seychelles revenue annual report commission · pdf filethe financial year 2011 proved to be...

SEYCHELLES REVENUE COMMISSION

2011

ANNUAL REPORT

Seychelles Revenue Commission

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TABLE OF CONTENTS 1. Foreward 4 2. Introduction 5 3. Vision, Mission and Core Values of SRC 5

3.1 Vision 5 3.2 Mission Statement 5 3.3 Core Values 5

4. SRC Organization Structure 5 5. An Overview of Revenue Collection 8

5.1 Business Tax Revenue 9 5.2 Goods and Services Tax Revenue 11 5.3 Trades Tax Revenue 13 5.4 Social Security and Income & Non Monetary Benefits Tax Revenue 14 5.5 Excise Tax Revenue 16 5.6 Other Tax Revenue 17

6. SRC’ Budgetary Performance 18 7. Domestic Tax Division 20

7.1 Taxpayer Services 20 7.1.1 General Performance 21

7.1.1.1 Registry Unit 21 7.1.1.2 Returns and Payment Processing Unit 21 7.1.1.3 Provision of Advice Unit 24 7.1.1.4 Interpretation and Appeals Unit 24 7.1.1.5 Exemption letters 25 7.1.1.6 Lodgment of monthly GST and Excise Tax Returns 25 7.1.1.7 Taxes Foregone 25

7.2 Audit Section 25 7.2.1 General Performance 25

7.2.1.1 Improve effectiveness of audit in ensuring tax compliance 25 7.2.1.2 Enhance future compliance by conducting professional and

effective audits 26 7.2.1.3 Revenue and case turnover targets 26

7.2.1.3.1 Aged Cases 27 7.2.1.3.2 Disputes Cases 27 7.2.1.3.3 Amended Assessments 28

7.2.1.4 Professional and effective audits 28 7.2.1.5 Improvement auditors’ skills & knowledge 28

7.3 Enforcement Section 29 7.3.1 Revenue Collection 29 7.3.2 SPF/Payrolls 29 7.3.3 Self-Assessed Returns 2010 29 7.3.4 Court Cases 30 7.3.5 Debt Recovery 30

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8. Customs Division 30 8.1 Enhance capacity for Customs Operation 31

8.1.1 Strengthening custom’s management 31 8.1.2 Building capacity of officers and units 31

8.2 Modern legislation and simplified procedures 31 8.2.1 A new Customs Management Act 31 8.2.2 Simplification of Operating Procedures 32

8.3 Building the framework for larger trade facilitation 32 8.3.1 Improved Time release of Cargo 32 8.3.2 Improve quality of Customs declarations 33

8.4 Minimizing physical inspection 34 8.5 Risk Management 35 8.6 Post clearance Audit 35 8.7 Border Control and Management 35 9.0 HS 2007 Migration 36

9. Support Services Division 36 9.1 Review of organigram 36 9.2 New salary wage grid and Inducement allowance 36 9.3 Staff movement 37 9.4 Three year training and development plan 37 9.5 Training and development 38 9.6 Better management of SRC’s Inventory 38 9.7 Vehicle write off and acquisition 39 9.8 Health and Safety 39

Appendices 40

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1. FOREWORD The financial year 2011 proved to be yet another challenging year for the Seychelles Revenue Commission (SRC) as it entered into its second year of the reform and modernization program. Whilst SRC remained committed to turn itself into a modern revenue administration, it was important that the reform efforts did not overwhelm its core mandate which is to efficiently and effectively collect and account for government revenue. At the same time SRC had also to be cognizant of its expenditure and better manage its allocated budget in light of tighter government controls imposed on the budget during the year. Despite all of this, I am pleased to report that for the year 2011, SRC not only attained meeting the revenue target of SR3.9 billion set for the year but surpassed this by an over collection of SR440 million or 12.6 % increase above the projected target and when compared to the revenue collection for 2010 represented an increase of 18.1 percent. On an institutional level, 2011 was a year characterized by fundamental reforms in terms of further restructuring across the organization. A new unit, Post Clearance Audit and Investigation, was created within Customs Division, as part of a wider risk management strategy, to expedite the release of goods hence facilitating trade. Work also started to further enhance the operations of the Domestic Tax Division through further restructuring to cater for better segmentation of the taxpayer population. With the modern approach being adopted by the Seychelles Revenue Commission, more emphasis will be placed on taxpayer services as it is internationally recognised that an effective taxpayer service plays a vital role in ensuring that taxpayers become self-compliant.

SRC also embarked on a performance management review with importance being placed on more results-based target setting to drive our performance. With the new performance management in place and a dedicated and focused workforce I am confident that 2012, although expected to be more challenging, with the introduction of the Value Added Tax and Customs Management Act, that SRC will discharge its responsibilities successfully.

On this note, let me thank the Deputy Revenue Commissioner, Heads of Divisions and the staff for their dedication and hard work during 2011.

Jennifer M. Morel Revenue Commissioner

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2. INTRODUCTION

The Seychelles Revenue Commission (SRC) established under the Seychelles Commission Act, 2009 has been in operation since 1 January 2010. SRC is mandated to administer the revenue laws of Seychelles, with the latest addition to the list of revenue laws being the Value Added Tax Act, 2010 and the Customs Management Act, 2011 approved by parliament in December 2010 and 2011 respectively. The CMA will become operational as of June 1st, 2012 whilst the VAT Act will take effect from July 1st, 2012. SRC collects and accounts for over 88% of Government Revenue. This comes mainly from five revenue streams: Business Tax, Income and Non-Monetary Benefit Tax, Trades Tax, Goods and Services Tax and Excise Tax. Towards the end of 2011, as SRC continued to modernise itself, there was a need for the organisation to redefine its strategies and the direction in which it was going. As such an exercise for the development of a three year strategic plan for SRC was initiated and the SRC’s mission, vision and core values were reviewed.

3. VISION, MISSION, CORE VALUES & STRATEGIC OBJECTIVE

3.1 Vision “To be a modern, fair and effective customer-oriented revenue administration” 3.2 Mission “Optimize revenue collection and facilitate trade to improve the socio-economic well-being of Seychelles” 3.3 Core values:

Integrity – demonstrate continually high moral and ethical behaviour while upholding the rule of law

Impartiality – without favour, apply the law equally and fairly to all Professionalism – be courteous ,conscientious, business-like and knowledgeable Transparency- share all relevant information to external and internal stakeholders Accountability – each officer is responsible for his/her actions

4. SRC’s ORGANISATION STRUCTURE During the year 2011, Seychelles Revenue Commission has been undergoing major changes in its organizational structure to keep abreast with the ongoing reform. SRC found the need to reinforce its dynamic workforce with a larger pool of professional, competent and integrity driven employees. The structure as depicted in Appendix 1 is made up of five main divisions/offices namely the Revenue Commissioner’s Office, Reform Project Office, Domestic Tax Division, Customs Division, and Support Services Division.

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The Domestic Tax Division which has seen the addition of a new section is now comprised of 4 main sections. These sections include:

The Audit Section, which is s responsible for assessing batch of Business Tax Returns

received and dealing with any request for amendment or objection lodged by taxpayers as a result of the assessment issued.

The Taxpayer Section, which receives GST, returns from the Cashiers and also directly from the taxpayers where returns are lodged without payment.

The Enforcement Section, which is responsible for ensuring that all debit assessments raised are followed up, payments collected, reminders issued, late payment penalties collected, provisional tax deduction at source certificate books reconciled, provisional tax deduction at source underpayment collected, tax defaulters prosecuted.

The Revenue Collection Section, which is responsible for ensuring on-time collection of revenue from all relevant collection points.

The Customs Division now consisting of 5 main sections with the addition of the newly created section of Investigation and Post Clearance Audit. This section will report directly to the Assistant Commissioner of the Customs Division. The 5 sections of Customs Division include:

The Inland Revenue Section, which approves and administers all Private Bonded Warehouses and ensures that Government revenue is protected and guaranteed through physical controls on the movement of goods inside the country.

The Airport Operation Section, which processes travellers entering or leaving the country by aircrafts, using risk assessment. It also controls entry of goods through the passenger terminal so as to ensure that dangerous goods are not smuggled into the Seychelles.

The Seaport Operation Section, which receives, assesses and validates import declarations from importers and further collects tax revenue, including customs duties, excise tax, Goods and Services tax and levies on importations.

The Investigations & Post Audit Clearance Section, where the Investigation Unit conducts investigation of any suspected offences involving illegal imports and exports and/or inland transactions detected and/or reported. The Post Clearance Audit assists in the correct collection of revenue or compliance to Customs legislation by conducting verification tours/visits of the premises as per the Audit Plan worked out and from there assesses the reliability of the company's accounting records by gathering information about the importers' various activities.

The ASYCUDA ++1 Section is responsible for maintaining the system which includes creating, updating and ensuring that the system works efficiently. It also provides assistance and support to Customs staff and Direct Traders Input (DTI) users.

1 ASYCUDA++ stands for Automated System for Customs Data. This software is an integrated

system made up of modules, each with a distinct function. These modules are designed core tasks like

declaration processing, accounting functions, transaction reporting.

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Declarations are the base document of Customs and are used to control the movement of goods in and out of the country and the system is also used as the media for calculation and collection of taxes and duties, and the basis for collection of national trade statistics.

The Support Services Division plays an important role in providing the necessary administrative support to the staff. The Division has now two sections as the Accounts section [renamed Revenue section] has been moved to the Domestic Tax Division. These 2 sections are:

The Human Resource & Administration Section which deals with all aspects relating to

the development of Human Resources and manages the administrative needs of all the divisions within SRC. Within this section, there exists the Health & Safety Unit which ensures that the working environment for the staff is conducive and safe.

The Training and Development Section has an important role to play in terms of continuous professional development of the staff, retention and career progression. The section is also involved in preparing the training budget and develops the administrative framework required to support training and development programmes and initiatives. It further assists with the formulation of training and development policies, procedures and schedules to support training operations and initiatives.

The newly created Reform Project Office which is directed by the Deputy Revenue Commissioner, consists of 4 main sections. These include:

The Information Technology Section which is responsible for managing the relationship of operational line areas of all divisions by designing and monitoring SRC IT programs.

The Taxpayer’s Education & Services Section which is responsible for developing taxpayers’ programs and policies to maximise voluntary compliance.

The Compliance, Policy & Program Section which is responsible for establishing strategies and operation policies and procedures so as to maximise taxpayer compliance through audit and investigation.

The Corporate Planning & Research Section which is responsible for consideration and ramification of current tax laws to suggest changes to improve the efficiency and effectiveness, and to be able to advice on administrative implication of new tax policy development.

The Revenue Commissioner’s Office was also extended in 2011 to consist of 2 main sections namely the Finance and Internal Audit Sections. Two appointments of an advisor and legal advisor reporting directly to the Commissioner were also made in 2011.

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5. AN OVERVIEW OF REVENUE COLLECTION SRC collected SR 3.9 billion over the financial year 2011. This represents SR 440 million or 12.6 percent above the revenue forecast and SR 605 million or 18.1 percent above the revenue collection for 2010. Table 1 below is a summary of the revenue collected for the year ended 31 December 2011 whilst chart 1 shows a graphical presentation of actual revenue collected against forecast for 2011. Chart 2 shows that Goods and Services Tax accounted for 31% of the total tax collected followed by Business Tax with 23%, Excise tax 18%, Income Tax & Social Security 16%, Trade tax 11% and 1% for other revenue which comprise of fees, fines, prepayments, deposits and other levies for the period under review.

Net Revenue Collection

2011 Net Collection SCR (m)

2011 Budget Estimates SCR (m)


Budget Variance Over (under) %

Business Tax

900.72

772.01

784.06

16.7%

Goods & Services Tax

1,224.91

1,213.87

1,057.18

0.9%

Trades Tax

423.73

318.58

357.96

11.0%

Social Security & Income Tax

617.26

573.46

540.55

7.6%

Excise Tax

727.23

563.57

569.86

29.0%

Other Revenue

52.30

0.97

31.42

5280.1%

Total Revenue Collection

3,946.15 3,505.46 3,341.03 12.6%

Total Revenue Collected

3,946.15

3,505.46

3,341.03

12.6%

Table 1: Summary of revenue collected for the year 2011

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Chart 1: Actual 2010 revenue per tax type against budget and actual 2011 revenue

Chart 2: Contribution per tax type for the year 2011

5.1 Business Tax Revenue

Business tax collected exceeded budget estimates by SR 128.7 million or 16.7 percent as can be seen from Table 2. The excess as shown in Chart 3 is primarily due to a higher collection of business tax from companies which accounted for 90 % of the total business tax collected over the year. The high

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collection of business tax from companies relates to the elimination of the threshold of SR 250,000 making companies liable to pay business tax on all their profits. When compared to the previous year, withholding tax has increased from SR 58 million in 2010 to SR 70 million in 2011 representing an increase of 20%. Business tax from sole traders was above forecast by SR 0.2 million where as Business tax partnership had an under collection of 5 million when compared to the forecast and underperformed by just under 4 million when compared to 2010. The increase in business tax is mainly attributed to a higher profit margin from groups such as the banking sector, construction and also some parastatal companies. Whereas the under performance of partnership is a result of delays in assessing partnership caused by a different self-assessment treatment which has only been sorted out in 2012. It should also be noted that partners enjoyed a tax free treshhold simillar to individual businesses for the year 2010 and 2011, this situation will be corrected in 2012 via an amendment to the BTA 2009.

Business Tax Collection





BT Companies

806.80

681.37

702.96

18.4%

BT Individuals

17.76

17.57

13.82

1.1%

BT Partnerships

5.07

10.39

8.99

-51.2%

BT Trusts

0.06

0.05

0.04

0.0%

Withholding Tax

70.67

62.63

58.11

12.8%

Others

0.36

0.00

0.15

Total Revenue Collected

900.72 772.01 784.06 16.7

Table 2: Analysis of business tax for the year 2011

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Chart 3: Business tax contribution per sector for the year 2011 5.2 Goods And Services Tax Revenue

Goods and services tax collection was above budget estimates by SR 11 million or 1% percent. The good performance is attributed primarily to GST on tourism receipts and GST on imports of which each contributed 46% and 34% respectively, towards the total GST revenue collected. GST collection of 2011 was above the previous year’s collection by SR 210.2 million or 21%.

Table 3 below shows that GST collected on locally manufactured goods is below the forecast figure by 33.7 percent but when compared to 2010 collection has increased by 44 percent. This may be attributed to the liberalisation of the economy, where local products face increased competion on imported products.

GST on Tourism has increased by 154.4 million in 2011 compared to 2010 and the actual collection is above the 2011 forecast by 9%. GST on tourism still remains the main contributor to GST earnings.

GST on Telecom services under performed against forecast by R 14.8 million or 13.4 percent and when compared to the actual revenue collected for 2010, fell by just under R 2.0 million or 2 percent. An audit of the Telecom sector was initiated in the last quarter of 2011 to find the reasons for the sector’s underperformance but some signs in the meantime suggest that the forecast for the year may have been too high.

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GST Collected 2011 Net Collection SCR (m)




GST Manufacturing Alcohol & Soft drinks Other Manufacturers

15.03 41.35

39.31 45.76

26.97 12.11

-61.8% -9.6%

Sub-Total GST Manufacturing

56.38

85.08

39.08

-33.7%

GST Petroleum Products Petroleum

1.81

10.23

0.0%

Sub-Total GST Petroleum 1.81 - 10.23 0.0%

GST Services Professional Tourism Telecom Insurance Rental Income Gambling

36.25 565.70 95.51 29.38 21.26 5.23

28.07 519.36 110.34 26.77 22.35 11.29

27.31 411.32 97.46 22.41 24.03 6.34

29.1% 8.9% -13.4% 9.7% -4.9% -53.7%

Sub-Total GST Services 753.32 718.17 588.87 4.9%

GST Imported Goods Imported Goods

413.40

410.62

376.53

0.7%

Sub-Total GST Imports 413.40 410.62 376.53 0.7%

Total GST Collected 1,224.91 1,213.87 1,014.71 0.9%

Table 3: Analysis of goods and services tax for the year 2011

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Chart 4: GST contribution per tax type for the year 2011

5.3 Trades Tax Revenue

Trades tax collected for the year under review was above budget estimates by SR 42.2 million or 11 percent. The increase is due to a higher collection of trades tax on both petroleum products and importation of vehicles which accounts for 39 percent and 16 percent respectively of the total trades tax collected as depicted in Chart 5. When compared to the previous year’s trades tax collected, there has been an increase of SR65.8 million, as shown in Table 4, attributed mainly to a continued increase in collection of trades tax on Mineral Products, Beverages and Prepared Food Stuff amounting to SR 11.6 million, SR 14.3 million and 19.4 million, respectively.

Trades Tax Collected 2011 Net Collection SCR (m)




Beverage, Spirits & Vinegar

43.69 34.38 29.44 27.1%

Mineral Products 162.83 156.01 151.22 4.4%

Textiles Articles 13.89 12.93 11.33 7.5%

Motor Vehicles 68.67 57.89 63.45 18.6%

Tobacco 0.47 2.34 1.53 -80.0%

Prepared Food Stuff 38.75 21.87 19.39 77.0%

Others 37.13 41.78 34.07 -11.1%

Levies 50.63 51.68 45.12 -2.0%

Documentary Charges 7.68 2.70 2.42 184.4%

Total Trade Tax Collected 423.73 381.58 357.96 11.0%

Table 4: Analysis of trades tax for the year 2011

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Chart 5:Trades tax contribution per tax type for the year 2011

5.4 Social Security And Income And Non Monetary Benefits Tax Revenue

Social Security contribution collected for the year 2011 is in respect of arrears on payments. As shown in Table 5 below, total arrears on social security collected amounted to 11.3 million or as depicted in Chart 6 represents 97 percent of arrears collected from the private sector.

Income tax collected for the year 2011 exceeded forecast by 32.5 million (6 percent) as shown in Table 6. Income tax revenue collected in 2010 was made up of only six months. Intitally, there were some difficulties encountered in the early stages of implementation of income tax, i.e July 2010 onwards, whereby some of the 2010 collections were processed only early in 2011 thereby increasing the actual figures for 2011. Chart 7, shows that the private sector accounts for 66 percent of total income tax collected.





Social Sec.Private 10.97 - 232.54 -

Social Sec. Government

0.30 -

54.11 -

Total Social Security Tax

11.27 -

286.65

Table 5: Analysis of social security tax arrears payments for the year 2011

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Table 6: Analysis of income tax for the year 2011

Chart 6: Social security tax contribution per sector for the year 2011

Chart 7: Income tax contribution per sector for the year 2011





Income Tax Private

396.93 361.28 153.48 0.10%

Income Tax Parastatals

67.35 75.02 29.68 0.10%

Income Tax Government

141.71 137.17 70.74 0.03%

Total Social Security Tax

605.99 573.46 253.89 5.7%

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5.5 Excise Tax Revenue Excise tax was introduced in January 2010 on motor vehicles, petroleum products, tobacco and alcohol imported into the country as well as on locally manufactured alcohol and tobacco. Excise tax collected for the year under review amounted to SR 163.7 millions or 29 percent above budget estimates, (refer to Table 7 below). The good performance was influenced by a higher collection of excise tax on petroleum products and locally manufactured goods. Chart 8 shows that excise tax on petroleum products accounted for 39 percent, locally manufactured alcohol accounted for 28% and locally manufactured tobacco 17% of the total excise collected.

Table 7: Analysis of excise tax for the year 2011

Chart 8: Excise tax contribution per tax type for the year 2011

Excise Tax Collected





Alcohol – LMG 202.16 130.24 132.73 55.2%

Tobacco – LMG 121.46 99.79 99.56 21.7%

Alcohol – Imported 60.82 52.68 46.87 15.4%

Petroleum 283.42 227.34 241.55 24.7%

Motor Vehicles 57.20 51.86 46.80 10.3%

Tobacco - Imported 2.15 1.65 2.36 30.3%

Total Trade Tax Collected 727.23 563.57 569.86 29.0%

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5.6 Other Tax Revenue

Other tax revenue represents collection not falling into the specific tax categories relate to mostly - fees and fines including levies from poultry, pet bottles and cans where the proceeds collected are remitted to other entities. Other levies represent 59 percent of other tax revenue collected for 2011 as shown in Table 8 and Chart 9 below.

Other Revenue Collected





Fees & Fines 2.96 0.80 1.00 269.6%

Storage (Imports) 0.28 0.17 0.15 63.1%

Prepayments (Imports)

15.13 - 7.91

Deposits (Imports) 3.29 - 2.52

Other Levies* 30.64 - 19.85

Total Other Revenue Collected

52.30 0.97 31.42

Table 8: Analysis of other taxes

Chart 9: Other tax contribution per tax type for the year 2011

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6 SRC’s BUDGETARY PERFORMANCE

For the year 2011 SRC was allocated with an Expenditure budget of SR48.6 million (refer to Table 9). However, SRC ended with a surplus of R 3.1 million on the allocated budget. The surplus was attributed to funds not entirely utilised for the reform process which began in 2010 and is expected to continue in 2011 and 2012. A savings of 1.7 million was also made from the Personnel Emoluments allocation which was due to difficulties encountered in recruiting for the vacant positions that existed within SRC. Other unutilised allocations were in Other Cost and Specific Costs as shown in Table 9 below. As with prior years, Wages and Salaries make up the greatest percentage of the budget at 59 percent and Office Running Cost at 17 percent.

The table and charts below show the breakdown of expenditure across the five divisions of SRC.

Particulars

Actual

Budget

Variance (Over)/Under

SCR (thousands) Office of the Commissioner

Reform Project Office

Customs Division

Support Services Division

Domestic Tax

Total Total

Wages & Salaries 428.33 1,460.38 5,108.81 19,179.68 2,520.66 28,697.87 30,408.31 1,710.44

Office Running Costs

53.67 19.16 973.66 5,777.30 514.53 7,338.31 7,155.49 -182.82

Repairs & Maintenance

21.73 9.39 299.22 424.36 38.26 792.95 770.00 -22.95

Transportation Costs

166.26 103.19 150.18 586.46 166.15 1,172.24 981.60 -190.64

Other Costs 97.87 9.16 54.80 320.21 51.93 533.97 933.90 399.93

Specific Costs 0.11 14.43 65.21 741.92 5.84 827.50 1,165.70 338.20

Tax Reform Programme

123.12 394.43 654.38 1,060.39 875.58 3,107.89 4,500.00 1,392.11

Minor Capital Expenditure

11.54 699.08 232.46 1,918.83 106.23 2,968.14 2,709.00 -259.14

Total Expenditure

902.63 2,709.20 7,538.72 30,009.15 4,279.18 45,438.88 48,624.00 3,185.12

Table 9: Administered budget –expenditure for the year 2011

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Chart 10: Expenditure budget consumption per division for the year 2011

Chart 11: Expenditure budget consumption per cost category for the year 2011

59%

17%

2% 3% 5% 4%

2% 8%

SRC Expenditure Consumption per Category

Wages & Salaries

Office Running Costs

Repairs & Maintenance

Transportation Costs

Other Costs

Specific Costs

Tax Reform Programme

Minor Capital Expenditure

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7 DOMESTIC TAX DIVISION As SRC entered into its last phase of the tax reform program the main focus for the Domestic Tax Division in 2011 was on recruitment, training and development of staff for the newly created VAT Section in anticipation of the launching of the Value Added Tax in July 2012. The Division managed to lay the ground work by recruiting the first nine staff for this Section with the remaining eleven to be recruited in the first half of 2012. A VAT resident expert recommended by the IMF also arrived in Seychelles in July 2011 to assist with the preparation for VAT implementation. Although SRC moved to the self assessment system in 2010, the year 2011 marked the first year that businesses lodged their self- assessment business tax returns. This was a major challenge for the division due to the lack of experience in the processing of self-assessment returns. Furthermore, with the introduction of the self-assessed system in January 2010, taxpayers voiced major concerns regarding lodgement under the self-assessed regime, which resulted in a decision being taken to grant a moratorium to all businesses allowing them to submit their return by 31 October 2011 as opposed to the normal deadline which is 31 March. The aim of having the moratorium was to give businesses time to become familiar with the self-assessed system. In view that business Tax returns were not pursued before end of October 2011 enforcement of returns were not undertaken during 2011. A number of amendments were done to the revenue laws that SRC administers such as to the GST, Business Tax, Revenue Administration laws. In addition, several statutory instruments were issued (Appendix 1), one of which obligated all employers with a workforce of 25 or more employees to submit their payroll electronically. Domestic tax had to also step up efforts in the area of pension fund compliance works which SRC has been mandated to do as many businesses were not submitting their monthly payroll. Staffs from all sections were mobilized to be able to increase the compliance level which by the end of the year had increased significantly. In addition to this the division took on additional responsibilities when the Accounts Section was transferred from Support Service to the Domestic Tax Division and renamed the Revenue Section. With this new arrangement, Domestic Tax Division is better able to monitor and report on the performance of all taxes on a weekly basis. 7.1 Taxpayer Services The Taxpayer Service within the Domestic Tax division together with the Taxpayer Education Service Delivery Unit within the Reform Project Office worked hard in 2011 to ensure that taxpayers better understand their obligations under the various revenue laws. Educational campaign and materials were developed and disseminated to taxpayers using various means such as the media (TV, newspaper), publications (guides, manuals leaflets) and the internet via the updated and user-friendly website. As it was the first year of lodgement of business tax returns under the ‘Self Assessment System’, a series of workshop was conducted on Mahe, Praslin and La Digue to explain to taxpayer how to complete the business tax return. Perhaps the most significant enhancement to SRC’s service delivery during 2011 was the issuing of online receipts for the Praslin offices, which was previously being done manually. Good progress was

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also made to extend the same facility to La Digue although some more work will have to be done in 2012 as there exists a connectivity issue between the servers of DICT and Seychelles Pension Fund. S 7.1.1 General performance

7.1.1.1 Registry Unit

The Registry unit continued to deal with the lodgement of business tax returns, registration of new business, daily correspondence, cessation of business and maintenance of each taxpayer’s physical file. Despite the challenges of working with a shortage of staff and an unstable Client Management System, the end result in terms of numbers of new businesses registered, returns lodged, assessments issued, refunds processed, cheques processed, bills of entries endorsed, enquiries dealt with, exemption letters issued and revenue collected the performance was good for the year 2011 as can be seen in table 10 below.

Particulars Number

Business Tax Return Lodge - 2010 5081

Business Tax Return Lodge – prior years 1196

New Businesses Registered 1222

Business Closed 474

Files Referred to Prosecution 13

Table 10: Registry Unit achievement for the year 2011

There was an increase in the number of new businesses registered not only on Mahe but also on Praslin and La Digue, which necessitated sending an inspection team within the Provision of Advice Unit to conduct field work up to twice a week on Mahe, Praslin and La Digue. The Unit maintained registration and cessation databases. The registration database assists the registry staff in checking businesses not yet registered from the monthly list provided by Seychelles Licensing Authority. During the year, a meeting was held with the Seychelles Licensing Authority to provide more accurate information in addresses and contact numbers in order to be able to register businesses issued with a new license. The cessation register ensured that the Client Management System is updated as and when a business ceases trading.

7.1.1.2 Returns and Payment Processing The Returns and Payment processing (RPP) unit’s main task is to process payments received through mail, lodgement of GST returns, process business tax, GST and withholding tax assessment and amendments as well as raised PAYG Instalment of Tax. There was a backlog of unprocessed 2010 business tax returns which had to be dealt with in 2011 and this put a lot of pressure on the unit during the year. The table 11 below gives a summary of the unit’s core function and achievement for the year 2011:

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Particulars

2011

2011

Business Tax Assessments Processed (Self Assessment System – Year 2010) against total received

2913 3,931

Business Tax Assessments/Amendments Processed – [Prior Years] against total received

2709 2749

Total Assessments Issued 5622

Total Returns Received 6680

Achievement 84% Table 11: Summary of RPP unit’s achievement for the year 2011

Since SRC introduced the Business Activity Statement (BAS) in January 2010, individual taxpayers still visit the Advisory Centre and request POA Officers to assists in completing their BAS. The unit ensures that the BAS information and the cheque are correct and the necessary forms or documents are attached, including the submission of payrolls. A spreadsheet was created to record payments received by tax type and this is done on a daily basis. Cheque payments processed via mail are shown in Table 12 below:

Particulars Amount in SR

Income & Non-Monetary Benefits Tax 419,182,406.91

GST 374,099,550.79

PAYG 135,697,909.66

Excise Tax 91,946,596.99

Business Tax 239,625,252.09

SSF / Withholding Tax 9,858,750.23

TOTAL 1,270,410,466.67

Table 12: Amount collected in 2011 from cheque payments that were processed A refund register is maintained to record refunds processed for Trades Tax on imports and fuel as well as GST on Imports and services. The total amount refunded in 2011 was SR94, 096,423.26 of which SR 87,817,421.75 or 93 percent was for fuel refund as can be seen in the table 13 below.

Particulars Value (SR)

GST (Imports/Services) 4,236,559.26

Trades Tax on Fuel 86,118,196.99

Trades Tax - Others 2,028,867.41

Excise Tax - Fuel 1,702,224.76

Excise Tax - Vehicle 10,574.84

TOTAL 94,096,423.26

Table 13: Total amount refunded in 2011

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The trades tax refund on fuel includes fuel consumed not only by boat charters, but also by generators used by the 5 Star hotels; embassies, Air Seychelles, IDC and the Praslin Transport Company.

The unit also raised PAYG – Instalments of Monthly Business Tax (Provisional Tax) which were issued out in December 2011. The table 14 below gives a comparison of the 2010 and 2011 PAYG as posted on the Client Management System.

Particulars Year 2010 Year 2011

No. Of Taxpayer 1828 907

Payable SR372,512,268.60 SR495,428,149.67

Monthly Instalment SR31,352,027.50 SR41,323,619.62

Table 14: A comparison of the 2010 and 2011 PAYG The assessment for 2011 was based on the 2010 business tax return or prior year returns lodged and grossed up with a 5 percent growth rate. With regards to issuing of business tax assessment/amendments, there was a delay as the Client Management System had not fully stabilised and moreover of the moratorium in place allowing tax agents and taxpayers to lodge their return by 31 October 2011 instead of March 31, 2011. However, the unit managed to issue the assessments, see table 15, although there will still be a backlog come 2012 which is expected to be processed before the 31 March 2012.

Particulars Value (SR)

Business Tax Debit Assessments/Amendment - PY 134,977,345.15

Business Tax Credit Assessments/Amendment - PY 79,017,414.17

Business Tax Debit Assessments/Amendment - 2010 258,579,923.33

Business Tax Credit Assessments/Amendment - 2010 235,149,384.32

GST Debit Assessment/Amendment 9,229,427.89

GST Credit Assessment/Amendment 2,540,871.82

Withholding Tax Debit Assessment/Amendment 10,203,193.49

Table 15: The value of the assessment issued for the year 2011

7.1.1.3 Provision of Advice The Provision of Advice unit’s main responsibility is to provide answers, clarification or explanation for any inquiries or any assistance that taxpayers may have or need including the endorsement of Bills of Entry. With the increase in the number of businesses on Praslin and La Digue, during 2011 staff from Mahe was sent to the two islands to assist the staff on Praslin during the peak payment period, which is normally the 21st of every month. A register is kept to record bills of entry endorsed and to record the type of queries from taxpayers. Table 16 below gives a summary of the various queries or assistance that the unit dealt with and provided in 2011.

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Particulars (Type of Inquiry/ Other Services Provided) Number

Pension Fund 1756

Income Tax 1524

GST 1340

Registration 181

PAYG – Specified Business Booklet Issued 1321

Tax Exemption Certificate Issued - CSL 11

Tax Exemption Certificate Issued - IBC 281

Certificate of Domicile – Double Treaty Agreement 27

Tax Exemption Certificate Issued – PAYG Specified Business 52

Sickness Benefits 117

Social Security Arrears 79

PAYG – Monthly Instalment of Tax 571

E-Service Organization 160

Endorsement of Bill of Entry (includes bill of entry endorsed at HQ) 17795

Others 1304

Table 16: Number of inquiries dealt with in 2011 7.1.1.4 Interpretation and Appeal

The unit deals with any objections, appeals and amendments arising from any business tax, GST or withholding tax assessment. As can be seen in table 17 below, in 2011, 167 current cases were finalised whilst 23 cases were outstanding by the end of the year.

Particulars Finalized Outstanding

Objection - Current 14 4

Appeal - Current 1 3

Amendment - Current 152 6

Objection – Old Cases 3

Appeal on Hand 3

Appeal - Court 4

Total 167 23

Table 17: Number of finalised and outstanding cases for the year 2011

7.1.1.5 Exemption Letters The Section processed around 367 requests for exemption from payment of taxes on importation of goods received from various organizations in line with the respective revenue laws. The request came mostly from different organizations, e.g., SFA, Seychelles Island Foundation, Seychelles Tourism Board, Seychelles National Red Cross, UNDF funded projects, and religious organizations. 7.1.1.6 Lodgement of Monthly GST and Excise Tax Returns Businesses are required to lodge a BAS form to effect payment of GST on Services, Manufacturing, Rental of Property for residential purpose and Excise Tax on locally manufactured cigarettes and

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alcohol. For 2011, majority of businesses liable to GST have lodged their monthly BAS on time except for some professional services providers (draughtsmen, consultancies etc), boat charters and small guest houses or self-catering establishments. For these businesses an on-going exercise which started in 2011 is being carried out to make them aware of the need to comply with their legal obligations. 7.1.1.7 Taxes Foregone As extracted from the ASYCUDA System, table 18 below shows the forgone tax on imported goods exempted from payment of Trades Tax, Excise Tax & GST for the year 2011 amounted to SR 762,783,428.27

Particulars CIF Value (SR) Payable (SR) Paid (SR) Foregone (SR)

GST 4,992,696,956.35 761,074,527.03 1,459,659.97 759,614,869.76

Trades Tax 2,925,863.88 3,165,965.19 4,981.02 3,160,984.17

Excise 1,682,295.21 8,564.84 990.50 7,574.34

TOTAL 4,997,305,115.44 764,249,057.06 1,465,631.49 762,783,428.27

Table18: The total value of imported goods exempted from taxes in 2011

7.2 Audit Section In general it is fair to say that the audit section managed to undertake most of the planned targets set for the year 2011 and the results were satisfactory. More could have been done to increase the general performance of the section if it had not been for the delays in the assessment and lodgement process.

7.2.1 General Performance The plans and targets for the period 1 January to 30 December 2011 focused on the following strategic objectives. 7.2.1.1 Improve effectiveness of audit in ensuring tax compliance

Allocate resources across all segments of the taxpayer population with emphasis in those perceived to present greatest risk to revenue.

Adopt new audit methods to assist in determining understatement of tax liabilities e.g indirect audit methods for reconstructing income.

Renew our focus on the top larger taxpayers in the top income level by targeting those taxpayers with a profile of high risks characteristics.

Have a pro active approach with those taxpayers who pose the greatest risk to revenue and in addition to those who are in most need of education.

Detect and deter non compliance through risk management approaches.

Encourage compliance on Praslin and La Digue by conducting at least 2 field trips to undertake audit activities.

Impose higher penalties on repeated offenders.

Carry out project based audits on; o Related party transactions

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o Defaulters of GST on residential rent o Lawyers o Car Hire Industry o Employee versus subcontractor (contract for service or contract of service)

7.2.1.2 Enhance future compliance by conducting professional and effective audits

Provide training to auditors in tax laws and audit techniques.

Hold monthly meetings to discuss any topical issues or technical problems and to share information.

Provide taxpayers with a full explanation of audit adjustments being made and provide them with opportunity to contest these adjustments before any adjustment to an assessment is made and to minimize the number of disputes.

Advice taxpayer of what must be done for future returns as an aim to remove ignorance as an excuse for future non compliance.

Advice taxpayer of follow up action and the consequences of not complying so as to ensure that taxpayer take our advice seriously

Review taxpayer’s capacity to pay. We aim that at least 70% of the audit debt raised is collected or is subject to a satisfactory payment arrangement.

Hold discussions with tax agents who are not preparing tax returns in the appropriate manner and where there are widespread deficiencies in knowledge on particular issues liaise with Interpretations and Appeal Section to have a circular or ruling done.

Ensure that less than 15% of audit cases on hand are over 3 months in line with the service standards in place.

Audit’s operational plan for 2011 was developed on the basis that the section would have at least 25 auditors (excluding director, managers, profilers and risk and research staff). However, the section was operating with a total of 28 staff, of which only 18 were auditors. During the year, a total of 12 staff joined the Section. This includes 3 internal staff who were rotated from within the other sections. The skills and experience of these staff also made a positive impact on our general performance. 7.2.1.3 Revenue and case turnover targets As much as possible, all taxes administered by the Revenue Commission were adequately covered through a balanced audit program. The overall objective was to maximize taxpayers coverage while at the same time conducting quality audits of selected returns. Considering that a fully comprehensive risk management system was not yet developed and the Risk and Research Unit is a newly created unit with staff with limited risk assessment skills, case selection was based on one’s own judgment, referral from other sections, information received from third parties or from senior management. As at 31 December 2011, a total of 2,458 assessments against a plan of 5,130 had been completed and sent to Refund and Payment Processing (RPP) Section as per Table 19 below. There was a total of 124 assessments which have either not been checked and/or not sent to RPP. The number of on-going cases under review at the end of the year amounted to 273.

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Results for the year have been satisfactory for mainly all tax types, except the business tax assessments where the achievement was only 44% against the planned target. The main reasons for the under achievement for business tax are due to the moratorium that was given for the 2010 business tax returns and the delay encountered in processing these returns (Client Management System Problems) before they could be escalated to Audit Section by the Refund and Return Processing Section.

Table 19: Number of assessments achieved for 2011 against the target set for 2011

7.2.1.3.1 Aged Cases The Seychelles Revenue Commission has in place service standards which state the level of performance taxpayers, tax agents and employers can expect when dealing with Audit section under the normal circumstances. At the beginning of the year, there were a large number of audit cases which were more than 4 months old and some efforts were been made to reduce these old cases. 7.2.1.3.2 Dispute Cases Considering that there was no Interpretation and Appeal Officers to deal with the dispute cases, Audit Section had to deal with a number of dispute cases, whilst the most complex objections were being handled by Taxpayer Services Section. A technical team was also set up to deal with those technical cases and bring closure to those old dispute cases. During the period, a total of 414 amended assessments relating to dispute cases were finalised. As at the end of 2011, the section had only 14 cases on hand. 7.2.1.3.3 Amended Assessments

Performance measure Number of assessments year to date

Dispute Cases

Business Tax 351

Goods & Services Tax 16

Withholding Tax 6

Income Tax -

Social Security Contributions 41

Total 414

Table 20: Number of amended assessments relating to dispute cases finalised in 2011

Performance measure Number of assessments year to date

Number of assessments year end target

% Achievement

Business Tax 2,128 4,893 44%

Goods & Services Tax 120 90 134%

Withholding Tax 19 33 58%

Income Tax 60 33 181%

Social Security Contributions 131 81 162%

Total Assessments 2,458 5,130

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7.2.1.4 Professional and effective audits To improve ongoing general compliance we have:

Reinforced our education strategies during and after the end of audits

Conducted 2 field trips Praslin and La Digue to undertake audit activities.

Educated taxpayers and tax agents during and after the end of compliance activities on problems areas found and how they should better comply in future.

Assisted Taxpayer Services Section by giving out advice and explanation to taxpayers on how to complete the 2010 tax returns and also answered technical queries that were escalated to the section.

To avoid further burden on the Enforcement Section, at the end of each audit, taxpayers were invited to come to the office and discuss their payment arrangements. A number of settlements were negotiated prior to the issue of the assessment. Recommendations were also made to the Enforcement Section as to the amount of surcharge or additional tax to be waived in certain circumstances.

7.2.1.5 Improve auditors’ skills & knowledge In addition to the on the job training during the year 2011, a large number of staff of the section had the opportunity to attend training either locally or overseas as part of their professional development. A total of 9 staff from the section was also given the opportunity to attend courses in the area of accounting and management. Three staff members are following ACCA, 2 Diploma in Management and 2 AAT Diploma in Accounting. An Introduction to Taxation course was also provided to all new recruits in October 2011.

During the month of June and July, a delegation from SRC visited Mauritius and Tanzania to build their capacity in taxpayer services, auditing and enforcement. In the delegation for the two study visits were the Director of Audit, Large Taxpayer Audit Managers, Small & Medium Taxpayer Audit Manager and the Risk & Research Supervisor.

7.3 Enforcement Section The Plans and Target set for the year 2011 was achieved on an average by 75 percent inclusive of all revenue debts, as can be seen in Table 21 below.

Revenue Type Target Actual Remarks

Business Tax 75% 70% Under by 5% as a result of Amendment/objection/Appeal

INMBT 75% 65% Under by 10% given that CMS report were not available. Report based on physical monitoring

SPF 100% 95% Under by 5% due to incompatibility of reports SRC/SPF

PAYG (monthly) 85% 90% Due to close monitoring of monthly instalments

Self assessed 2010 90% 80% Self assessed tax payable being recovered at the point of lodgement

Table 21: The Section’s target against actual performance for the year 2011

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7.3.1 Revenue Collection Revenue collection was measured against actual and budgeted target set for each month. For each respective month the target was achieved and this could only happen with the close monitoring of large debts. The section was timely in recovering the large debts in collaboration with the work being done with the Forecasting and Analysis Branch (FAB) of the Ministry of Finance. Current debtors were given not more than one year to settle their liabilities. However, fewer debtors were reported in 2011 compared to 2010 given the Moratorium that was in place. 7.3.2 SPF/Payrolls The year was full of additional tasks for the Section which put more pressure on the already heavy workload of the section. The most crucial one related to the compliance work in respect of payroll submission which SRC took over in January 2011. By the end of the year however compliance level was up to 90% for payroll submission by employers with 25 or more employees.

7.3.3 Self-Assessed Returns 2010 The self assessment for the year 2010 was submitted only in October 2011 given the moratorium in place. Debtors were not attaching cheques with returns once submitted. Enforcement had to double its effort to monitor self assessed returns that were lodged without payment and to request that the same be submitted to SRC. Enforcement managed to recover 80% of the business tax payable for the year 2010. On the debtors’ outstanding list table 22 below specifically relates to taxpayers requesting payment by instalment and also includes requests made by taxpayers for objections, amendments or contentious issue for appeal before the Court.

Type Cases Business Tax Social Security Goods & Services Tax

Withholding Tax

Company 400 63,997,017 132,605,825 17,004,991 31,152,935

Sole Trader 333 9,896,655 4,269,689 1,062,009 0

Partnership 55 2,965,879 8,447,125 229,420 0

Total 888 76,859,551 141,322,639 18,296,420

31,152,935

Table 22: Debts outstanding by entity type as at 31 December 2011 7.3.4 Court Cases Cases for non-lodgement of returns were not brought before the Court as there with the moratorium in place. 25 cases were issued with Notice of intention to Prosecute for which dates have been given in 2012 for the court to process.

Cases Business Tax Cases Social Security Cases Business Tax Returns

20 2.5million 15 15million 11 16 returns

Table 23: Non-Lodgment of Business Tax Returns/Liabilities (ongoing) inclusive of Penalties and surcharges for the year 2011

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7.3.5 Debt Recovery

A total of 25 old debts are still being pursued before the court involving an amount of R.5,521,581. The figure includes business tax and social security and is also inclusive of late payment penalties. It is to be noted that the old debtors listing is going through a phase of cleaning up data given that there were overstatements in the figures reported for old debts. DICT took charge of the reporting and will provide Debtors listing as and when requested by SRC. Effective 2010 the data is now being captured under the CMS which is monitored by SRC 8 CUSTOMS DIVISION

Within Customs the year 2011 was the second full year into the IMF 2010-2012 reform program, and work also started to pave the way for the implementation of the Columbus Program namely the implementation of the SAFE Framework of Standards to Secure and Facilitate Global Trade. The focus for the year was to:

i. Enhance capacity for customs operation ii. Improve legislation and simplify operating procedures iii. Build the framework for larger trade facilitation

8.1 Enhance capacity for Customs operation

8.1.1 Strengthening custom’s management In an effort to improve efficiency in the day to day operations at Customs, a first phase promotion took place in July 2011, with six sections acquiring new managers, together with new supervisors in several units. A further boost to operations came by way of rotation of staff across the division, aiming at broadening the knowledge and skills base, as well as providing new learning opportunities to officers. This was facilitated by the new polices on recruitment, rotation and transfers which were approved by the Revenue Commissioner and implemented in 2011. As a further step, an internal restructuring in the last quarter of 2011 also took place with a new Assistant Commissioner being appointed for the Customs Division. 8.1.2 Building capacity of officers and units Customs Division is highly operational in nature and obliges officer to be dedicated and uphold a high level of integrity. Training is given top priority and as much as possible all training offered, especially on areas specific to customs operations, were taken up. More details can be seen under section 10.14 (Training and Development). An internal communication campaign was also launched with the aim of educating staff on new legislation, procedures and new developments within SRC so that they are better equipped to discharge their responsibilities whilst at the same time educate their customers.

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8.2 Modern legislation and simplified procedures

8.2.1 A new Customs Management Act The Customs Division has for many years now been operating under the Trade Tax Act 1976, Customs Management Decree 1980, Trades Tax Act 1993 and Trades Tax Regulations 1997. Although, a number of ad-hoc amendments to the customs legislations have been done over the years, the Decree itself has never been revised and is somewhat archaic in content. The Trades Tax Act and most of its accompanying regulations have been found to be inadequate, complex and lacking in transparency. Therefore a decision was taken to have a new and modern law to govern the operations of Customs as part of the effort to modernize Customs operations. The Customs Management Act (CMA) 2011 was approved by parliament in December 2011 and will come into effect on 1 June 2012. The CMA has been drafted to take into account the present day business circumstances, the current WTO accession process and the articles of the Revised Kyoto convention. The latter was ratified by parliament in November 2011 for Seychelles to be party to it. The CMA has also incorporated the best practices as set in the WCO SAFE Framework of Standards to Secure and Facilitate Global Trade. This framework is followed by customs administrations worldwide. The provisions of the COMESA Customs Management Regulations, which is part of the benchmarking towards COMESA Customs Union, were also taken into account when the CMA was drafted. 8.2.2 Simplification of Operating Procedures The Current Standard Operating Procedures (SPOs) for Customs date back to over 20 years ago at a time when the customs declaration process was lengthy and done completely manually. The fast evolving international trading environment, increased international flights, and the introduction in 2008 of an automated customs declaration system (ASYCUDA++) signified that it was time for the SOPs to be reviewed accordingly as some processes have become obsolete. The CMA, the Value Added Tax Act which will replace the Goods and Service Tax on 1 July 2012, were other reasons for the review of the SPOs. Work to revise the SOPs which started in late October 2010 continued in 2011 with teams set up within Customs to handle this exercise. A total of 17 procedures were under review, covering all areas of customs operations. In addition, 2 new operating procedures were identified to be drafted. Those are export and warehousing procedures. The new and revised operating procedures will be in place in time to complement the new Customs Management Act and Regulations when they become operational in June 2012. 8.3 Build the framework for larger trade facilitation

8.3.1 Improved Time release of Cargo Facilitating trade is at the core of Customs Division’s mandate. During the year, a number of activities to ensure the lead-time between appointment and verifications are shortened as much as possible

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were initiated. Cargo was stopped automatically through the ASYCUDA++ cargo selectivity module or by the Investigation Unit, which applies manual random check, as per risk management guidelines. During 2011, the Investigation Unit became more involved with physical verification of containers that had been e randomly stopped. They also assisted the Examination Unit with normal verifications, either within the port area or at the owners’ premises. This is due to the limited number of officers attached to the Examination Unit. The present system of appointment is on a first come first served basis. Although this is in place, principally for control purposes, as an importer with a lead-time of two days can be called in after within a day or less for verification depending on the number of containers cleared daily. In order to ease congestion in the port area, risk assessment is done on the spot by the Examination Unit after having reviewed the documents for any special remarks by the Entry Processing Unit or new information on the documents. In addition facilities for outside verification at importers premises is also offered for a fee. Customs is moving towards promoting pre-arrival declarations which will be of joint benefit to both parties. It will allow faster clearance of goods as Customs would have already received the documents; risk assessed the declarations and established whether it is low, medium or high risk. Table 24 gives a summary of the traffic at Customs in terms of total cargo vessels and total number of containers (in size) that landed at the Seychelles Commercial Port and hence through Customs procedures during 2011. Note that Teu = 20’ Equivalent Unit. So a 40 feet container is equivalent to 2 teus.

Description Number / Size

Cargo (Container) vessels 144

Container (teu) landed 17,959 teus

Container(teu) for domestic 17,467 teus

Container (teu) for transhipped 492 teus

container (teu) exported 5,937 teus

Table 24: Total number of cargo vessels and total number of container (in size) that landed in Seychelles in 2011 8.3.2 Improve quality of Customs declarations Customs processed 49,388 Bills of Entry in 2011 as can be seen in Table 25 below. With all the bills being processed it is important that importers and their agents ensure that their declarations are correct. Correct declarations remove the need for the importers and agents to go back to make amendments which delays the time that Customs can clear their goods. Training and educating the importers and their agents are vital in achieving this objective.

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MODEL OF DECLARATION SEAPORT AIRPORT

IM4 (Home Use) 17226 20459

IM5 (Temporary Import) 23 92

IM6 (Re-import) 2 1

IM7 (Warehouse) 1377 783

IM8 (Tranship/Shipstores) 1038 1501

SD4 (Private Use) 2111 2086

Ex1 (Permanent Export) 635 1966

EX2 (Temporary Export) 5 64

Ex3( Re-export) 13 6

Total declaration 22430 26958

Table 25: Number of declarations processed by Customs in 2011 In 2011, Customs equipped itself to provide added capacity to the traders’ community and their agents with the setting up and delivery of training for DTI holders2 and agents on ASYCUDA++ , HS classification, import regulations and other Customs procedures. A decision was also taken in 2011, in line with the new customs agent’s registration requirement, that all applicants to be registered as a customs agent will be obliged to pass a test with Customs. During 2011 Customs conducted 3 training courses for both the customs agents and the DTI holders. In 2011 also saw the setting up of an HS Committee, comprising of senior officers, with sound knowledge in classification or whose nature of their work deals with HS matters. The role of the committee is to provide advice to traders on correct classification and provide guidance to management on HS related matters. In 2011 a total of 5 cases were decided by this committee. 8.4 Minimizing physical inspection Trade liberalization through massive reduction in customs tariff (to 0% in most cases) has limited physical inspection mostly to areas of prohibited and restricted goods, community protection and intelligence information. The ASYCUDA system, through its selectivity system, channels consignments for physical checks or for immediate release. However, with resource constraints, including the absence of scanners at the port, this service suffered in 2011, especially as cargo level has increase drastically coupled with a lack of human resources. Despite all these constraints the inspections carried out led to a number of offence cases being discovered in 2011 - 205 cases in total amounting to R 4,088,843/- comprising of total taxes of R 2,939,630/-, levy of R 41,303 and penalties of R 1,107,910/- as depicted in Table 26 below.

2 At the end of 2011, 30 clearing agents and 86 companies had the appropriate ASYCUDA component

installed on their computers.

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Section No. cases Type of offences Tax Excise GST Levy Penalty Total

Investigation Unit 10 Undervaluation 143,846 30,936 1,000 14,033 189,815

19 Smuggling 662,931 795,221 150,780 21,326 829,450 2,459,708

18 Misclassification 156,171 11,040 60,814 12,469 240,494

7 False declaration 38,621 1,702 20,117 20,624 81,064

Total Collected 54 1,001,569 807,963 262,647 34,795 864,107 2,971,081

Seaport Examination

6 Undervaluation 2,865 55,542 17,304 75,711

50 Smuggling 10,713 436,742 48 33,055 480,558

20 Misclassification 208,434 25,827 6,460 70,524 311,245

Total collected 76 222,012 518,111 6,508 120,883 867,5174

Air Cargo unit 1 Undervaluation 1,625 1,218 0.00 0.00 2,843

62 Smuggling 42,003 54,787 0.00 112,619 209,419

4 Misclassification 24,734 1,408 0.00 7,439 33,581

Total collected 67 68,362 57,413 0.00 120,058 245,833

Inland Revenue

3 Smuggling 0.00 0.00 0.00 0.00 0.00

4 Misclassification 0.00 0.00 0.00 1,308 1,308

Total collected 7 1,308 1,308

Warehousing 1 Smuggling 0.00 1,553 0.00 1,553 3,106

Total Collected 1 0.00 1,553 0.00 1,553 3,106

Table 26: Number of offences and revenue collected from the offences in 2011

8.5 Risk management As a strategic decision, SRC placed risk management as the cornerstone of having customs operate efficiently and effectively through a well defined risk management framework., As a result Customs risks will be better managed and resources deployed to mitigate high risk areas. Risk management took a major step in the last quarter of 2011. In response to a request from the Commissioner, an IMF-AFRITAC South revenue administration technical expert visited Seychelles between October 24 and 28, 2011. The purpose of the mission was to provide technical assistance in developing a risk management function in customs and, in particular, to help draft a Risk Management Strategy for customs.

8.6 Post clearance Audit The Customs Division planned on introducing the post Clearance Audit function since 2010. The ASYCUDA system already has the in-built Post Clearance selectivity route, called the Blue Channel. However, in 2008, when ASYCUDA formally took off, a decision was taken not to activate it, for reason of capacity and also due to the Division’s risk mindset and pro-physical control tendency. With the setting up of the PCA unit in 2010, the priority in 2011 was to build capacity of officers of that unit. One officer completed an attachment with the Tanzania Revenue Authority and also carried out a study visit on PCA with the Mauritius Customs Department. The Supervisor of that Unit

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attended a workshop on PCA in Zimbabwe in December, 2011. The attachments and workshop have equipped the officers concerned with the necessary skills to better understand how Post Clearance Audit functions although technical assistance is this area is expected in early 2012. Management decision to implement post clearance audit is based on the following objectives:

To gain assurances that clearance provided to compliant traders under the blue lane system in ASYCUDA++ is in line with Customs regulations and procedures;

To ensure that that the revenue, legally, due to government has been identified and paid ;

To facilitate trade for compliant traders and promote voluntary compliance with this fast track clearance system.

8.7 Border Control and Management As a strategic objective, customs continued to place emphasis on border control and management as it moved ahead with its customs reform. In 2011, customs concentrated on staffing the various entry points, such as airport terminals, airport cargo, and seaport offices. However, there are still deficiencies in the number and competence of staff as well as the work environment in which they operate. A project to extend the airport cargo building was finalised with the Seychelles Civil Aviation Authority in 2011 and discussions continued to enhance facilities for improved facilitation and control at the passenger terminal. The process toward procuring scanners was brought to the attention of the Minister of Finance who confirmed that government would provide funding for a new scanner, at the Post Office as UNDP had already provided funding for scanners at the airport. The project to construct a container verification shed was again put across to the Port Authority and Ministry of Finance to consider. Verification is still being carried out in open air and often in austere weather conditions. Hence, for those reasons the turnaround time for verification is affected. The risk management framework being put in place will greatly increase the way that border controls are done, as when correctly applied, this will lead Customs to focus on high risk areas, whilst keeping an eye on less risky ones, where the latter is targeted only on a random basis. 9.10 HS 2007 Migration In March 2011, SRC started an exercise to migrate from the current tariff nomenclature based on the 2002 version of the WCO Harmonized System (HS) to the 2007 version. Two technical experts from COMESA Secretariat were assigned to assist with this migration. The objective of this project was to produce a final draft of the 2007 version of Harmonised System Tariff nomenclature. Once completed, the project is expected to produce the following outcomes: a national tariff nomenclature based on the WCO 2007 version of the Harmonized Commodity Description and Coding System and an updated ASYCUDA++ database.

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9 SUPPORT SERVICES

Support Services Division being the backbone of SRC, exists to provide, monitor and assess the efficient use and allocation of resources within all divisions of SRC. With the ongoing reform and modernization taking place within SRC change is inevitable and as such the Division’s role becomes increasingly important. The Division, through its four sections namely Administration, Human Resource, Health and Safety and Training and Development has to ensure that all divisions get adequate and skilled human resources, proper infrastructure and that the working environment is conducive for all staff. This is vital as SRC needs to be able deliver an efficient service for the collection of revenue, trade facilitation and border protection at all times. 9.1 Review of organigram In 2011 saw the review of the SRC’s organizational structure to cater for the ongoing changes that have been taking place as SRC modernizes itself. The most significant change that was made to the organigram was the re-allocation of the former accounts section form Support Services Division to the Domestic tax Division. It was concluded that due to the nature of their duties, which was mainly collection of revenue, the accounts section mandate was more in line with what the other sections in Domestic Tax were doing. Thus in view of that, the accounts section was renamed to become The Revenue Collection Section and fell under the responsibility of the Assistant Commissioner of Domestic Tax. In addition a significant restructuring which took place was introduction of a new VAT unit within Domestic Tax Division. The unit was introduced so as to ensure the successful implementation of VAT in Seychelles come 1 July 2012, which since 2011 had been announced as being the major change in terms of implementation of new taxation laws in Seychelles. 9.2 New salary wage grid and Inducement allowance In January 2011, SRC introduced its new salary wage grid for all staff not on SRC contract - those from grade SRC01 to SRC06. The new wage grid brought about more flexibility in terms of rewarding employees through increments rather than just promotion as the previous salary wage grid limited the possibility of rewarding staff through an increase in salary. With the new wage grid also came the inducement allowance which was given to all staff from grade SRC01 to SRC06. The inducement allowance took into account the difficulty to attract and retain staff, high risk of corruption, working under difficult circumstances in the enforcement of law and order and to encourage endurance/exposure to unsociable working hours. SRC was allocated a total of SR1.8 million to effect payment of the inducement allowance. By the end of 2011, 252 staff had received the allowance which ranges from SR300 to SR1250 depending on their salary grade. 9.3 Staff movement As with the previous year, SRC continued to see a significant number of staff movements in 2011 in the form of new recruits, internal transfers, promotions and termination. As shown in table 27 below a total of 69 new staff were recruited during the year and 47 staff received a promotion in view of their good performance throughout 2010. Due to restructuring that took place in the last quarter of

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2011, all the 24 staff in the Account Section were transferred to the Domestic Tax Division and the Accounts Section became the Revenue Collection. Consequently the recorded internal transfer was high compared to the previous year. Staff turnover continued to be relatively low at 6%, with only 13 staff leaving the organization.

DIVISIONS NEW APPOINTMENTS PROMOTIONS TRANSFERS TERMINATION OF EMPLOYMENT

IN OUT

Commissioner’s Office 1 2 1 0 0

Reform Project Office 2 NIL 0 0 3

Support Services 13 6 0 24 5

Customs 35 23 1 1 2

Domestic Tax 18 15 25 1 3

Total Amount 69 47 27 26 13

Table 27: Staff movement for the year 2011

9.4 Three year training and development plan The major achievement in the area of training and development was the development of a detailed three year training plan for the period 2012 -2014 which was submitted in SRC’s budget proposal to the Ministry of Finance in the last quarter of 2011. The training plan makes provision for all supervisors, managers and Heads of Division to assess their staff training needs and in turn requests the right kind of training that their staff will need for their personal and professional development. The plan comprises of different trainings that cater for all SRC staff from individual needs taking into account their personal academic growth to the development of their interpersonal skills. Whilst this exercise sought to provide staff with the relevant skills that would better help them in providing a better service in their respective sections, it also gave the Heads an overview of what skills and experience they need to inculcate in their staff so as to maximize productivity within their respective divisions. It also provides them with the opportunity to know the ability of their staff and how they can better allocate them to the right posts and with the right duties so that they can achieve the goals set by SRC. 9.5 Training and Development Capacity building was one of the priorities for SRC for 2011 and as such SRC continued to invest in its staff. The budget allocated for training budget was SR 3,365,976.00 for the year 2011 (refer to Table 10). The budget was spread over all the different divisions with the two largest divisions sharing the highest percentage, of which Domestic Tax represented 50 percent and Customs 21 percent. Table 28 presents the distribution in the number of SRC staff who attended local and overseas training and the corresponding expenditures per division.

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Table 28: Statistics on participations and cost of SRC staff training By the end of the year SRC had recorded:

100 percent of staff attendance in at least in a local training. For all the courses entertained by SRC for its staff, staff participation in all these courses amounted to a total attendance of 683 (614 local & 69 overseas),

284 certificates were presented to SRC staff of an average of one per staff, following completion in various in house held trainings such as Introduction to Taxation and Performance Development;

9.6 Better management of SRC’s Inventory

SRC acquired an inventory software from the Department of Information and Communication Technology during the last quarter of 2011 with the purpose of providing a readily available stock register system that will facilitate the acquisition, monitoring, disbursement and replenishing of SRC stock. The system also aims at keeping reliable and up to date tracking of all disbursement made and usage of stocks within all units and sections within SRC.

9.7 Vehicle write off and acquisition Three SRC vehicles were written off during 2011 as they were old, damaged and too costly to repair. SRC purchased 2 new cars and a third mini-bus. The mini-bus was allocated to transport staff working on shift duty. With each shift having a mini-bus, the amount of time that staff have to wait for a driver to either collect or drop them at their domicile will be reduced. All three vehicles were tendered and sold to SRC staff as per procedures.

9.8 Health and Safety

In light of the alarming rate of fires taking place across the country during the year 2011 SRC saw the need to intensify its effort in the area of fire prevention. A fire safety survey was conducted with the

Local Training Overseas Training Total Expenditure

Division Number of

staff % of Total Staff in the division

Number of Staff

% of Total Attendees

Rs/ x 1000

%

Secretariat 06 100 04 10 351.597 16

Reform Project Office 10 100 05 12

241.723 11

Domestic Taxation 91 100 13 32

1,098.742 50

Customs 117 100 18 44 461.471 21

Support Services 23 100 01 02 43.949 02

Total All 247 SRC staff

100% of SRC staff

41 17.6% of Total

SRC staff

2,197.484 65.3% of available funds

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assistance of officials from Seychelles Fire and Rescue Agency Services (SFRAS). The aim of the survey was to assess the level of fire safety on SRC premises. The survey identified a number of weaknesses and immediately SRC took some measures to address them. One of them was the lack of fire alarm system at Customs House. Electronic fire alarm facilities were installed at the Customs House and staff were trained, through fire drill sessions, on how to use the facility during an emergency evacuation situation, Staff also underwent a series of fire safety training facilitated by officials from SFRAS in relation to their work place. In view of the size of SRC, both in terms of the number of staff and how the different offices are dispersed over various locations, a decision was taken in 2011 to train a number of staff at each SRC location rather than recruiting additional health and safety officers . Twenty seven staff from every section of SRC were identified, trained and certified as Health and Safety representative by certified trainer for health and safety from the Ministry of Health. The aim of the Health and safety representatives is to assist the Health and Safety Unit to identify unsafe work practices and condition.

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APPENDIX 1: SRC REVISED ORGANISATIONAL STRUCTURE

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APPENDIX 2: S.I. (STATUTORY INSTRUMENTS) APPROVED DURING 2011 Correction to income and Non-Monetary Benefits Tax (Payroll withholding statement)

Regulations 2011 in SI 94 of 2010 SI 5 of 2011 – Business Tax Act – Business Tax (Double Taxation Agreement) Regulations,

2011 SI7 of 2011 – Business Tax Act – Business Tax (Amendment of First Schedule) SI8 of 2011 – Business Tax Act – Business Tax (Amendment of second schedule) Regulations,

2011 SI9 of 2011 – Excise Tax Act – Excise Tax (Amendment of Schedule 2) Regulations, 2011 SI 11of 2011 – Income and Non-Monetary Benefits Tax Act – Income and Non-Monetary

Benefits (Amendment of second schedule) Regulations, 2011 SI 19 of 2011 – Goods and services Tax Act – Goods and services Tax (Newspapers, Journals

and Periodicals) Regulations, 2011 SI 21 of 2011 – Income and Non-Monetary Benefits Tax Act Income and Non-Monetary

Benefits (amendment of schedule) Regulations, 2011 SI 22 of 2011 – Trades Tax Act – Trades Tax (Amendment of Schedule 3) Regulations, 2011 SI 26 of 2011 Revenue Administration Act – Revenue Administration Regulations, 2011 SI 28 of 2011 – Seychelles Revenue Commission Act – Seychelles Revenue Commission

(Amendment of schedule) Regulations, 2011 Correction to SI 26 of 2011 published in the official Gazette No.16 dated 28th March ,2011 SI 31 of 2011 – Trades Tax Act – Trades Tax (Imports ) (Amendment ) Regulations, 2011 SI 35 of 2011 – Income and Non-Monetary Benefits Tax Act – Income and Non-Monetary

Benefits (Amendment of Second Schedule) (No2) Regulations, 2011 SI 36 of 2011 – Business Tax Act – Business Tax (Business Tax Return Form) Regulations, 2011 SI 44 of 2011- Income and Non-Monetary Benefits (Amendment of schedules) Regulations

2011 SI 49 of 2011- Value Added Tax (Amendment of fourth and fifth schedules) Regulations 2011 SI 58 of 2011 – Goods and Services Tax (Amendment) Regulation, 2011 SI 98 of 2011 – Business Tax (Business Tax Return Form) (No2), Regulations, 2011 SI 101 of 2011 – Tourism (Incentives) (Amendment of Schedules) Regulations, 2011 SI 105 of 2011 – Goods and Services (Baby food, Napkins, LPG Gas, Books, and Musical

Instruments) Regulations, 2011

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APPENDIX 3: CHARTS AND TABLES

Charts Chart 1: Actual 2010 revenue per tax type against budget and actual 2011 revenue Chart 2: Contribution per tax type for the year 2011 Chart 3: Business tax contribution per sector for the year 2011 Chart 4: GST contribution per tax type for the year 2011 Chart 5: Trades tax contribution per tax type for the year 2011 Chart 6: Social security tax contribution per sector for the year 2011 Chart 7: Income tax contribution per sector for the year 2011 Chart 8: Excise tax contribution per tax type for the year 2011 Chart 9: Other tax contribution per tax type for the year 2011 Table 9: Administered budget –expenditure for the year 2011 Chart 10: Expenditure budget consumption per division for the year 2011 Chart 11: Expenditure budget consumption per cost category for the year 2011 Tables Table 1: Summary of revenue collected for the year 2011 Table 2: Analysis of business tax for the year 2011 Table 3: Analysis of goods and services tax for the year 2011 Table 4: Analysis of trades tax for the year 2011 Table 5: Analysis of social security tax arrears payments for the year 2011 Table 6: Analysis of income tax for the year 2011 Table 7: Analysis of excise tax for the year 2011 Table 8: Analysis of other taxes Table 9: Administered budget – expenditure for the year 2011 Table 10: Registry Unit achievement for the year 2011 Table 11: Summary of RPP unit’s achievement for the year 2011 Table 12: Amount collected in 2011 from cheque payments that were processed Table 13: Total amount refunded in 2011 Table 14: A comparison of the 2010 and 2011 PAYG Table 15: The value of the assessment issued for the year 2011 Table 16: Number of inquiries dealt with in 2011 Table 17: Number of finalised and outstanding cases for the year 2011 Table18: The total value of imported goods exempted from taxes in 2011 Table 19: Number of assessment achieved for 2011 against the target set for 2011 Table 20: Number of amended assessment relating to disputes cases finalised in 2011 Table 21: The Section’s target against actual performance for the year 2011 Table 22: Debts outstanding by entity type as at 31 December 2011 Table 23: Non-Lodgment of Business Tax Returns/Liabilities (ongoing) inclusive of Penalties and surcharges for the year 2011 Table 24: Total number of cargo vessels and total number of container (in size) that landed in Seychelles in 2010 Table 25: Number of declarations processed by Customs in 2011 Table 26: Number of offences and revenue collected from the offences in 2011 Table 27: Staff movement for the year 2011 Table 28: Statistics on participations and cost of SRC staff training

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APPENDIX 4: STATEMENT OF REVENUE AND STATEMENT OF EXPENDITURE

seychelles revenue annual report commission · pdf filethe financial year 2011 proved to be...

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