LEADING THE WAY IN TRANSFORMATION:

1
LEADING THE WAY IN TRANSFORMATION THE SARS
SUCCESS STORY! Pravin Gordhan Commissioner SA
Revenue Service
2
The 2nd BANKSETA International Conference 2004

• Presentation by
• PRAVIN GORDHAN
• Commissioner of SARS
• to

3
SARS Mandate

• 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

4
The Economy
1994-2003 Growth around 3 a year Investment
expands 4.7 a year Inflation down to lt6 Deficit
down to around 3 Fin account, net inflows of
R169,6 bn Unprecedented ratings upgrades
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
5
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
6
SARS Profile

• The SARS profile
• Collects approximately 90 of the governments
  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 lt1.5 of revenue collected
  (developed countries 2 developing countries
  4-5)

7
SARS VOLUMETRICS
3 000 Bonded Warehouses
1,4 Million SACU Movements
4 Million Individual taxpayers
1,7 Million Import transactions
14 000 SARS Employees
1 451 Manufacturers of excisable products 4
licensed distributors
1,4 Million Export transactions
3 000 Rebate Manufacturers
1,3million Corporate Taxpayers
136 000 Registered Traders/Operators
274 764 PAYE Employers
536 281 Vat vendors
8
REVENUE 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
9
SARS Performance
Stable tax regime Fiscal stability Increased
revenue yield (exceeding revenue
targets) Significant tax relief (R73
billion) Broadening the tax base Improved
service
10
OUR LEGACY

• 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

11
OUR LEGACYThe 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

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

13
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

14
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)

15
EVOLUTION 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

16
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

17
SARS LBC

• Launch of SARS Large Business Center - 2
  September 04
• The LBC Business Model

• 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

Developing enhanced Relationships with our
corporate taxpayers based on intimate
knowledge derived from industry sector
specialization
18
LBC 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
19
Noteworthy achievements

• 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

20
AT A GLANCE10 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

21
A REALITY CHECK

• Change is ongoing
• Weve achieved a lotbut 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 strategy
• Institutional transformation

23
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

24
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
• Create a vision for the future
• Transformational passionate leadership actively
  driving change and instituting a new way

25
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

26
Thank You