Basic Building Blocks of SARS Domestic Resource Mobilisation Aidan Keanly South African Revenue Service

THE FIRST STEPS…… Remember….. Every country is very different Understand YOUR particular environment Customise by looking at three basic questions What’s NEW? What’s the TRUTH? What’s the RIGHT thing to do?

SARS Integration Blueprint WARNING – DO NOT GO HERE!!!! ECONOMIC ENVIRONMENT Performance Process Competency Facilities & Layout Organisation Application Equipment Delivery Vehicle Culture Strategy SARS Integration Blueprint GOVT. TAX POLICY GOVT. POLICY IMPACT LEGISLATION SA TAXBASE

Definitions Culture Strategy Performance Organisation Staff To define how people, process and technology will interact and create a Business Case and implementation plan to show when and how targeted value can be obtained Definitions Culture Group behaviors needed to work in the future I.e norms, values, group behavior Strategy Performance Organisation Staff The key elements and structure of the organisation Facilities & Layout All competencies related to the process in terms of knowledge, skills, professional qualities Clear picture of: SARS role in SA What need to be achieved Changing need of stakeholders Services and methods of reaching taxpayers Achieving target measures on key strategic and operational dimensions All facilities to support Architecture I.e. buildings, layout, size, capability, requirements, standards, supply services I.e. water Process The arrangement of tasks / activities within the organisation Application Equipment The software required to satisfy business needs All equipment needed for architecture Delivery Vehicle The hardware and software required by the chosen applications

BUILDING BLOCKS OF SARS DMR Political will, support and air-cover Required legal framework Functioning institution (process not products) Know your market and segment Involve all stakeholders Change management Manage donor support and advice Measurement of success

TAX GAP IN SOUTH AFRICA Tax Gap in South Africa between 15% and 30% Capital flight (unrecorded and untaxed illicit leakage of capital and resources) estimated at 6.6% of GDP Approach by SARS to address leakages; Policy reform and International collaboration Enhancement of administrative efficiencies to optimize compliance of formal economy taxpayers Education and outreach to informal economy Risk Management

Environmental Knowledge and Understanding Effective Segmentation SARS COMPLIANCE MODEL Deter and catch non-compliant taxpayers. Credible, legitimate and firm enforcement, with appropriate sanctions, will discourage tax evasion. Focus on making compliance easier for taxpayers by improving service and reducing the administrative burden. Risk Assessment Service Enforcement Environmental Knowledge and Understanding Effective Segmentation Customer Awareness Broadening tax base by educating the public about their tax obligations. It’s recognised that there is a low awareness of responsibilities of fiscal citizenship. Education

VOLUNTARY COMPLIANCE BASED ON Key to this approach is to ensure that taxpayers/traders understand obligations make it as easy as possible for those trying to comply make it very hard for those trying to avoid paying their fair share improve service improve enforcement Some taxpayers/traders will always try to comply whether effective enforcement exists or not - people who believe in doing the right thing some taxpayers/traders will not comply whether effective enforcement exists or not – the criminals The goal of voluntary compliance is to influence the undecided majority who will choose one way or the other based upon how well we implement this strategy

SEGMENT TAX BASE DUE TO ECONOMIC DISPARITY Special Individuals Businesses and SOE Intermediaries Tax practitioners Complex Large Government NGOs & PBOs 1 3 6 9 Traders (Trade inter- mediaries) Standard Formal business 2 4 7 Informal business Employer as agent SITE and below threshold 10 5 8 9 JOH-RNS014-20090629-AB-P1 9

SARS ADOPTED A LEADERSHIP MODEL BASED ON KEY BEHAVIOURAL COMPETENCIES Higher Purpose & Integrity Transformation Empowering Delivery Insight Higher Purpose & Integrity Championing the Mandate Responsibility Social Impact Empowering Delivery Driving Excellence Mobilising Teams Developing others Building Sustainability Leveraging Diversity Influencing Others Conceptual Thinking Accurate Understanding Humility Source Hay Group

POLICY STEPS TO ADDRESS TAX GAP International Tax Amnesty Small Business Amnesty Legislative amendments Residents worldwide income 3rd Party data requirements Scheduling of provisional payments Increased obligations on employers Penalty regime Voluntary Disclosure

SUMMARY AND CONCLUSION Compliance drives sustained SARS when GFC kicked in Exponential increase in e-channels Improved refund methodology and turnaround times Systematised deferment & agreements to assist taxpayers Widening of tax net through Risk Management via 3rd party validations Better collections from Medium and Small companies Containment of suspicious VAT refunds & prosecution Significant improvement in provisional payments of individuals