

Documents

Portfolio Committee 2001 Presentation to the Portfolio Committee on Finance Date: 11 May 2001 Presented by: Pravin Gordhan