sars presentation to the portfolio and select committees on finance 14 may 2002

SARS Presentation to the Portfolio and Select

Committees on Finance

14 May 2002

SARS Presentation to the Portfolio and Select

Committees on Finance

14 May 2002

Contents

Introduction Strategic Framework SARS’ achievements Current Operations Understanding the Tax base SARS Compliance Model Changing Culture & Work Ethic Siyakha - SARS Transformation Programme SARS Budget Divisional Plans

Introduction

Minister has dealt with - External & Internal challenges Tax & Customs Challenges Core capabilities required in SARS Transformation Programme: Siyakha Budget Vote

SARS will focus on details of deliverables for this fiscal year

Strategic Framework

Strategic Framework for next two years: Balancing continuity and change Sustain and Improve current Operations Change Compliance focus to tax gap Design and Implement Transformation Program Implement Cultural Change Management

Program

SARS’ achievements

Exceeded printed estimates by 6.5% Implementation of tax proposals Siyakha KZN pilot roll out - physical/ process

infrastructure/ teaming Increased compliance through Woodmead Project

and outbound call centre Process efficiencies through Warrooms (49%

increased returns processed - >1 000 000) Customs - better control over movement of goods

and established anti-smuggling teams Service -established dedicated presence in all

offices

Current Operations

Current Operations

Improve Service to Taxpayers and Traders Improve Processing efficiencies (Warroom &

EDI) Shift from “normal flow” to tax gap Improve profiling & targetting Increase skills base Measuring Performance Legacy systems still exist

Understanding the Tax

base

Dual Economy

Operating in a dual economy Formal & Informal economy & structural

constraints to the tax base Tax base is narrow (about 6 million individual

taxpayers) Low tax morality is legacy of a pervasive culture

of non-compliance Cash economy poses a regulatory challenge -

raises issues of an appropriate tax system Balance service, education, enforcement

Segmenting the Tax base

Former Homelands

Rural Districts

Townships

City centres

Income Source /Job Type /

Income Level

Geography

Suburban Areas

1

112

12

5

3

46 10

8

9

7

Un-employed

Salary0 - 60

Employed

Salary 60 - 120

Salary 120 - 300

Salary 300 - 500

Salary > 500

Turnover< 300

Employed

Turnover300 - 2mil

Turnover2 - 10mil

Turnover> 10mil

Multiple Income Source

2+ sources, at least 2

over 200k

HighNet WorthIndividuals

> 10mil of assets

13

Intentionalbehaviour

The taxpayer isliable forregistration, butis not registered

The taxpayer isregistered, but isnot filing /submittinginformation whenrequired to do so

The taxpayer isfiling / submittinginformation, butthe information isincorrect

Unintentionalbehaviour

The taxpayer isliable forregistration, butis not registered

The taxpayer isregistered, but isnot filing /submittinginformation whenrequired to do so

The taxpayer isfiling / submittinginformation, butthe information isincorrect

Behavioural Segmentation

The “Strategic Revenue Analysis Project”: Project Design

Tax Gap Module

Integrated team of 5 staff

Activation Module


Long Term Revenueand Strategy Module


Deductive Analyses

Inductive Surveys

Segmentation of Tax Payers

Tools for Activation

Key Accounts & their Drivers

Models for Estimation

What is the future Revenue Base?

How to close the Tax Gap?

Rbn

Time

How big is the current Tax Gap?

Revenue Analysis & Estimation

What is the future “natural” Revenue

Flow?

How much “extra” Revenue Flow from

closing the gap?

How big is the remaining Tax Gap?

Rbn

Time

Policy EffectsMacro-economic estimation based

on status quo

Evaluate policy changes & impact

on revenues

Administration of initiatives

Special Activation Programs

Estimation of Size & Test for

Compliance

SARS

TREASURY

Revenue Analysis & Estimation Process

Distribution of the Economically Active People (StatsSA Labour Force Survey)

Note: *Pensioners include those formally employed and those self-employedSource: Labour Force Survey 2001; All Media Products Survey (AMPS) 2000

Of the 16.39 million economically active people, less than 45% (formal sector) could contribute tax to the Fiscus (this excludes the informal sector).

6.91 0.46 0.32

4.46

4.24 16.39

0

2

4

6

8

10

12

14

16

18

Formallyemployed

Formalbusiness

Pensionersearningincome*

Informal Unemployed Totaleconomically

activepopulation

Mill

ion

s o

f p

eo

ple

Economically Active Population 2001

The Analysis Indicates That SARS Is Potentially Missing up 5.9 Million Income Earning People…

12.2 mn

The informal sector represents the largest percentage of missing individuals.

5.2 - 5.9 mn

Note: The term ‘economically active’ here excludes the unemployedSource: Labour Force Survey, 2001; All Media Products Survey,2000; SARS Analysis

SARS Population Range to bedetermined

Non-filers Total Population

6.3 - 7.0 mn

Business > 65 yrs

Informal

Business < 65 yrs

Salaried > 65 yrs

Salaried < 65 yrs

0.7 mn

De

gre

e o

f c

om

pli

an

ce

Common objectives that directly impact tax paying behaviour

Tax paying Behaviour

Minimize at all cost

Pay what is due

Don’t pay tax at all

Get refund

Monetary Objectives

Get it out of the way

Do the “Right Thing”

Beat the system

Peace of mind

Low

High

Lik

elih

oo

d o

f ev

as

ion

Emotional Objectives

High

Low

Key drivers and barriers influencing Taxpayer behaviour

Tax Paying Behaviour

Tax Paying Behaviour

IndividualCompliance Cost

IndividualCompliance Cost

FearFear

Gender-PatternsGender-Patterns

Tax Related Knowledge/ Education

Tax Related Knowledge/ Education

Job TypeJob Type

Income LevelIncome Level

CulturalBackground

CulturalBackground

Citizenship/Social Attitude

Citizenship/Social Attitude

Perception ofGovernment

Perception ofGovernment

Image of SARSImage of SARSCustomer ServiceCustomer Service

Media/EducationalCampaigns

Media/EducationalCampaigns

SocialBackground

SocialBackground

ChannelChannel

Tax SystemTax System

Tax Gap - Complexities of the PIT Tax Gap

Foreign dividends

Rental

Allowances

Deductions

Understate Taxable Income

Overstate expenses / deductions

Filing

Not filing

Individual Evasion

Travel

Donations

Medical

Pension / RA

Other

Salary

Self-employed profits

Interest

Other allowances

Uniform

Entertainment

SubsistenceFringe Benefits (non-cash income)

Retains partial

Deducts

Not deduct

Registered for PAYE

Not registered for PAYE

PAYE - EmployerEvasion Retains all

Incorrect issuance of IT3’s

Simply not deducting tax

PIT

Ev

as

ion

Retirement Benefits

Under deducts(with knowledge)

This tree defines the exhaustive set of areas that require data to estimate the tax gap based on where the decision rights are held.

Tax Gap - Corporate Income Tax Evasion

Cash

Non cash

Active

Dormant

Filing

Not filing

Corporate Evasion

Depreciation

Allowances

Provisions (14)

Inflation of expenses (7,8,9,10,11,12)

Private expensesOverstate

expenses(1, 12)

Under-declare income(1, 12)

Active

Dormant

Recoupment

Understate income (2)

Declaring income as capital (5,6,7,8)

Other income

Interest received**

Discounts/rebates

Sundry (3,4)

Tax underpaid (13)

Assessed lossschemesTax holidays

* Income earned on ‘grey’ money, which cannot be declared as it was taken out illegally** Interest received and foreign exchange gains on Rand denominated outward bound loans

Evasion Schemes:

1. Offshore structures (includes transfer pricing)

2. Controlled foreign entities

3. Under-declare foreign income

4. Foreign dividends

5. Deferred allotment and share-incentive schemes

6. Incorporation of professional practices

7. Long-term insurance schemes (inflated premiums)

8. Short-term insurance schemes (inflated premiums)

9. Preference share financing schemes

10.Property schemes (could include CGT)

11.Structured finance schemes

12.Transfer pricing

13.STC not paid

14.Under-valuation of trading stock

False deductions

SARS Compliance

Model

Inte

nti

on

al

beh

avio

ur

Incorrect filing

Non-filing Non-registration

Potential yield per case

Resources, skills level, time requiredNumber of inter-dependencies

SARS response

Intentional evasion and Revenue Yield

Not registered

Not filingFiling

incorrectly

Intentional behaviour

Unintentional behaviour

En

forc

eEn

cou

rag

e

•Investigative audits

•Criminal investigations

•Aggressive collections

Compliance Model

-

•Maintenance audits

•Media Campaigns, educational campaigns, enhancing the tax system

The SARS response to taxpayer behaviour

Taxpayer is willing tocomply

Taxpayer tries tocomply but does notalways succeed

Taxpayer does notreally want to comply

Taxpayer refuses tocomply

Penalties No penalties No penalties Medium penalties Maximum penalties

Prosecution No prosecution No prosecution Prosecution Prosecution with aview to obtainingmaximum sentence

Publicity Positive publicity atrequest of taxpayer

Positive publicity atrequest of taxpayer

Publicity of names ofoffenders

Publicity of names ofoffenders

Aggressivecollections efforts

T/p will be assistedto make paymentarrangements

T/p will be assistedto make paymentarrangements

Will be consideredreadily

Will be employed

Aggressive meansof obtaininginformation

Will not be used Will not used Will be used Will be usedextensively

Alternative,aggressive meansof enforcingcompliance

Will not be used Will not be used Will be employed Will be employedaggressively

Education Educationalcampaigns to informtaxpayers how tocomply

Educationalcampaigns to informtaxpayers how tocomply

Educationalcampaigns to informtaxpayers of theconsequences ofnon-compliance

Educationalcampaigns to informtaxpayers of theconsequences of non-compliance

Comparison of lifestyle, 3rd party information & SARS database

GEOGRAPHIC INFORMATION SYSTEM

Example: Electronics IndustryThe Electronics Industry Initiative

Investigation on specific subjects within electronics industry

Observations Selective action against

suspicious offices Collection of poof for

evasion Design of argument for

resolving the issue

Analysis of Employment, Sales, Import&Export Statistics

Analysis of SAR-data Cooperation within

CLETG Information exchange

between authorities

Review of insights from convicted tax subjects

Review specific materials for further evidence of evasion

What was achieved?

How was it done?

Firmed up hypothesis evasion of customs duties by specific tax subjects

Formulation of convincing story

Resolving the issue with subjects short-cutting lengthy audit procedures

Admittance of guilt of alleged tax subjects

“5 minute court sentence”

Identification of electronics industry as appropriate target industry

Developed hypothesis on evasion scheme and group of non complying subjects

Further subjects to follow up (40 families linked to forex scheme)

Learnings across tax types

Further schemes discovered

LearningLearningActionActionInvestigationInvestigationAnalysisAnalysis

Changing Culture &

Work Ethic

Changing Culture & Work Ethic

From bureaucratic mindset to service orientation

Mobilising for participation in change Understanding SARS future direction &

challenges Intensive internal communication

Siyakha - Transformation

Programme

Siyakha - SARS Transformation Programme

SARS’ own Capability & Governance Infrastructure, Process, Technology People: Skills, Change, Culture Business Culture & Innovation Conception of Tax & Customs Administration Stakeholder relations

The Architectural Framework

Physical

INFRASTRUCTURE Virtual

Empirical

DATABASE Analytical

Business

KNOWLEDGE

Cognitive

Physical

FIMS

CUSTOMS

TAX

HRMS

EDS

GOVERNANCE

BUSINESSLOGIC

(Governance)

BUSINESSRULES

(Legislation)

CRM

Communities

Interaction layer

Electronic

Virtual

Transformation Progress

Implemented Siyakha Pilot Project in KZN Redesigned business process and created new

physical infrastructure introduced teaming in the organization appointed new management in KZN and

Gauteng

Siyakha enhancement

KZN design of process and infrastructure Customer centricity Synergy and integration in Tax and Customs

functions An enterprise architecture approach Strong focus on innovations Programme and project management capability

Siyakha enhancement: Defining scope and exploring possibilities

Business context High level business process design High level enterprise systems integration

design Technology architecture design Business case justification Implementation approach and roadmap

SARS Budget

Personnel Expenditure

Administrative Expenditure

Inventories

Accommodation

Prof & Spec Services

Miscellaneous Expenditure

Capital

New Business Architecture

1,604,526,933

583,795,361

94,831,875

147,634,246

483,150,656

6,608,000

154,633,930

2001/2002

1,643,509,258

536,563,962

82,456,791

164,245,411

452,167,256

5,292,099

56,478,258

476,582,965

1,716,169,920

572,056,640

86,166,031

178,767,700

464,796,020

5,363,031

58,993,341

493,041,317

2002/2003 2003/2004

Total 3,075,181,000 3,417,296,000 3,575,354,000

MTEF Allocation

% of Revenue

2,863,181,000

1.15%

3,417,296,000

1.29%

3,575,354,000

1.24%

Revenue Collected 249,259,926,000 265,521,310,000 288,713,100,000

Budget Allocations 2002/03: Operational Budget

Classification2001/02Budget

2002/03Budget

Increase/(Decrease)

Communication 20,755,119 17,169,517 (17)

Finance 490,660,656 410,429,792 (16)

Internal Audit 15,893,038 20,000,000 26

Human Resources 158,276,228 186,112,138 18

Processing & Branches 1,201,642,533 1,131,868,964 (6)

Technology Services 238,981,871 238,052,706 (0.4)

Business Systems Design Centre 41,899,557 14,691,444 (65)

Law Administration 54,862,620 63,011,847 15

Strategic Planning 23,935,113 80,381,835 236

Compliance 264,133,507 401,681,436 52

Customs 262,543,714 326,478,474 24

Tax Payer Service 18,764,585 50,834,882 171

Siyakha 282,832,459 (100)

New Business Architecture 476,582,965 100

Total 3,075,181,000 3,417,296,000 11

Budget Allocation: SARS TOTAL

Divisional Plans

Divisional Plans

Strategic goals Optimising revenue yield Aligning business and technology Transform business processes and technology Responsible enforcement Improved taxpayer service, communication and

education People first Effective governance Building relationships Consistent application of legislation

Divisional Plans

Service

What has been achieved: SERVICE

Creation of Service division to focus on Service strategy and delivery

Creation of new Service Centres in KZN - per Siyakha rollout

Creation of Service Centre front office in all existing ROR offices except Northern Cape

Service KPI’s implemented in 90% of ROR branches

Implementation of Monitoring unit to resolve complaints received by Commissioner and Minister’s offices

Focus Areas for 2002/03:SERVICE

Optimise existing processes to support front office.

Provide input on the tax simplification process Increase training & transfer of skills (multi-

skilling): technical skills client service orientation

Performance management through service delivery and taxpayer satisfaction survey

Improvement of service at Customs ports of entry


Migration to and entrenchment of a customer centric culture through: External service

Increased understanding of the nature of taxpayer interactions at the frontline

Interaction with compliance and processing to achieve timely and effective resolution of queries, requests etc.

Offering multi-channel service options to suit taxpayer preferences

Internal service Cultivate a service ethos internally through focused

interventions


Implementation of ‘integrated branch office’ offering full service delivery across tax products, with enabling technology, supportive business rules and enhanced skills at the frontline in Western Cape

Increased communication with stakeholders to reinforce a positive perception of SARS and the tax system in general.

Launching of a complaints office to speed up resolution of outstanding administrative issues.


Contributing to base broadening through education and communication drives addressing the formal and informal sectors, in collaboration with compliance.

Upgrading service infrastructure at customs offices and border posts



Inventories

Accommodation



Capital

12,111,684

1,676,161

528,349

634,176

3,540,649

273,566

Classification2001/02MTEF

Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 18,764,585 50,834,882 269

36,267,049

3,386,710

1,937,521

1,953,400

5,599,202

1,691,000

299

202

366

308

154

618

Budget 2002/03:SERVICE

Divisional Plans

Processing

What has been achieved: PROCESSING

Tax assessment backlogs eliminated – additional war rooms (BFTN & JHB)

Income Tax returns processed 3,255 million. Reduction in SMR Account from R15 bn to

R1.57 bn Year end contingency arrangements - R1.4 bn

deposited on Sat 30 March 2002 Implementation of payment limits at banks

System changes Process changes (debit orders, cheques)

What has been achieved: PROCESSING

Reduction in processing time of payments to 48 hrs SARS Bank 2

E-Filing introduced with VAT/PAYE & Provisional Tax

Role out and stabilisation of KZN processing centre

Focus Areas for 2002/03: PROCESSING

Introduction of additional quality control measures in assessment.

Create central operations room to align operational divisional activities

Introduce new systems maintenance management model (One point of entry & Prioritization)

E Filing enhancements to include Income Tax returns

Focus Areas for 2002/03: PROCESSING

Improve internal controls Revise and standardize operational policies /

procedures Siyakha roll-out in Western Cape



Inventories

Accommodation



Capital

886,976,237

148,968,115

60,772,082

18,831,095

86,095,004


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 1,201,642,533 1,131,868,964 (6)

837,122,889

138,857,330

58,360,468

32,262,842

61,275,294

27,699

3,962,442

(6)

(7)

(4)

71

100

100

(95)

Budget 2002/03:PROCESSING

Divisional Plans

Compliance

What has been achieved: COMPLIANCE

62% increase in audit results from prior year due to more focused, targeted compliance activities: Focus on risk profiling (“hit rate” more than

doubled) Implementation of computerised risk profiling –

SARAP - identification of high risk areas Performance management tracking Emphasis on field audits Introduction of integrated audits


Additional assessments raised R4b increase from the previous year Average assessment per audit R7 500 000

Increased transfer of skills through: Collections training – 100% coverage 90 courses presented in basic audit skills Basic Special Investigations course attended by

all staff Woodmead approach -cash collected R4.3b


Collections: Contributed R13.2b (exceeded R12.6b target) Increased focus on customs debt reduction Implementation of collections outbound call centre-

66 workstations (contribution of R376m to results) Successfully piloted co-sourcing of aspects of debt

collection Piloted the Revenue Optimisation Strategy (ROS)-

Geographical Information Systems to assist in third party information matching thereby reducing the potential for non-compliance.

Focus Areas for 2002/03:COMPLIANCE

Implement Compliance Model & Toolkit to guide compliance approach & strategies

Siyakha roll out in W. Cape and Gauteng – implementation of teaming, integrated audits, integration of compliance components and establishment of a separate Compliance Centre

Increase investment in skills development of compliance staff: Risk profiling training Incorporating KZN lessons learnt Training linked to career development, potential

and goals


Continue high risk sector specific investigations and audits

Increase conviction rate of non-compliant taxpayers

Expand implementation of electronic risk-profiling to remaining offices

Increase emphasis of utilising SESSAM audit tool

Reinforce results culture within audit and investigations through implementation of case management tracking system


Collections: Expansion of outbound call centre Fill capability gaps re legal skills Automate debt management system Focus on outstanding returns

Tax base broadening Implement ROS following results of successful pilot,

use to inform compliance activities Collaborate with taxpayer service programmes to

address the informal sector Focus on High Net Worth Individuals through life

style questionnaire



Inventories

Accommodation



Capital

166,027,626

24,309,290

2,461,371

34,153,111

8,942,911

4,500,000

23,739,199


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 264,133,508 401,681,436 52

206,202,813

27,005,342

4,171,482

123,578,611

22,487,988

18,235,200

24

11

69

262

151

(100)

(23)

Budget for 2002/03:COMPLIANCE

Divisional Plans

Customs

What has been achieved: CUSTOMS

Policy and procedures Quality management documents and manuals

placed on Website Valuation guide, and database installed Refunds Reference guide placed on website Cape system implemented in small ports like

Lebombo and PE Cape and CCA1 systems enhanced for EDI and

transit processing


Client accreditation commenced implementation - Examples include Edcon with 600 suppliers, 19 clearing agents at JIA and discussions with organised road freight and forwarding business

Warehouse Inventory Management system developed

Informal Dispute Resolution mechanism implemented

Paperless Cape system developed


Enforcement Post clearance inspection and anti-smuggling

teams established nationally Customs mobile unit inspections in 16 ports Integrated compliance operations executed Post-Agoa implementation ratified by US Customs First joint investigation with EU on roundtripping in

fishing industry executed (Olaf Mission) Revenue Yield Model - first cut completed

indicating 6% gap in Customs duty and VAT on imports nationally.


Export controls introduced with dedicated teams Rail controls improved through submission of

manifests to first port of entry and anti-smuggling operations

Passenger controls improved through risk-based measures anti-smuggling interventions

Risk-Assessment system enhanced through Compliance database linked to Suspicious Activity Reports


Personnel Development Management echelon overhauled nationally Teaming implementation completed February

2002 Technical management training (90%) and team

leader training completed First 68 officers taken through revamped Basic

Customs course


Infrastructure Border Control Improvement Programme

established to execute NIDS functions Further upgrades and equipment provided under

re-prioritised SARS budget (forklifts, baggage scanners, computers, inspection ramps)

Regional & International Co-operation Host and participant in 5 Customs Advisory

Working Groups to implement programme of SADC Sub-Committee on Customs Co-operation


Organised and hosted regional workshop on Customs Policy and Trade Facilitation in November 2001

Signed Memmoranda of Understanding with Mozambique, Netherlands, and Zambia

Negotiations underway with Malawi, Zimbabwe, Hungary, Spoornet, Portnet, Acsa, SAA

Focus Areas for 2002/03:CUSTOMS

Enhance management and officer skills - Approx. 1100 officers to be trained this Fiscal Year

Enhanced Customs service culture Complete operational policy review Continue infrastructure upgrade Strengthen external compliance partnerships with

SAPS, Home Affairs, Transnet, other Customs administrations and stakeholders

Refine compliance strategy Enhance Customs integrity and good governance Enhance regional and international co-operation



Inventories

Accommodation



Capital

197,770,175

20,321,737

9,120,188

6,157,336

15,951,318

13,222,960


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 262,543,714 326,478,474 24

239,723,644

23,631,724

4,602,620

11,894,612

43,635,460

2,990,414

21

16

(50)

93

174

(77)

Budget for 2002/03:CUSTOMS

Divisional Plans

Law Administration

What has been achieved: LAW ADMINISTRATION

Legislation Taxation Laws Amendment Act, 2001

Capital Gains Tax Revenue Laws Amendment Act, 2001

Strategic Investment Incentive Subject directors of private companies to PAYE Accelerated capital allowances - small manufacturing

corporations Capital allowances for airport infrastructure Enabling Laws for:

Duty at Source Registration and accreditation - Customs Customs control over goods


Second Revenue Laws Amendment Act, 2001 Refinement of Capital Gains Tax legislation Group re-organisation relief Customs - Enabling provisions for IDZ’s

Unemployment Insurance Contributions Act, 2002 Double Taxation Agreements

Negotiated & Re-negotiated 27 Customs & Excise Tariff Amendments 152

Rulings High level Income Tax 35 General CGT Rulings 700


Litigation Success rate

Tax Court 81.8% High Court - Customs 80.7%

- Non-customs 68.0% Dispute Resolution

Income Tax cases 139 Vat cases 35

Training VAT training - Botswana, Lesotho, Zimbabwe International Tax Training - Malawi CGT Training


Other Requests for Access to information 31 Public Benefit Organisation (PBO’s) 1 288

Applications for exemption

Focus Areas for 2002/03:LAW ADMINISTRATION

Amend SARS Act Assist in development of Budget proposals Codify Budget and other tax proposals Investigate introduction of Tax Administration Act Re-commence Customs Act rewrite Enhancing legislative and policy capacity Evaluate effects of certain Acts on current SARS

procedures and policies Preparation of policy guidelines Investigate advance rulings system

Focus Areas for 2002/03:LAW ADMINISTRATION

Knowledge sharing database development, rollout & tracking

Develop mutually beneficial partnerships with business community & other stakeholders

Assist with training in other African countries Assist in successful utilisation of Special

Boards (in Operations) Assist in Dispute Resolution process rollout Assist in closing the tax gap by exposing tax

avoidance techniques

Budget for 2002/03:LAW ADMINISTRATION



Inventories

Accommodation



Capital

31,144,127

4,046,488

3,356,221

16,354,276

250,508

711,000


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 54,862,620 63,011,847 15

40,406,692

2,772,700

2,791,355

13,079,500

2,892,000

1,069,600

30

(31)

18

(20)

1054

50

Divisional Plans

Strategy and Planning

What has been achieved: STRATEGY & PLANNING

Initiated tax gap project to quantify the revenue gap and activation strategies to close it.

Data warehouse being set up for statistical & analytical purpose.

Implemented Interim Performance Management Systems (IPMS).

Formalised business planning process Participated in the WCO & its subcommittees Participated in the Doha negotiations of the WTO Hosted SADC Regional Customs Workshop. Hosted regional tax and customs study visits from

neighbouring countries.

Focus Areas for 2002/03 STRATEGY & PLANNING

Tax gap quantification and activation strategies. SARS 2005 Strategic Blueprint. Performance Management and the Balanced

Scorecard. Strengthen relations with stakeholders. Benchmarking against international tax and

customs administrations.



Inventories

Accommodation



Capital

16,274,485

5,391,073

575,496

174,286

534,994

984,778


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 23,935,113 80,381,835 236

36,040,399

7,734,615

2,821,424

20,364,245

2,467,848

10,953,304

121

43

390

11 584

361

1 012

Budget for 2002/03:STRATEGY & PLANNING

Divisional Plans

Finance

What has been achieved:FINANCE

Procurement Ministerial approval of procurement reform

obtained in April 2002

Own Accounts Unqualified audit opinion for the first time since

autonomy. PFMA due dates for submission of 2001 audited

financial statements successfully achieved for the first time since autonomy.


Administered Revenue Standards of Generally Recognised Accounting

Practice (GRAP) promulgated by Minister of Finance in October 2001.

The 2001 financial statements compiled in terms GRAP - “Except for” audit qualification obtained (previously disclaimers since autonomy)

This opinion is due to perceived lack of controls within the assurance process - not a reflection of inadequate accounting records.

Revenue Balancing Unit ensures that all reconciling differences are explained & followed up.


Own Accounts / Administered Revenue Significant progress in strengthening working

relationships with the Auditor-General through both top level liaison & the establishment of working groups

The issue of skills development and training reinforced through the appointment of financial managers and personnel in business areas and training of finance personnel.

Focus Areas for 2002/03:FINANCE

Procurement Enhance finance capacity Procurement reform implementation Agreeing on stakeholder reporting requirements

(content and timing) Developing & implementing integrated financial

information management system (FIMS) – phase I Enhancing key relationships Developing policies and procedures

Focus Areas for 2002/03:FINANCE Own Accounts

Enhance finance capacity Benchmarking & recommending improvements to

all non-staff related expenditure Agreeing on stakeholder reporting requirements


information management system (FIMS) – phase I Developing & implementing standard budget

process and cycle (budget model) Enhancing cash management methodology and

processes Enhancing key relationships

Focus Areas for 2002/03:FINANCE

Administered Revenue Enhance finance capacity Agreeing on stakeholder reporting requirements


information management system (FIMS) – phase I Enhancing key relationships Developing policies and procedures

Facilities & Asset Management Assessing the potential for outsourcing

Budget for 2002/03:FINANCE



Inventories


Land & Buildings


Capital

22,870,769

313,348,582

1,256,445

123,953,686

20,240,020

2,108,000

6,883,154


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 490,660,656 410,429,792 (16)

40,831,226

313,411,880

1,450,664

22,260,110

24,670,100

2,000,000

5,805,812

79

0

15

(82)

22

(5)

(16)

Divisional Plans

Human Resources

What has been achieved:HUMAN RESOURCES

Facilitated staff redeployments Agreement with Unions on Siyakha People

Placement Protocol KZN people rollout completed Western Cape & Gauteng management

appointments completed New job grades verified for all employees

Implemented ACCA qualification program


Rationalise employee health insurance Establishment of task team to rationalise

medical aid schemes Medical aid equalisation - over next 3 years Employee health insurance (Life cover)

underway Implemented employee assistance programme

Implemented & rolled out in most of the regions - Eastern Cape & Head Office to follow soon.

400 managers & other stakeholders trained


Upgrading the level of Management training All team leaders & managers in KZN and

Western Cape trained All customs team leaders & management cadre

trained. The INSEAD partnership intervention for senior

management team The GIBS programme - 30 senior managers

attending executive development programmes The leadership development programme (LDP)

developed about 40 employees Introduced an Interim Performance Management

System (IPMS).

SARS by Race & Gender

0

200

400

600

800

1000

1200

1400

1600

1800

Eastern Cape 178 61 12 331 124 20 4 128

Free State/North west 209 51 5 518 170 27 2 112

Gauteng 702 81 52 1643 427 39 33 411

Head Office 223 50 28 561 238 39 37 291

Kwa Zulu Natal 248 52 198 492 216 21 146 190

Mpumalanga/Northern Province 221 17 5 287 300 9 1 72

Western Cape/Northern Cape 42 202 21 878 42 193 15 287

Female African

Female Coloured

Female Indian

Female White

Male African

Male Coloured

Male Indian

MaleWhite

Focus Areas for 2002/03:HUMAN RESOURCES

Develop a staffing plan by 01 July 2002. Develop a SARS succession plan Produce Policy and Procedure Manuals

Established HR policy site on the Intranet - various policies developed & posted

Review implications of new service programme (enhanced Siyakha) on the Siyakha Protocol

Launch SARS College by 1 June 2002 Negotiate & implement employee health

insurance Consolidate and evaluate effectiveness of

employee assistance programme


Establish dedicated recruitment function Enhance, upgrade and roll out PeopleSoft Develop decision matrix for HR matters Implement attendance management system Reconstitute union-management governance

structures Roll out new discipline and grievance

procedures Risk management and internal control


Revise management competency assessment tools portfolio

Re-engineer HR administration processes Develop and formalise staff policies and rules Review career ladder processes and related

policies Implement performance based and comparable

remuneration Consolidate and improve employee benefits



Inventories

Accommodation



Capital

129,116,140

5,317,237

1,650,408

9,392,800

3,304,775

9,494,868


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 158,276,228 186,112,138 18

172,840,221

2,669,539

929,924

8,006,568

754,325

911,561

34

(50)

(44)

(15)

(77)

(90)

Budget for 2002/03:HUMAN RESOURCES

Divisional Plans

Technology Services

What has been achieved:TECHNOLOGY SERVICE

Supported Siyakha implementation – Rollout and upgrade of infrastructure and enhancements to business systems

Business impact study and strategy completed for Disaster Recovery

Contributed towards EDMS/Contact centre proof of concept

Completed network (ATM) backbone roll-out plan Information Security (INFOSEC) - developed

security policies for personnel, Documents, Logical security and System process security

What has been achieved: TECHNOLOGY SERVICE

Acquired new Methodology software Developed system for the collection of UIF and

integrating functions and forms with PAYE and SDL

Implemented system for Capital Gains Tax Implement Disaster Recovery Plan

Focus Areas for 2002/03:TECHNOLOGY SERVICE

Upgrade hardware and migrate to Windows 2000 software

Implementation of new development environment (JAVA)

Upgrade mainframe environment (inc. storage capacities)

Server replacements Complete network (ATM) roll out Implement storage area network (SAN) Support new service programme (enhanced

Siyakha)

Focus Areas for 2002/03: TECHNOLOGY SERVICE

Review of SITE system Review of provisional tax payments Develop single registration function

Establish central database Integration of registration for revenue, customs and

excise Data clean up and matching and link of clients

Implement business rules in order to maintain the single registration database

Implement a single view of the client - personal details and all taxes and duties the client is registered for (Tax Identification Number)

Budget for 2002/03:TECHNOLOGY SERVICE



Inventories

Accommodation



Capital

4,964,304

2,226,864

1,946,532

196,103,065

33,741,106


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 238,981,871 238,052,706 (0.4)

6,248,911

2,271,560

2,234,325

217,112,973

50,485

0

10,134,452

26

2

15

11

100

(70)

Divisional Plans

Internal Audit

What has been achieved: INTERNAL AUDIT

Improved Internal Audit capabilities and capacity through recruitment and training

Improved internal processes - audit manual Increased visibility and service to the

organisation Commenced with process to implement an

Integrated Electronic Risk Management Solution in the organisation

What has been achieved: INTERNAL AUDIT

Increased awareness of governance and Internal control in the organisation

Conducted focus audits on risk areas Conducted audits jointly with anti-corruption

unit Performed audits as requested by management Pre & post implementation review of SIYAKHA

Focus Areas for 2002/03: INTERNAL AUDIT

Proactive involvement on initiatives including SIYAKHA 2

Full implementation of risk management pilot roll-out

Roll out of COSO framework and control self-assessment (CSA)

Improve on the audit capabilities through people development and recruitment of suitable skills

Focus Areas for 2002/03: INTERNAL AUDIT

Strengthen the audit process and approach adopted to assist organisation - automated work process

Involvement on new system development Provide a value added service to SARS by

focusing on critical areas (initiatives in divisions)

Provide a consulting role and help in the design and improvement of Internal controls (e.g. SIYAKHA 2)



Inventories

Accommodation



Capital

12,572,276

2,998,171

94,020

49,500

68,000

111,071


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 15,893,038 20,000,000 26

16,603,992

2,005,226

159,726

498,600

65,500

666,956

32

(33)

70

9070

(0.04)

500

Budget for 2002/03:INTERNAL AUDIT

Divisional Plans

Communications

What has been achieved: COMMUNICATIONS

Tax Education Campaign arranged countrywide roadshows on CGT Placed CGT advertisements in print media

Developed & Published various educational materials

Participation of senior staff on radio programmes

Exhibitions The Pretoria, East Rand, Pietersburg, & PE

Shows

Focus Areas for 2002/03 COMMUNICATIONS

Taxpayer Education Customs / Trade information Internal Communication Media liaison

Budget for 2002/03:COMMUNICATION



Inventories

Accommodation



Capital

2,921,133

15,123,649

2,244,992

37,992

236,000

191,354


Baseline

2002/03MTEF

Baseline

Increase/(Decrease)

%

Total 20,755,120 17,169,517

2,162,727

12,286,436

2,245,000

37,004

191,354

-35%

-23%

4%

THANK YOU FOR YOUR SUPPORT

THANK YOU FOR YOUR SUPPORT

sars presentation to the portfolio and select committees on finance 14 may 2002

Documents

tax gapdesign

tax basedual economyoperating

tax basetax base

sothe taxpayer

registeredthe taxpayer

mil turnover

mil multiple income

woodmead project