1. SOUTH AFRICAN REVENUE SERVICE AMENDMENT BILL, 2002

2. Purpose To brief the SCOF on the SARS Amendment Bill, 2002

3. Background - 1 SARS established as an organ of State on 1 October 1997 Juristic person - own separate legal identity Within public administration but outside public service Reasons therefor:  Greater administrative autonomy  Better control over its resources

4. Background - 2 SARS now in existence for 5 years 5 years to experiment with the model By and large the concept has proven itself As with any law the need for change arises Different reasons therefor Deal with them under the proposed amendments

5. Consultation Bill was published in the Government Gazette on 31 July 2002 Invited comment SARS Bargaining Chamber SARS Board members

6. Proposed amendments Summary of issues: Objectives of SARS Functions of SARS Alignment with PFMA Appointment of the Commissioner Disestablishment of SARS Board and establishment of Specialist Committees Method of funding SARS Membership of the Government Employees’ Pension Fund Deletion of obsolete provisions and other textual matters

7. Objectives of SARS Current wording concentrates on collection of revenue Following amalgamation of Customs and Revenue, SARS also has the important objective of control Therefore – incorporate objective of control over import, export, movement, manufacture, storage or use of certain goods Clauses 2, 3 and 17

8. Functions of SARS Similarly – current wording concentrates on enforcement and advice on Revenue matters Enforcement – references to legislation extended to include customs matters Advice  Minister of Trade and Industry responsible for trade policy  Linkage between customs matters and trade policy

9. Alignment with the PFM Act When SARS Act came into operation - PFMA not yet introduced Exchequer Act, 1975 still applied SARS performed its functions and exercised its powers under the policy control of the Minister of Finance Consequential amendments required as a result of the introduction of the PFMA SARS is a National Public Entity listed in Part A of Schedule 3 of the PFMA Financial management and controls envisaged in Chapter 6 of the PFMA apply to SARS Section 3 of the PFMA provides that the PFMA prevails in the case of inconsistency with other legislation As the PFMA already ensures effective financial accountability, many provisions in the SARS Act have become obsolete Clauses 1(b), 1(c), 3(b), 4, 7, 11, 12, 14, 15 and 16

10. Appointment of the Commissioner SARS Act at present provides that the Minister of Finance must appoint the Commissioner for SARS President appoints the heads of national departments, as well as the Auditor-general, the Public Protector and also the Governor of the Reserve Bank Purpose of this amendment is to bring the authority to appoint the Commissioner in line with the abovementioned

11. Disestablish Board / Establish Specialist Committees-1 Part 3 of the SARS Act provides for the establishment of a SARS Advisory Board Board is only an advisory and consultative body It advises the Minister and the Commissioner on the administration of the revenue collection system Role of the SARS Board in comparison to controlling boards Considered more appropriate to appoint specialist committees to advise on technical matters

12. Disestablish Board / Establish Specialist Committees-2 Proposed to disestablish the Board – clause 18 Proposed that the Minister can establish one or more specialist committees – clause 8 Purpose of committees is to advise the Commissioner and the Minister on the management of SARS’s resources including:  Asset management  Human resources  Information technology Human resources committees must advise-  Minister on terms and conditions of employment of management  Commissioner on terms and conditions of employment of other employees

13. Disestablish Board / Establish Specialist Committees-3 Constitution, powers, procedures, disclosure of interest and remuneration of members Audit Committee  No need to establish it i.t.o. SARS Act  Sections 51(1)(a), 76(4)(d) and 77 of the PFMA  Treasury Regulation 27.1 dated April 2001

14. Method of funding  Section 25 of the SARS Act provides that its main source of income is money appropriated by Parliament  Determined in accordance with estimates of income and expenditure  International precedent for different mechanisms of determining income  Propose a further option in terms of which the money appropriated by Parliament could be determined in a manner agreed between the Minister and the Commissioner  Method must be approved by Cabinet

15. Membership of the Government Employees’ Pension Fund At present – SARS Act requires all employees become members GEPF excludes certain persons, e.g. certain contract workers Proposal to align SARS Act with GEPF rules

16. Deletion of obsolete provisions and other textual amendments Conclusion The proposed amendments will contribute to the efficient and effective functioning of SARS Most amendments arose as a result of the introduction of PFMA