The South African Revenue Service:Transformation and Service Delivery

Annual Service Delivery Learning AcademyDurban, 11 July 2003

17/07/2003 2

Overview of the presentation

• Introduction

• The role of SARS

• SARS’ vision

• Transformation and Service Delivery

• Challenges

• Conclusion

17/07/2003 3

The value of interactions like this

• For a country in the throes of transformation, there are benefits in

sharing best practices, particularly in the public sector;

• The issues and challenges of transformation are similar and shared;

• The transformational success of SARS is dependent on the

transformational success of the nation as a whole;

• Consequently it is imperative that we share our lessons on

transformation and learn from the experiences of others.

The SARSexternal environment

17/07/2003 5

“No longer the lackluster bureaucratic outpost that SouthAfricans grew to love and ignore, SARS, as the agency isknown, is fast becoming the ravenous revenue machinethat every bona fide government needs and every citizendreads.”

New York Times

17/07/2003 6

Since 1995, the first full year of black-majority rule, the state treasury's annualtake has swelled by almost 100 percent.

Minister T Manuel

17/07/2003 7

“Not unexpectedly, the newfound zeal hasunnerved more than a few taxpayers.”

Moneyweb

17/07/2003 8

SARS’ role

economy

Statespending

Moneygeneratedby SARS

Borrowmoney

IMF

Enha

nced

serv

ice

deliv

ery

Ideally more

Ideally less

economy

-

+

(e.g. increasedinterest rates…)

Enhancedautonomy+

17/07/2003 9

The SARS environment

Tax gap

SARS’mandate

SARS’resources

State’sspendingrequirements

SA history

Current macro-economic andSocio-political conditions

Culture ofcompliance

Taxpayerbehaviour

Business environment

Industry factors

Sociological factors

Economic factors

Psychological factors

SARS’behaviour

SARS’history

17/07/2003 10

Compliance climate

• Some inroads made into non-compliance.

• Succeeding in identifying deliberate non-compliance.

• Still some way to go in adequately combating sophisticated and

aggressive tax planning.

• Insufficient inroads into organised crime.

• Insufficient inroads into cash (informal) economy.

• Impact of penalties plus additional tax plus prosecution has

improved levels of compliance.

• Some non-compliant taxpayers want to disclose, but fear total

reprisal.

What we aspire to

17/07/2003 12

Our vision

Commitment tocountry &constitution

Compliance:

• Voluntarycompliance

• Early detection ofnon-compliance

• Deterrence ofnon-compliance

• Anticipatedynamiccomplianceenvironment

• Differentiatedapproach tocompliance

SupportingGovernment:

• Support thedelivery ofessential publicservices

• Best practicemodel for publicadministration

Internally:

• Consistent,transparent &collaborativeactions

2. Professional,competent,approachable,flexible staff

3. Integrated &seamless serviceoffering

4. Service aimed atreducing compliancecost & makingcompliance aspainless as possible

17/07/2003 13

The future of revenue administrations

•Promotion of fiscal citizenship

•Promotion of national sovereignty

•Enabling the delivery of government services

•Leveling the economic playing field

•Expanding the role of RA to include benefit distribution

•Consolidation of service delivery across government

•Invoking principles of equity and removing tax bias

•Managing population registers

•Agency for tax

collection

•Protection of

economy

New Revenue AdministrationsOld RA’s

17/07/2003 14

Anticipating the future

• Effective, sharplyfocused, more flexible

• Community approachwhich censures non-compliance behaviour

• Consolidated view ofgovernment – offersseamless citizenengagement

•Increasedknowledge•Increasedsophistication•Smarter, moreknowledgeable•Morediscerning•Moredemanding

•Threats to existing tax base &national sovereignty•Interlinked economies•Taking on other government roles•Erosion of the base throughelectronic transacting, trade &financial liberation, increased labourmobility•Environmental scanning &anticipatory interventions = key togrowing collections•Do more with less, leverage info,mutually beneficial alliances

17/07/2003 15

Achieving our vision

Administrativesimplification

Administrativesimplification

Quality,Timely

processing

Quality,Timely

processing

Empowered staff

Empowered staff

Extended SARS

enterprise

Extended SARS

enterprise

Personalisedservice

Personalisedservice

Integrated Taxpayer

view

Integrated Taxpayer

view

Balanced,Differentiated

approach

Balanced,Differentiated

approach

•Extended reliance on 3rd party info, •Electronic Administration, •Collaborative

Less duplication = Less disruption

•Meeting expectations, •Segmentation,•Account managers•Max frontline resolution•Reward compliance

•Core competence = Skill + professionalism•Knowledge management•Motivated, skilled•Integrity

•Reduce TAT’s•Assurance mechanisms

•Simplify requirements,•Procedures & forms•Increased reliance on third party info

Transformation and Service Delivery

17/07/2003 17

Our transformational implementation

Pre-1997 1997 1998 1999 2000 2001 2002 2003 2003-onwards"SARS" pre-1997

Autonomy 1997

Diagnose current roll-outsDevelop newly defined strategies

Plan Gauteng Roll-out 2003 onwardsPilot newly defined strategy:

Large Business Office

Planning to changeRecognise the need to change

Starting to change- Siyakha "we are building introduced"-1999-2001

Experimenting: Test concepts & formulate strategies 2001-2002

SCU & Woodmead Roll-outs2000-2002

Rolled out KZN 2000-2002

Rolled out WC 2002-2003Based on KZN lessons learnt

17/07/2003 18

Our transformational timeline

“SARS” pre-1997 Autonomy 1997

• Fragmented: separate tax andcustoms departments

• Activities had a product focus (VAT,IT…)

• Bureaucratic and administrativeculture: mechanistic and inflexible

• Limited in its ability to attract, rewardand retain core expertise

• Promotion to management positionsbased on years of tenure

• Geographically spread• Service did not feature• Inadequate in terms of representivity

THE BEGINNINGS OF:• Increased accountability• Greater flexibility in employment practices• Devolution of decision making authority• Imposition of financial and planning

discipline• Upgrading of physical and processing

infrastructure• Commitment to employment equity• Recognition of the need for excellent

service• Exploration of technology enhancement

Concomitant increase in productivity

17/07/2003 19

Our transformational timeline (2)

Siyakha (“we are building”)Moving towards a process based

organisationImprove efficiencies – concentrate,

standardise, streamline,front office v back office

Processes first, technology laterTaxpayer service & education

BUT

No retrenchmentsInternal advertisements for posts –Siyakha protocol

OPERATIONALLY

Criminal InvestigationsIntelligence collectionHigh profile cases

Starting to change1999

Recognised the need to change

Identified key levers

Not a holistic change programme

Garnered support from our external stakeholders

Planning to change

Audit / CI / Collections as concentrated enforcementarm

SCU, Woodmead project

Business process engineering – high level

Exploring the role of business intelligence & risk

Increased the profile of enforcement action

Experimenting 2001 / 02

Concomitant increase inproductivity

17/07/2003 20

Our transformational implementation

Understanding our compliance climate andthe structure of our economy

Understanding why we do what we do

Understanding our environment

Development of strategy

SWOT analysis

Development of the comprehensivecompliance approach

Transformation of processes andtechnology

2003 / 06

Rolled out KZN / WC: Lessonslearned

Process needs to be more detailed

The way in which we clustered sub-processes was sub-optimal

Key accountabilities cannot be pinned onbusiness division e.g. revenue streamcollection, non-registration, non-filing

SLA’s between business units notoptimal – hand-offs, accountabilities

2000 / 03

17/07/2003 21

Challenges going forward: Sustaining themomentum and building capability

• Innovation and design of business products,processes and technology;

• Business and risk intelligence;• Planning, design and implementation capability;• Measurement and MIS;• Enablement of electronic transactions, e-SARS;• Skills development:

technical,professional,managerial andleadership;

• Change management and culturetransformation.

1

17/07/2003 22

Challenges going forward: Integrating businessproducts, processes and technology

2

All taxes

ITVAT

Customsetc

All functions

Taxpayer service

Assessing

Enforcement

Relationship & segment driven

E-based

17/07/2003 23

SARSaction

SARS action

Counter-thrust

SARS action

Counter-thrust

SARS action

Counter-thrust

Challenges going forward: Implementingorganic planning

3

17/07/2003 24

Spec

ific

alle

gatio

n O

f non

-com

plia

nce

Submit returnReceive, capture,

batch returnAssess returnNo risk

Risk

Investigation

Investigation

Collect

Assess

Assess

Suspicion ofcriminality

DatabaseRisk &

Intelligence process

Collect

Prosecute

Assess &prosecute

CollectG

eneric / General risk

MaintainAuditcycles

Refund

RefundRegister Allocate

riskscoring

Challenges going forward: Implementing new businessprocesses 4

17/07/2003 25

Organised Revenue CrimeOrganised Revenue Crime

Intentional nonIntentional non--compliancecompliance

Creative complianceCreative compliance

Capitulative / surrendered complianceCapitulative / surrendered compliance

Committed complianceCommitted compliance

Enfo

rcem

ent

Ris

k-ba

sed

case

sel

ectio

n

Mai

nten

ance

Ran

dom

cas

e se

lect

ion

Exam

inat

ion

Insp

ectio

n

Fina

ncia

l In

vest

igat

ion

Crim

inal

In

vest

igat

ion

Enco

urag

e vo

lunt

ary

disc

losu

res

of

non-

com

plia

nce

Compliance > enforcement

Challenges going forward: Implementing theCompliance regulatory model 5

17/07/2003 26

Taxpayers file and payeasily,

Communicate withtaxpayers, inform themof their obligations

Make it easy fortaxpayers to comply

Examine & inspectdeclarations toSARS

Investigatewhere wesuspectnon-compliance

Challenges going forward: Implementing theComprehensive Compliance Approach

6

17/07/2003 27

Conclusion

Our success is measured by:

• Revenue collected to meet Governmentneeds;

• Increasing levels of compliance; and• Improving the quality of our service and

the ease for taxpayers in meeting theirobligations.