Disperses Taxes. NATIONAL TREASURY National Revenue Fund

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2 SOCIAL CONTRACT Social Obligation & Social Benefit MUTUAL RELATIONSHIP Citizens Pays Taxes SARS Collects Taxes Engages Private Sector to Create Public Benefits from Tax Revenue Disperses Taxes NATIONAL TREASURY National Revenue Fund PROVINCIAL TREASURIES Provincial Revenue Funds NATIONAL & PROVINCIAL DEPARTMENTS PUBLIC ENTITIES PUBLIC GOODS AND SERVICES Visible transactional relationship between SARS and citizens. Invisible link between the creation or facilitation of public goods and services by SARS. 1

3 SARS COMPLIANCE MODEL SERVICE ENFORCEMENT EDUCATION We are responsible for obtaining compliance to customs and revenue legislation. 2

4 MODERNISATION JOURNEY Since 2007 we have been modernising our business Improved Service Improved Education Automation enhances services by significantly improving the ease, convenience and speed of the tax and trader process HUMAN RESOURCES Automation allows for the expanded risk tools through the 3rd party data. Both to simplify the processes for taxpayers as well as to enhance the ability to detect and deter non-compliance Releases human resources from mundane, low yield administrative activities to focus on customer facing education, service and other compliance initiatives Increase Enforcement and the modernisation journey continues. 3

5 SARS AT A GLANCE.TODAY. 47% increase in electronic filing 54% electronically filed for all major tax types 58% electronically filed for Income Tax 25% decline in manual return submission R573.1 billion of payments were processed via efiling 66.35% payments received electronically efiling returns were 54.16% of total returns 4.1 million efiling registered taxpayers as end 28/2/2010 Revenue R14,6 billion debt collected Collectable debt book reduced by 53% from R51 billion to R 24 billion audits completed 290 guilty verdicts attained 1% improvement on PAYE Réconciliations submissions Outstanding Returns Book increased by 18% to million Collected R598.5 bn 15,267 employees 67.57% compliance with Equity Targets 91.57% affirmative action appointments and promotions 91.62% compliance to Individual Performance Management Guidelines Trade Statistics Imports R680 bn Exports R665 bn 9.21 million Taxpayers on register million assessments processed 7.09 million payments processed 0.28 million PAYE Reconciliations processed with million IRP 5 certificates 6.49 million calls received 3.96 million Taxpayers visits AND TOMORROW (2012/13) Estimated 88% of IT returns processed within 24 hours 42% of IT returns processed resulted in a refund 83.68% of VAT refunds processed within 21 days 8,816 workshops held to train 687,648 taxpayers 1544 anti-smuggling seizures 1106 counterfeit goods seized to the value of R280million 1413 contraband seizures to the value of R82 million Improved Customs Visibility (491 CBCU officers trained). Revenue Collected R818.3 bn Trade Statistics Imports R1,053 bn Exports R1,007 bn 4

6 SERVICE EMPHASIS To date we have placed emphasis on improving service and education SERVICE Introduction of customised and pre-populated Personal Income Tax (PIT) forms Returns captured in the front office during filing season 2008 increased by 49,62% from (2007) to (2008). The total number of queries handled increased by 20% Significant improvement in use of electronic channels EDUCATION 960 Points of service where there are no permanent branch offices people attended education workshops 4464 Outreach activities conducted at employers premises(largely for filing season) Over the next few years the emphasis will shift to Further service and education improvements 5

7 ENFORCEMENT EMPHASIS and an intensified focus on enforcement ENFORCEMENT Automated intelligent risk engines, for both Tax and Customs Optimised application of limited skilled resources through prioritised case selection New risk model identified outliers from information contained on submitted returns and routed to audit where necessary in order to broaden the tax base Validated information supplied by tax payers which deviated materially from third party data sources error rate dropped to 3.5% from 10% the year before 6

8 COMPLIANCE ENVIRONMENT This compliance rests on a institutional environment of : SERVICE FAIRNESS ENFORCEMENT EDUCATION SUSTAINABILITY 7

9 AT AN ECONOMIC LEVEL SARS IS A KEY INSTRUMENT OF FISCAL POLICY ADMINISTRATION Domestic Economy Macro-Economic Factors Micro-Economic Factors GOVERNMENT REVENUE DEFICIT/SURPLUS SPENDING Monetary policy South African Reserve Bank Fiscal Policy National Treasury Revenue Administration South African Revenue Services Administrative Efficiency Taxpayer Compliance Taxpayer Service All Tax Types PIT CIT VAT Customs Duties 8

10 SARS STRATEGIC PRIORITIES 1. Drive revenue realisation to deliver now and ensure sustainability 2. Drive productivity, service quality and cost efficiency 3. Fully deliver on our Customs mandate 4. Improve the SARS operating model, streamline governance and strengthen Leadership 5. Implement segmentation to strengthen our business model 6. Enable our people to perform optimally 7. Deepen key external relationships to enhance reputation and results 9

11 WE WILL DRIVE REVENUE REALISATION TO DELIVER NOW AND ENSURE SUSTAINABILITY ASPIRATION Consistently increase voluntary compliance, through institutional insight generation and outreach, education, service and enforcement, to collect all revenues due. Enhance focus on enforcement responding to the increased risk of non-compliance, to increase revenue flows and strengthen voluntary compliance. THREE-YEAR DELIVERABLES Detailed understanding of compliance levels across major areas in taxpayer/trader life cycles; Increased voluntary compliance through implementation of a comprehensive compliance framework; Strong central revenue forecasting and management capability; Streamline audit and Customs inspection processes and strengthen our audit capability; Re-engineer our debt collection processes; Expand the administration of penalties for non-compliance; and Expand the use of third party data, time-series taxpayer history and statistical scoring methodologies. 10

12 WE WILL DRIVE PRODUCTIVITY, SERVICE QUALITY AND COST EFFICIENCY ASPIRATION Deliver cost-efficient, consistent and reliable service to all taxpayers and traders, with top quartile performance against appropriate benchmarks, e.g. tax and customs authorities world-wide. THREE-YEAR DELIVERABLES Fully implemented Enterprise Capability Management System; Redefined and implemented service philosophy, service charter and channel strategy; Improved ease and speed of registration and other interactions; and Improved taxpayer and trader satisfaction. 11

13 WE WILL DELIVER ON OUR CUSTOMS MANDATE ASPIRATION Develop partnerships with all supply chain stakeholders to facilitate legal regional trade to strengthen our economy, and collect all revenues due. THREE-YEAR DELIVERABLES Improved ease and speed of declaration processing and inspections; Rolled-out accreditation programme to qualifying traders; A system to prioritise and expedite Customs inspections through CBCU and DDU; and Enhanced smuggling detection capability. 12

14 WE WILL IMPROVE OUR OPERATING MODEL, STREAMLINE GOVERNANCE & STRENGTHEN LEADERSHIP ASPIRATION An organisation that is clear on its accountabilities and collaborates effectively across internal units; Streamlined governance, to shift from a gatekeeper to risk manager approach, but with requisite levels of oversight; and An aligned and capable leadership group, that adheres efficiently to all governance requirements. THREE-YEAR DELIVERABLES A fully implemented evolving operating model, with integrated capacity plan; Streamlined governance framework; and A fully-articulated and embedded SARS leadership model which emphasises leadership development based on accountability, integrity and commitment 13

15 WE WILL IMPLEMENT SEGMENTATION TO STRENGTHEN OUR BUSINESS MODEL ASPIRATION Deliver differentiated products and compliance approaches (i.e. outreach, education, service and enforcement), that meet the needs of taxpayer/trader groups and shape compliance behaviour. THREE-YEAR DELIVERABLES Holistic segmentation designs developed for all ten taxpayer and trader segments; Phased implementation and institutionalisation of the operating model for five segments and Targeted outreach, education, service and enforcement initiatives launched for the other five segments with phased endto-end implementation soon after 2012/

16 WE WILL ENABLE OUR PEOPLE TO PERFORM OPTIMALLY ASPIRATION Create a high-performance environment that is values-driven (based on integrity and zero tolerance of corruption) and fosters professional and personal growth at leadership, managerial and technical levels. THREE-YEAR DELIVERABLES Train and retrain individuals in line with capacity and capability requirements within SARS and in other government institutions; Fully articulated and implemented employee value proposition, to attract and retain the skills we need; Sharpening our performance management processes and empowering our managers to effectively manage employee performance. 15

17 WE WILL DEEPEN KEY EXTERNAL RELATIONSHIPS TO ENHANCE REPUTATION AND RESULTS ASPIRATION Enhance outreach, education, service and enforcement by building collaborative partnerships with private, public and international sector partners and utilising their feedback to improve compliance; Make a broader societal contribution through targeted, high-impact initiatives. THREE-YEAR DELIVERABLES Clearly articulated & implemented broad external relationship/reputation programme; Implemented set of targeted corporate social investment and stakeholder assistance initiatives; and Measurable improvement in stakeholder perceptions through establishment & monitoring of stakeholder reputation index. 16

18 OUR MEASUREMENT APPROACH INPUTS ACTIVITIES OUTPUTS OUTCOMES STRATEGIC PRIORITIES How much do we need to invest in resources to achieve the desired outcomes? What activities are we going to do to achieve the outputs? Which priority outputs should we measure to achieve the outcomes? What are the key outcomes that we need to achieve our strategic priorities? What strategic priorities do we need to achieve our mandate? Determine optimal allocation of inputs given desired outputs Reallocate inputs if necessary Measure delivery of key activities that we believe will enhance the performance of the conversion process Measure key outputs that will tell us if we are making progress in delivering the outcomes Measure delivery of strategic priorities Measure delivery of mandate through strategic priority delivery We will continue to focus and align our divisional, business unit and individual targets and measures with overall outcomes 17

19 EXPENDITURE ESTIMATE OVER THE MEDIUM-TERM EXPENDITURE FRAMEWORK 18

20 SARS IN THREE YEARS EDUCATION We will engage in community and taxpayer outreach and education We will target outreach, education, service and enforcement initiatives specific to taxpayer and trader segments We will measure improvement in stakeholder experience through establishment & monitoring of stakeholder reputation index We will build a culture emphasising the importance of tax compliance and the responsibility of citizens to meet their obligations SERVICE We will introduce a single registration process for taxpayers and traders to eliminate duplication and enable a single view of a taxpayer and trader which will form a basis for a single business register We will differentiate and improve service delivery to taxpayers and traders based on clear standards We will ease and speed up registration, filing, assessment and payment interactions with us We will make it easy for taxpayers and traders to voluntarily comply ENFORCEMENT We will understand compliance levels across major areas in taxpayer/trader life cycles in detail We will streamline, expand and strengthen our audit and Customs inspection processes and capability We will expand the administration of penalties for non-compliance; We will expand the use of third party data, time-series taxpayer history and statistical scoring methodologies to enhance compliance risk detection and rating capabilities We will develop more effective penalisation for noncompliance behaviour and effectively support the NPA to prosecute for tax evasion We will have released human resources from mundane, administrative activities to perform customer facing education, service and enforcement activities 19

21 THE OUTCOME OF THE STRATEGIC PLAN IS A SARS THAT WILL increasingly provide swift efficient service to honest taxpayers and traders and equally swift and effective enforcement to those who aren t 20

22 BACKGROUND

23 THE ENVIRONMENTAL FACTORS THAT INFLUENCED THE STRATEGIC CHOICES OF SARS ONGOING SARS TRANSFORMATION EFFORTS Segmented education, service and enforcement delivery Modernisation efforts have freed up staff to focus on areas requiring additional resources IMPACT OF OUR EXTERNAL ENVIRONMENT Continued growth in revenue targets Slower economic growth means a reduction in the growth (or level) of potential revenue yield protection Global emphasis on enforcement cooperation to detect tax non-compliance Reducing threat of tax heavens Increasing pressure on compliance levels Increased regulation and safeguards Closer co-operation between tax administration On-going global security concerns SARS Strategic Priorities ASSESSMENT OF INTERNAL CAPABILITIES Change in national priorities and assessment of our service delivery Increased requirement to deliver an attractive employee value proposition, increased emphasis on improving skills levels and training GOVERNMENT POLICIES AND PRIORITIES Improve the quality of basic education Enhance the health of our people Making our community safer Foster rural development Create jobs Invest in local government and human settlements B1

24 AS AN INSTITUTION WE PLAY A CRITICAL ROLE IN THE DEVELOPMENT STATE.. Institutional Capacity Institutional Integrity Sustainability Fairness People Level SARS Citizens Skilled Professional Performance Driven Value Based Service Needs Tax Morality Compliance Culture Culture State Citizens Integrity Sustainability Fairness Rights Responsibility Obligations B2

25 AT AN ECONOMIC LEVEL SARS IS A KEY INSTRUMENT OF FISCAL POLICY ADMINISTRATION Domestic Economy Macro-Economic Factors Micro-Economic Factors GDP Trade Price Stability Employment Industries Sectors Firms Households Interest Rates Impact on revenue collections Government Impact on revenue Collections Monetary policy South African Reserve Bank Fiscal policy National Treasury Revenue Collections South African Revenue Services Government analyses available information to formulate appropriate policy Administrative Efficiency Taxpayer Compliance Taxpayer Service All Tax Types PIT Customs Duties CIT VAT Customs B3

26 PRIORITY 1: DRIVE REVENUE REALISATION TO DELIVERY NOW AND ENSURE SUSTAINABILITY THREE-YEAR DELIVERABLES Detailed understanding of compliance levels across major areas in taxpayer/trader life cycles; Increased voluntary compliance through implementation of a comprehensive compliance framework; Strong central revenue forecasting and management capability; Streamline audit and Customs inspection processes and strengthen our audit capability; Re-engineer our debt collection processes; Expand the administration of penalties for non-compliance; and Expand the use of third party data, time-series taxpayer history and statistical scoring methodologies. How we will measure progress 2010/ / /13 Revenue Collected R billion R billion R billion % on time filing (PIT) as interim measure for Voluntary compliance 80% (currently 78.6%) 83% 85% % Enforced Compliance (measure to be developed) % Reduction in outstanding returns 6% (currently 5%) 7% 8% Cash collected from debt book R12.4 billion (currently R11.4 billion) R13.4 billion R14.4 billion B4

27 PRIORITY 2: DRIVE PRODUCTIVITY, SERVICE QUALITY AND COST EFFICIENCY THREE-YEAR DELIVERABLES Fully implemented Enterprise Capability Management System; Improved taxpayer and trader satisfaction. Redefined and implemented service philosophy, service charter and channel strategy; Improved ease and speed of registration and other interactions; and How we will measure progress 2010/ / /13 % Increase in Productivity Develop and implement an Enterprise Capability Management System Track performance of staff productivity Track performance of staff productivity Revenue collected against staff cost 133:1 (currently 134:1) 136:1 141:1 % Adherence to Service Charter Standards % First contact resolution (Contact Centres) 50% (currently 44%) 60% 70% Escalation turn around times 15 days 10 days 5 days Taxpayer/Trader Satisfaction Index Develop and implement Taxpayer/Trader Satisfaction Index Track Taxpayer/Trader satisfaction against Index Track Taxpayer/Trader satisfaction against Index B5

28 PRIORITY 3: DELIVER ON OUR CUSTOMS MANDATE THREE-YEAR DELIVERABLES Improved ease and speed of declaration processing and inspections; Rolled-out accreditation programme to qualifying traders; Enhanced smuggling detection capability. A system to prioritise and expedite Customs inspections through CBCU and DDU; and How we will measure progress Increase in ease & speed of declaration processing 2010/ / /13 Track performance in ease and speed of overall declaration processing Track performance in ease and speed of overall declaration processing % Uptake in electronic declarations (SACU) 50% (currently 36%) 60% 70% % Adherence to TAT for electronic declaration processing (incl. Imports & Exports, International & SACU, excl. Exceptions) 95% within 2 hrs (currently 72% in 2 hrs) 95% within 1.5 hrs 95% within 1 hr Increase in ease and speed of inspections 50% (currently 44%) 60% 70% B6

29 PRIORITY 4: IMPROVE OPERATING MODEL, STREAMLINE GOVERNANCE & STRENGTHEN LEADERSHIP THREE-YEAR DELIVERABLES A fully implemented evolving operating model, with integrated capacity plan; Streamlined governance framework; and A fully-articulated and embedded SARS leadership model which emphasises leadership development based on accountability, integrity and commitment How we will measure progress 2010/ / /13 Effectiveness of the new SARS Operating Model % Roles filled with fit-for-purpose employees 95% leadership, 45% identified staff (currently 92% leadership, 0% identified staff) 95% leadership, 60% identified staff (currently 92% leadership, 0% identified staff) 95% leadership, 75% identified staff (currently 92% leadership, 0% identified staff)) % Employees with Personal Development Plans (PDP s) 100% Employees placed with 60% PDPs (currently 99.6% employees with 0% PDPs) 100% Employees placed with 70% PDPs 100% Employees placed with 80% PDPs Increase in Leadership Effectiveness Index Develop and implement Leadership Effectiveness Index Track performance against Index Track performance against Index Report issued by Auditor General Unqualified Unqualified Unqualified B7

30 PRIORITY 5: IMPLEMENT SEGMENTATION TO STRENGTHEN OUR BUSINESS MODEL THREE-YEAR DELIVERABLES Holistic segmentation designs developed for all ten taxpayer and trader segments; Phased implementation and institutionalisation of the operating model for five segments and Targeted outreach, education, service and enforcement initiatives launched for the other five segments with phased endto-end implementation soon after 2012/2013. How we will measure progress 2010/ / /13 Progress against the design of the 10 segments Design of 5 segments completed (Large, Standard, Medium, Tax Practitioners, Traders) Design of further 3 segments completed Design of further 2 segments completed Progress against implementation of the 5 priority segments Implementation of 3 priority segments (Large, Standard, Medium Business) Implementation of 1 priority segment (Traders) Implementation of 1 priority segment (Tax Practitioners) % Compliance of the 5 priority segments Develop and implement capability to measure and monitor compliance by priority segments Track performance of segment compliance against target Track performance of segment compliance against target B8

31 PRIORITY 6: ENABLE OUR PEOPLE TO PERFORM OPTIMALLY THREE-YEAR DELIVERABLES Train and retrain individuals in line with capacity and capability requirements within SARS and in other government institutions; Fully articulated and implemented employee value proposition, to attract and retain the skills we need; Sharpening our performance management processes and empowering our managers to effectively manage employee performance. How we will measure progress % Employee Engagement Index achieved 2010/ / /13 55% (currently 54%) 56% 57% % BARETT score achieved 23% (currently 25%) 20% 17% % Staff adherence to Performance management practices 95% (currently 95%) 95% 95% B9

32 PRIORITY 7: DEEPEN KEY EXTERNAL RELATIONSHIPS TO ENHANCE REPUTATION AND RESULTS THREE-YEAR DELIVERABLES Clearly articulated & implemented broad external relationship/reputation programme; Implemented set of targeted corporate social investment and stakeholder assistance initiatives; and Measurable improvement in stakeholder perceptions through establishment & monitoring of stakeholder reputation index. How we will measure progress 2010/ / /13 Achievement of External Stakeholder Reputation Index Develop and implement External Stakeholder Reputation Index Track performance of External Stakeholder Reputation Index against target Track performance of External Stakeholder Reputation Index against target Achievement of Corporate Social Investment (CSI) Index) Develop and implement a corporate Social Investment Index Track performance of Corporate Social Investment Index against target Track performance of Corporate Social Investment Index against target B10