1. Portfolio Committee 2001 Presentation to the Portfolio Committee on Finance Date: 11 May 2001 Presented by: Pravin Gordhan

2. Portfolio Committee 2001 Contents  SARS Plans 2000/01  Tax  Revenue  Transformation  SARS Achievements 2000/01  Tax / Trade policy implementation  Operational targets  Transformation  Support Services  SARS Budget  SARS Focus for 2001/02  Strategic Plan  Operational Objectives / KPI’s  Measurement  Implementation of Transformation  Divisional Plans

3. Portfolio Committee 2001 SARS Plans for 2000/01

4. Portfolio Committee 2001 Plans for 2000/01  Implementation of Tax proposals  Residence Base Taxation  CGT  Airport Tax  Other  Revenue & Customs Targets  R215b vs R219.6b  Transformation  Design of Siyakha / Business Architecture

5. Portfolio Committee 2001 SARS Achievements for 2000/01

6. Portfolio Committee 2001 What has been achieved: IMPLEMENTING TAX POLICY ? Implemented radical tax policy changes  Taxation Laws Amendment Act 2000  Foreign Dividends  Revised regime for Public Benefit Organisations  Air passenger Tax on International Travel  Closing of tax loopholes  Restraint of trade payments  Employment companies and trusts  Revenue Laws Amendment Act 2000  Residence Basis Taxation  Enabling legislation for AGOA  Proposed draft Capital Gains Tax Bill

7. Portfolio Committee 2001 What has been achieved: REVENUE TARGET?

8. Portfolio Committee 2001 What has been achieved: CUSTOM DUTY?

9. Portfolio Committee 2001 What has been achieved: REVENUE? TAX REVENUE COLLECTED AGAINST GDP

10. Portfolio Committee 2001 What has been achieved: COMPLIANCE?  Audits  Policy  Finalise new policy and approach  Integrated risk based audits in teams  25% of audits are risk- based  Planning  Set targets  Measure achievements and cost  Cost benefit Analysis  Assessments  R6,370,160,874 increased form R5 for 99/2000  PAYE questions: Collected R34m from one taxpayer.  Transfer pricing – investigating transactions to value of R1 billion.  Training

11. Portfolio Committee 2001 What has been achieved: COMPLIANCE?  Industry Investigations  Food Wholesaler (JSE)  Vat Fraud – Negotiated settlement of R128m  Electronics Industry  Customs and VAT invasion: New co-operative approach to industry.  9 arrests  R50m recovered  Motor vehicle imports  Customs evasion  Assessment R15.6 m  Seizure by asset forfeiture – R60m  SARS official sentence 6 years  Financial Industry  Investigating undeclared income – R100m

12. Portfolio Committee 2001 What has been achieved: COMPLIANCE?  Criminal Investigations  107 cases.  27 Convictions  121 years imprisonment  Internal Corruption  Dismissals 57  Conviction 5  Approach

13. Portfolio Committee 2001 What has been achieved: CUSTOMS?  Bills of entries processing  Inspections  Stoppages  Post clearance  Detection of illegal imports  Implementation trade agreements  EU  SADC  AGOA agreements  Drug seizures  Total value of R1,241 billion  Teaming piloted

14. Portfolio Committee 2001  Established three dedicated Rapid process areas to reduce backlogs in processing of income tax returns  Reduced assessment backlogs from 850 584 to 230 000 by end of financial year - now Zero backlog What has been achieved: OPERATIONS? Unprocessed returns in top 10 offices @ 15/09/2000 Normal inflow of returns up to 30/03/2001 850 584 1 485 401 Returns processed 2 345 985 2 115 985 Balance unprocessed on 30/03/2001 230 000

15. Portfolio Committee 2001  Improve control on outstanding debt  Implement the Bulk data capturing processes which improved quality of returns captured on the NITS system.  Initial operational problems with NITS overcome  Service desks established in larger customs & revenue offices What has been achieved: OPERATIONS?

16. Portfolio Committee 2001 What has been achieved: OPERATIONS?

17. Portfolio Committee 2001  Sought and obtained ministerial and cabinet approval  Redesigned critical business processes for both revenue and customs  Established project teams which developed detailed implementation plans  Aligned the organisational structures with redesigned business processes  Developed a taxpayer service strategy  Started the development of key performance indicators for each business processes What has been achieved: TRANSFORMATION?

18. Portfolio Committee 2001  Accounting policy  GAAP vs GRAP  Own Accounts  Strong expenditure and cash resources control  Accounting polices and procedures - December 2000  Fixed assets register implemented - Feb 2001.  Bank account and supplier reconciliations now prepared monthly for the first time in 3 years  Administered Revenue  Re conciliation of net cash received per accounting records and the individual Taxpayer records in the core systems.  Own Accounts/Administered Revenue  PFMA implementation plan developed for progressive implementation by April 2003  1 st Phase of an integrated financial management system (Accounting module) implemented 2 April 2001 What has been achieved: FINANCE?

19. Portfolio Committee 2001 What has been achieved: TS?  New Income Tax System  Stabilised  Bulk Data Capture  An improved Bulk Data Capture system.  Implementation of Tax Proposals  Air Passenger Tax for International Departures  A Diesel Rebate system  CGT  Manifest system for Customs  The new manifest system for Customs  Integrated Financial Management System and Data Warehouse.  Implementation is underway.

20. Portfolio Committee 2001  HRMS system implemented  8 500 employees positioned on Career ladders  Agreement reached with trade unions on restructuring.  New job grades verified for all employees.  Partnership formed with ACCA and university tax departments to build auditor capacity.  Performance management system developed. What has been achieved: HR?

21. Portfolio Committee 2001  Employee representivity improved. What has been achieved: HR?

22. Portfolio Committee 2001 What has been achieved: INTERNAL AUDIT?  One year and 3 year audit plan.  Introduced a risk based audit approach, new audit manual and methodology, and identified training requirements for audit staff.  Conducted focussed audits including requests that added value e.g. Review of high risk areas within Siyakha, and input into the draft prevention plan.  Identified high level risks that SARS is exposed to.  Combined audit efforts between SARS internal audit and the AG on all audits to be performed by the AG.

23. Portfolio Committee 2001 Budget Allocations 2001/02 Operational Budget Personnel Exp Admin Exp Inventories Accommodation Prof & Spec Serv Misc Exp Capital Total MTEF Allocation % of Revenue Revenue Collected219 732 000 000 2000/01 1.15% 2 529 114 000 132 801 661 3 003 231 180 703 830 294 611 101 68 818 247 316 441 420 1 532 734 510 234 000 000 000 2001/02 1.14% 2 673 181 000 69 807 477 7 10 8 000 220 229 107 143 836 989 100 777 979 499 900 871 1 631 520 577 2002/03 0.00% 2 944 296 000 2 874 044 373 132 894 881 7 108 000 209 416 963 166 262 740 92 248 549 564 749 287 1 701 363 953

24. Portfolio Committee 2001 Budget Allocation: SARS TOTAL

25. Portfolio Committee 2001  Strategic Plan  Objectives & KPI’s  Implementation of Transformation  Tax / policy proposals  Measurement Focus for 2001/02

26. Portfolio Committee 2001 Strategic Plan Focus for 2001/02: STRATEGIC PLAN Strategic direction Business Plan Divisional Objective Outputs & KPI’s Office Objectives Office Outputs & KPI’s Individual Outputs & KPI’s Branch Level Organisational Level Divisional Level

27. Portfolio Committee 2001 Our Strategic goals Focus for 2001/02: STRATEGIC PLAN  Optimising Revenue Yield  Transforming our people and culture.  Consistently providing service and education to our stakeholders  Responsible enforcement  Promoting regional and international co-operation  Promoting good governance  Ensuring consistency, uniformity and accuracy in the application of laws  Transforming our processes and technologies

28. Portfolio Committee 2001 Focus for 2001/02 PERFORMANCE MEASUREMENT DIMENSIONS Taxpayer Satisfaction Employee Satisfaction External Stakeholder Satisfaction Revenue Collection Financial Management Organisational Change & Transformation Ministerial Initiatives Risk Management & Enforcement Objectives & KPI’s

29. Portfolio Committee 2001  Draft PBO Activities list  Tax incentives  Strategic Investment allowance  Small manufacturing companies  Diesel fuel refund - Farmers, Mining, Forestry  Review tax on banks  Unemployment Insurance contributions  Siyakha amendments Focus for 2001/02: IMPLEMENTING TAX POLICY

30. Portfolio Committee 2001 Focus for 2001/02: IMPLEMENTING TAX POLICY

31. Portfolio Committee 2001 Focus for 2001/02: Transformation Gauteng East  Processing Center  Compliance Office  Taxpayer Service Centers Gauteng West  Processing Center  Compliance Office  Taxpayer Service Centers Durban  Processing Center  Compliance Office  Taxpayer Service Centers Cape Town  Processing Center  Compliance Office  Taxpayer Service Centers Port Elizabeth  Processing Center  Compliance Office  Taxpayer Service Centers Bloemfontein  Processing Center  Compliance Office  Taxpayer Service Centers Tendering Process 3 Months 9/0112/013/026/029/0212/023/036/036/010 Nov 2002 May 2002 National Roll Out Sep 2002 Mar 2003 Oct 2001

32. Portfolio Committee 2001 FMO functions Processing Centre Compliance Centre Taxpayer Service Centre  Assessments  Return control  Check return  BDC  Pre-assessment  Refund checking  Payments  Remittance  BDC Input  File Control  New Registrations  Registration Maintenance  File Management  Mail room  Assessment Maintenance  Account Maintenance  Audit  Desk Audit  Field Audit  Collections  Field Collectors  Account Maintenance (Collections focus only)  Admin support (tracing)  Attorneys  Criminal Investigations  Client Service  Simple queries  Complex queries  Cash Hall  Call Centre (location to be finalised) Focus for 2001/02: Transformation

33. Portfolio Committee 2001 Focus for 2001/02: Transformation

34. Portfolio Committee 2001 Focus for 2001/02: CUSTOMS  Raise examination to 5%  Accreditation of low risk custom traders  Implement electronic submission of declarations to cover 60 - 80 % of top clients  Conduct 8 customs Mobile Unit office inspections in high risk parts  Align procedures with revised Kyoto Covention  Raise capacity through  350 additional staff  Improved training & management development programs  Basic operational facilities

35. Portfolio Committee 2001 Focus for 2001/02: CUSTOMS  Roll-out teaming  Complete risk-based implementation Passenger Control system  Conclude mutual assistance Agreements with:  Transnet;  Post Office Ltd.  Customs Administrations of neighboring trading partners

36. Portfolio Committee 2001 Focus for 2001/02: CUSTOMS

37. Portfolio Committee 2001 Focus for 2001/02: REVENUE  Account clean-up to ensure correct accounts to taxpayers  Introduce quality control over measures to ensure correct assessments  Develop simplified Income Tax Returns  Dedicated Taxpayer Service areas at all Branches  Analyse developments in the economy to find opportunity for additional revenue collection

38. Portfolio Committee 2001 Focus for 2001/02: REVENUE

39. Portfolio Committee 2001 Focus for 2001/02: COMPLIANCE  Audit  Policy  Manual Risk Profiling implemented  Automated risk profiling system  Planning  Audit plans for 2001/2002 developed  Assessments  Target 8 billion  Siyakha  Roll-out of pilot  Training  Various courses developed

40. Portfolio Committee 2001 Focus for 2001/02: COMPLIANCE  Industry Investigations  Industry areas identified  Criminal Investigations  Increased number of cases  Revenue target set  Debt Collections  New Target set  Expand outbound Call centre  New legal capacity  Tax Base broadening  New approach developed

41. Portfolio Committee 2001 Focus for 2001/02: COMPLIANCE

42. Portfolio Committee 2001 Focus for 2001/02: FINANCE  Own Accounts  Strengthening & enforcing proper financial record keeping & maintaining & enforcing strong expenditure.  Administered Revenue  Finalising GRAP reporting (cash accounting) at Feb 2001 with a migration plan for progressive implementation to GAAP  Own Accounts/Administered Revenue  Provide (develop/enhance) appropriate financial management information to facilitate decision-making.  Execution of PFMA implementation plan.  Strengthening liaison and working relationship with AG  Improving financial literacy in SARS  Procurement  Providing a procurement service that is sound, cost efficient and timeous.  Ensuring that the changing business facilities needs are timeously and economically catered for.

43. Portfolio Committee 2001 Focus for 2001/02: FINANCE

44. Portfolio Committee 2001 Focus for 2001/02: HR  Facilitate Siyakha staff redeployments  Produce policy and procedure manual  Launch SARS College  Rationalise employee health insurance  Implement employee assistance programme  Develop succession plan

45. Portfolio Committee 2001 Focus for 2001/02: HR

46. Portfolio Committee 2001 Focus for 2001/02: TS  Technology architecture  A technology architecture needs to be finalised with a proper migration plan  Implementation of Capital Gain Tax  Future developments on NITS  Further development of NITS functionality:  external interfaces  year end functionality  Single Registration Number  Infrastructure networks

47. Portfolio Committee 2001 Focus for 2001/02: TS

48. Portfolio Committee 2001 Focus for 2001/02: COMMUNICATION  Tax payer education campaign  Tax literacy campaign  Product placement of material on popular soap operas  Campaign on Income Tax Returns, Provisional Tax  Capital Gains Tax Implementation Campaign  Tax Stakeholder’s workshop  Materials development – publications, leaflets, pamphlets and brochures  Training and development of staff  Internal communications  Re-launch Internal News letter  Review website, Intranet – Corporate Image

49. Portfolio Committee 2001 Focus for 2001/02: COMMUNICATION

50. Portfolio Committee 2001 Focus for 2001/02: INTERNAL AUDIT  Overall Risk Management Strategy – process and the tool to be purchased.  Continuously review the corporate governance.  Ensure compliance with PFMA for all its processes and systems.  Close internal control gaps using combined audit teams to identify risks and controls.  Perform audits as in the 1 year plan – Risk Audit and Control Adequacy Review.

51. Portfolio Committee 2001 Focus for 2001/02: INTERNAL AUDIT

52. Portfolio Committee 2001 THANK YOU FOR YOUR SUPPORT