Honourable chairperson and members Our President has said that the year 2010 must be a year of doing things differently in response to a changed and changing world. He said that in doing this we must be creative and inventive while building on the sound, secure foundations already laid. This Strategic Plan is a blueprint for what we as SARS are going to do differently, creatively and inventively over the medium term in support of government’s priorities.
This strategy builds on the solid foundations of our compliance model which forms an enduring and tested formula for enhanced compliance through which sustainable revenue is generated to fund all of government’s strategies, plans and priorities.
But our mandate as a revenue and customs administration stretches wider than revenue collection. It encompasses facilitating economic growth through effective administration of tax and trade policies which maximise the conditions favourable for economic growth. And it encompasses supporting the social contract between citizens and the state by providing an efficient and effective service which facilitates, encourages and where necessary compels all citizens meeting their obligations.
The SARS Compliance Model
SARS has joined most advanced revenue authorities in adopting a behavioural compliance model based on education, service, and enforcement. This compliance model has as its premise that driving the desired human behaviour relies on three necessary components: firstly, we must ensure that taxpayers and traders know what is expected of them and how to comply; secondly, we must make it as easy as possible for taxpayers and traders to be compliant; and thirdly, we must ensure that we have a credible and visible ability to detect and punish non-compliance.
It is this strategic foundation which underpins the seven year SARS Modernisation Programme which began three years ago. By automating the tax and customs processes, this programme seeks to enhance these enablers for compliance. It does this in three primary ways: Firstly, automation enhances service by significantly improving the ease, convenience and speed of the tax process as witnessed by the changes to the income tax process over the past three years. Secondly, automation allows for the expanded use of risk tools using third party data both to simplify the process for taxpayers as well as to enhance our ability to detect and deter non-compliance. And thirdly – and perhaps most critically – it releases human resources within SARS from mundane, low yield activities to focus on education, outreach, service and other compliance initiatives in pursuit of our ultimate objective.
The strategic choices we have made are already bearing fruit. During Tax Season 2009, a record number of over 4 million tax returns were submitted on time – a 25% increase on 2008. Of these more than 80% were processed within 24 hours and, where relevant, refunds paid directly into taxpayers’ bank accounts within 48 hours. Resources released through our strategic decisions have been deployed to engage with taxpayers around education and compliance, including making over 1 million calls to taxpayers to remind them of their obligations during the previous financial year.
These advances in compliance are translating into revenue gains in support of government’s priorities. At the end of our financial year on 31 March SARS was able to deliver R8.1 billion more revenue than anticipated. While clearly stronger than anticipated economic recovery played a significant part in this revenue boon, special compliance initiatives from SARS accounted for over R23 billion in additional revenue over the course of the year.
Firmer enforcement
Our strategy over the past five years has been to focus on service enhancements for this is where the greatest challenge and scope for improvement lay. In addition, easing the administrative burden and providing efficient service to taxpayers and traders is the preferred motivator for voluntary compliance. The gains achieved in easing the burden of compliance now provide the space and legitimacy for stricter enforcement and SARS will over the coming years increasingly turn our attention to enforcement improvements. As mentioned by the minister this is also in line with a global realisation that the regulatory regime needs to become tougher in order to reduce the risks that led to the current economic crisis.
This includes re-engineering our audit and exception case handling, expanding the use of third party data and risk tools, and continuing with the implementation of administrative penalties. This is also in response to the growing international nature of tax evasion in seeking tax arbitrage opportunities and exporting complex and highly technical tax evasion products by immoral financial advisory services. Curbing these crimes requires both closer co-operation between tax authorities as well as investing in specialist audit and financial management skills able to identify and investigate evasion which is frequently cloaked in seemingly legitimate structured finance deals.
This focus on enforcement was always planned as a second phase of our modernisation journey but its timing in response to the changing environment in which revenue collection around the world is under pressure could not have come at a more opportune moment for SARS or South Africa. So the first key focus of the SARS Strategic Plan for 2010 is to continue to build on our foundation of compliance through strategies to further enhance service, prioritise education, and to strengthen enforcement.
The importance of building capacity
The second key focus of the SARS Strategic Plan is that we must continue to build and invest in a skilled, professional, performance driven and value-based institution which is able to deliver on its mandate in a sustainable way. This requires measures to enhance the efficiency of SARS, expand the skills of our people and ensure the governance and leadership structures to maintain the integrity, values and vision which underpin our organisation. The minister has spoken of the importance of state institutions. Building sustainable state institutions is about building people. We believe that the people of SARS are its defining feature. They are the embodiment of the values and culture which define our institution.
They are the drivers of performance and service delivery. They are the collectors and custodians of revenue. They are the protectors of our borders and enablers of efficient trade. In short, it is our people who – enabled by appropriate systems, processes and policies - will ensure the success of our strategic choices.
Government cooperation
The third key focus of our Strategic Plan is that SARS is an integral part of government. Tax administration, trade facilitation and border security cannot occur in isolation or be a means unto themselves. Our role is not only to provide the funds to other areas of government to do their work but simultaneously to do what we can to support and advance the overall objectives of government.
This means cutting red tape and other barriers to entrepreneurship and economic growth through initiatives such as single registration and more efficient administration, especially for small businesses. It means providing the platforms for smoother and faster movement of goods through our ports to boost trade and build the economy. It means focusing on skills development of our own people. It means clamping down on crime and corruption both in the illicit economy and in our own back yard.
It also means fully supporting and contributing to cooperative government including initiatives such as the development of the Border Management Agency to ensure more effective and efficient border security and trade facilitation for South Africa. And it means harnessing and sharing the skills available in government to improve our overall efficiency. Already SARS is working together with other government departments and agencies to assist with key technology, contract and project implementation skills obtained as part of our on-going modernisation.
In this regard, SARS is currently working hand-in-hand with the Department of Home Affairs, the South African Police Services, the National Intelligence Agency, the Department of International Relations and Cooperation and other key border stakeholders on improving security at our points of entry for the 2010 FIFA World Cup. This form of cooperation and collaboration has the potential to form a foundation for a model of integrated government that prioritises the service of our people in a cost-effective and efficient way as our shared goal rather than focusing on the narrow mandates of individual departments.
Streamlining trade processes
While working with other government agencies to establish better and more efficient mechanisms and structures to secure our borders, SARS is simultaneously proceeding with planned enhancements to the process for the import and export of goods as a key economic enabler. In support of government’s priority to create jobs, measures to boost trade while simultaneously protecting local industries from unfair competition from illicit, counterfeit and duty-free goods are a key priority.
According to the World Bank, unnecessary Customs delays have more sinister effects than increasing costs; the Doing Business 2009 report suggests that the more delays in the import and export process, the less likely that a trader will be able to reach markets which negatively affects the ability to expand businesses and create jobs. Another study found that each additional day that a product is delayed prior to being shipped reduces trade by more than 1% percent.
Research indicates that countries that pursue reform in Customs, generally achieve improvements in revenue collection and international trade compliance and administrative efficiency, which provide benefits to both governments and the international trading community. At a time when technological developments are changing the world of international trade and travel, our focus is to minimise the level of Customs intervention in cargo movements and to maximise the level of trade facilitation by:
- revolutionising the core Customs processing system
- enhancing risk management techniques to better identify suspect imports and exports for scrutiny
- implementing new philosophies on Customs and border control and engaging with private sector partners in mutually beneficial alliances
This focus manifests itself in a Customs modernisation agenda that replaces aging legacy systems with a locally developed cutting edge integrated customs and border management solution. This solution, which is already in use and been tested in a European country, will allow for seamless, swift movement of goods and passengers while at the same time enhancing our ability to identify risk earlier in the process and thereby focussing our enforcement resources on high-risk consignments. A key component of this strategic approach is the concept of a “trusted trader” model in which key stakeholders who meet strict criteria of self regulation will enjoy the benefits of more rapid movement of goods.
The solution provides the opportunity for massive gains in streamlining and improving supply chain security for all stakeholders not only for South Africa but for its neighbours and other regional partners. We have already negotiated the implementation of the solution in Lesotho with support from the international community and will engage with other countries to explore further expansion through the African Tax Administration Forum.
The SARS strategic outcomes
SARS has identified seven strategic priorities linked to specific outcomes that will guide us over the next three years.
1. Revenue realisation through compliance
The first is driving revenue realisation to deliver now and to ensure sustainability. This comes from enhanced compliance from taxpayers and traders achieved through a range of outcomes including:
- A better and more detailed understanding of compliance levels across different taxpayer and trader segments to allow more targeted service, education and enforcement initiatives
- Streamlining our audit and customs inspections to deal with complex cases and serious non-compliance
- Re-engineering our debt collection processes to reduce debt
- Expanding the implementation of administrative penalties; and
- Expanding the use of third party data, taxpayer history and other statistical information to enhance risk identification
2. Productivity, service and efficiency
The second key strategic priority is to drive productivity, service quality and cost efficiency. This outlines outcomes to improve the quality of service delivery and entrench a culture and practice of efficient, transparent, honest and caring public service. We will achieve this over the medium term by:
- implementing an Enterprise Capability Management System that tracks and drives productivity across SARS
- revising our Service Charter and channel strategy to better meet taxpayer and trader needs and
- improving the ease and speed of registration and other interaction
3. Customs modernisation
Our third priority is to deliver on our Customs mandate in a way that is aligned with government’s priorities to both grow the economy through facilitating trade and protecting local businesses.
Our outcomes over the medium term to achieve this include:
- improving the speed of the movement of goods through our borders
- implementing an accreditation programme to qualifying traders and
- enhancing the detection of illicit goods through the use of risk tools and expanding non-intrusive inspection capability as well as heightened visibility at points of entry
4. Streamlining operations
The fourth priority is to clarify the SARS operating model, streamline governance and strengthen leadership.
Our three-year outcomes include:
- implementing an evolved operating model with an integrated capacity plan to ensure an empowered, agile and responsive workforce
- implementing a streamlined governance framework and
- implementing a leadership model with appropriate resources and capabilities to ensure sustainable leadership
5. Segmentation of our clients
The fifth priority is the continued segmentation of taxpayer and trader groups to allow differentiated products, service and compliance initiatives to better and more closely meet the particular needs of these segments.
Over the next three years SARS will:
- develop holistic segmentation designs for all 10 taxpayer and trader segments based on a thorough understanding of the behaviour and needs of each segment and
- implement operating models for five of these segments namely large businesses, medium-sized businesses, the informal sector, tax practitioners and traders
6. Empowering our people
Priority six is focused on the SARS people to create a high-performance culture and environment that is values-driven and which fosters professional and personal growth at all levels of the organisation.
Specific outcomes include:
- the establishment of a systematic response to train and retrain individuals in line with capacity and capability requirements within SARS
- implementing an employee value proposition to position SARS as an employer of choice to attract and retain skills; and
- enhancing our performance management processes and empowering managers to bring the best out of their people
7. Deepening relationships
Our final priority is to deepen external relationships with key stakeholders to advance co-operation, partnership and integration in pursuit of compliance, trade facilitation and border control. This includes advancing relationships with domestic stakeholders in the public and private sector as well as other revenue and customs authorities internationally through bilateral and multilateral forums. One such forum is the recently launched African Tax Administration Forum (ATAF) pioneered by and currently chaired by South Africa. The ATAF, which has already attracted more than 30 African tax authorities, is a springboard for our united quest towards greater self-reliance, economic growth and social development.
We all know successful countries are built on strong economies. Effective tax systems and revenue collection administrations are central to providing our governments with the fiscal space to pursue their socio-economic developmental agendas.
While the world economic crisis has once again showed that no country is an island, at the same time it has thrown into sharp relief the lingering disparities between north and south, east and west, between the developed and developing world.
As Africans we face unique circumstances and unique challenges. On the tax administration and revenue collection fronts these are played out most often in wide gulfs between the relatively few who contribute and the many who require support and assistance from the state to realise their human rights.
Who better than African tax administrators to share our experiences and answer these challenges?
Performance monitoring and evaluation
Honourable members, in line with government’s commitment to improved performance monitoring, we have identified specific outcomes to be delivered for each of these actions, and the indicators to be used to monitor and measure performance in our strategic priorities. This strategic plan therefore contains tangible, measurable and very specific outcomes and outputs which we have set ourselves as targets for delivery. These will be reported on in our annual reports for the medium term ahead and we have built corresponding measures into the performance scorecards for our business areas and into individual scorecards.
Such an approach is not new to SARS and we are fortunate to have had a head-start in beginning to implement and refine performance management tied to deliverables within our organisation over the past few years. Yet this public undertaking on which our success will be scrutinised now demands an even greater organisational focus and alignment of divisional, business unit and individual targets and measures with our overall outcomes. Alignment was further achieved through the process followed in the development of this strategic plan, a feature of which was the widespread participation of SARS employees in the form of surveys, road shows and other discussion forums which encouraged contribution to this plan from all levels within the organisation.
It is equally important that our plans and ambitions are aligned to the available resources. In this regard our Strategic Plan is designed to match with our projected expenditures over the medium term.
Conclusion
As the providers of the revenue which fuels government delivery, we are acutely aware that our performance has a direct impact on performance throughout the public sector. It is both humbling and inspiring to have such an important and pivotal mandate. The strategic plan we present is our vision for how we intend to meet this mandate and in so doing meet the high expectations of the ultimate beneficiaries of the strategic choices we make as government – the people of South Africa.
It is the people of South Africa who must benefit from the jobs created through economic growth fostered by effective administration, efficient service and streamlined trade. It is the people of South Africa, who by embracing the social contract, must benefit from expanded and accelerated government delivery funded by higher revenue collections on the back of economic growth and enhanced compliance. And it is the people of South Africa who must benefit from dedicated service that is cost-efficient, people-centred, values-driven, and above all honest, trustworthy and corruption free.
Thank you.
Source: South African Revenue Services
