The Administration of Provincial Taxation

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The Administration of Provincial Taxation

• Select Committee on Finance
• 30 October 2001

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SARS CAPACITY

• Limited SARS capacity a key concern in the
  Seventh Interim Report of the Katz Commission
  issued in 1998
• Substantial improvement in capacity evidenced by
  SARS exceeding revenue targets for six years in a
  row
• However

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TAX POLICY REFORMS

• Taxation Laws Amendment Act 2000
• Taxation of foreign dividends
• Revised regime for Public Benefit Organisations
• Air passenger tax on international travel
• Closing loopholes in the employment field
• Revenue Laws Amendment Act 2000
• Residence basis of taxation - 1 January 2001
• Enabling legislation for AGOA
• Revenue Laws Amendment Act 2001
• Capital Gains Tax - 1 October 2001
• Second Revenue Laws Amendment Bill 2001
• Group re-organisation relief

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IMPACT OF REFORMS

• SARS has expended a massive amount of effort in
  gearing up to implement these reforms
• Legislation
• Systems
• Forms
• Training
• The private sector has faced similar demands

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SIYAKHA

• SARS has also embarked on a process of
  restructuring its operations to improve
  collections and client service
• This approach will fundamentally change the way
  that SARS does business
• The first region to be restructured was
  KwaZulu-Natal and it will shortly be followed by
  the Western Cape

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• NEW ORGANISATION

42 Old SARS Offices
New SARS Structure
6 large scale processing centres Gauteng (2),
Cape Town, Durban, Bloemfontein, Port Elizabeth
7 major compliance centres plus satellites (most
co-located with processing centres)
40 SARS taxpayer service centres, mainly in
current locations
Taxpayer queries, education and support
New SARS taxpayer service centres in previously
disadvantaged areas
New SARS call centres to handle most frequent
queries
Customs staff (where posted)
Remain in existing international border posts
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TIME TO CONSOLIDATE

• The improvement in SARS capacity has largely
  been applied to aligning the South African tax
  system with the global nature of trade and
  investment
• SARS capacity constraints thus remain an issue
  with regard to additional reforms in the short
  term
• Once the Siyakha transformation has been bedded
  down SARS capacity will be improved substantially

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CONSTITUTION

• The impact of section 228 of the Constitution on
  the administration of a tax surcharge was a key
  concern in the Seventh Interim Report of the Katz
  Commission
• This concern has been addressed by the amendment
  to the Constitution proposed in clause 14 of the
  Constitution of South Africa Second Amendment
  Bill 2001

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PERSONAL INCOME TAX

• A Personal Income Tax (PIT) Surcharge was
  considered in the Seventh Interim Report of the
  Katz Commission but was not recommended in the
  light of
• Capacity concerns
• International benchmarking of developing
  countries
• Unequal distribution of tax bases
• Continued need for equalising grants

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PERSONAL INCOME TAX

• SARS data indicates that approximately 60 of PIT
  is paid in Gauteng
• PAYE payments for 1 April 2000 toto 31 March
  2001

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PERSONAL INCOME TAX

• Tax table required for each province
• An additional burden will be placed on employers
  in respect of SITE
• Allocation of taxes collected to the correct
  province will require systems changes for
  employers and SARS
• Allocation of refunds and of payments to
  penalties and interest will be problematic

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FUEL LEVY

• A devolution of the fuel levy was considered as a
  medium term possibility in the Seventh Interim
  Report of the Katz Commission
• Once again there is an unequal distribution of
  the tax base if levied on actual sales in a
  province at the retail level or on a proxy basis
• SARS is in the process of introducing duty at
  source or the collection of the fuel levy at the
  refinery to reduce compliance costs

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OTHER TAXES

• A number of other taxes are possible
• SARS will be required to build capacity to
  administer many of these taxes as they will be
  outside the normal framework of taxes SARS
  administers
• SARS will be in an strong position to build such
  capacity as the Siyakha process frees up
  personnel

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COSTS

• The cost of administering a tax depends on many
  factors, amongst them the degree to which
  existing capacity can be reused to support the
  tax
• The Skills Development Levy is a tax that is
  closely aligned with the current employees tax
  system
• SARS recovered its system development costs and
  charges an ongoing fee of 2 of collections

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