South African Revenue Service 2023/24 Annual Performance Plan

Meeting report

Mr Edward Kieswetter, Commissioner of the South African Revenue Service (SARS), presented the SARS 2023/2024 Annual Performance Plan (APP). [Please see the slide presentation for full details].

Strategic Intent: Develop a Tax and Customs System Based on Voluntary Compliance 
In support of its Strategic Intent, SARS have nine Strategic Objectives:
1. Provide clarity and certainty for taxpayers and traders of their obligations 
2. Make it easy for taxpayers and traders to comply with their obligations 
3. Detect taxpayers and traders who do not comply, and make non-compliance hard and costly 
4. Develop a high performing, diverse, agile, engaged and evolved workforce 
5. Increase and expand the use of data within a comprehensive knowledge management framework to ensure integrity, drive insight and improve outcomes 
6. Modernise SARS systems to provide digital and streamlined online services
7. Demonstrate effective resource stewardship to ensure efficiency and effectiveness in the delivery of quality outcomes and performance excellence 
8. Work with and through stakeholders to improve the tax ecosystem 
9. Build public trust and confidence in the tax administration system

Design Philosophy and Principles comprise the following:
1. The nine strategic objectives 
2. Enabling the SARS compliance model: Better taxpayer and trader experience; segmentation of tax base; and differentiated compliance programme
3. Capable and accountable leadership team 
4. High employee performance and engagement culture 

Key Must-Win Battles 2020-2025
1. Broadening the tax base 
2. Improving voluntary compliance and fiscal citizenship 
3. Leveraging SARS resources and efforts intelligently to achieve more with less 
4. Maintain crucial partnerships within government, stakeholders local and internationally 
5. Building an organisation with integrity that can be trusted and admired 

Delivering on the SARS Mandate (2022/2023)
• Net revenue collection: +R123 billion
• Compliance: +1.3%
• Trade facilitation: +R606 billion 
• R2.07 trillion in gross revenue collections (R183 billion or 9.7% more than 2021/2022)
• R381 billion worth of refunds paid (R60 billion or 18.7% more than 2021/2022)
• R1.687 trillion net revenue collected (R123 billion or 7.8% more than 2021/2022)
• 64.2% voluntary compliance index (+1.3% movement than 2021/2022)
• R231 billion compliance revenue (R17 billion or 7.5% more than 2021/2022)
• R3.93 trillion trade facilitated (R606 billion or 18.2% more than 2021/2022)

Mr Kieswetter said that for the period 2015 – 2022 tax revenues grew by 6.92% while SARS grant allocation increased minimally, by 2.60%. SARS should be funded R16.87bn as per the Organisation for Economic Cooperation and Development (OECD) recommendation of cost to revenue collection for developing countries of 1% against revenue collections for 2022/23 of R1.687tn. The grant allocation for 2022/23 was R11.6bn.

Strategic People Matters 
1. Embedding the SARS Leadership Model as a path to continuous learning is ongoing 
2. Women in Leadership gaining momentum towards empowerment and development 
3. Junior Board is fully functional in executing their mandate
4. SARS ranked #1 most Admired Employer in young professionals B.Com field 2022
5. Recruited 441 skilled employees from the market and appointed 641 internal employees that includes the re-established talent pipeline - 249 graduates and customs cadets 
6. Implemented the Nugent Recommendation on Reparations 
7. Developing the Career Development Framework 
8. Focusing on creating an environment of positive employee engagement 
9. Piloting the SARS Employee Value Proposition (EVP)

See attached for full presentation

Discussion
Ms P Abraham (ANC) [who was acting Chairperson for the meeting] said she could not see if any hands were raised and asked for assistance. 

Dr D George (DA) recalled how things at SARS went horribly wrong around 2015. Seeing the improvements under the current Commissioner and his team was pleasing. There was a situation on vehicle trade across the South Africa/Lesotho border. There were some court cases that SARS lost in the Free State High Court about the return of vehicles. That dispute went through the courts, which ruled that the vehicles should be returned, but SARS had not responded. This information could be incorrect. He wanted to know if that was, in fact, the case, and why it was happening. It was an unusual thing to happen with SARS. On the ‘must win’ battles, the Commissioner mentioned broadening the tax base. How do you measure that? How much do you estimate is the size of the untaxed base? The informal economy was not insignificant, so it would be good to know if there was a feel for the size of that could be. It could be a lot of tax revenue. 

The tariff on sugar was complicated. It was calculated by comparing actual traded prices over a 20-day period. This was with a fixed reference price and the addition of a real exchange number for the Rand against the currencies of major trading partners, adjusted for relative inflation rates. He looked that up online. He had to read it several times just to understand it. He thought it was sensible. The issue was that implementing that adjustment took about four to six weeks, apparently. This was from the triggering of the formula by SARS, to approval by the International Trade Administration Commission (ITAC) and then to implementation by SARS. Several articles in the press about that process took around 34 weeks. Does SARS have a standard procedure for that? There was a formula and a process etc., which impacted the ability to trade that commodity. There was a bit of uncertainty in the industry on that. He wanted to know if that process was under control. 

Are other tax authorities having additional interactions with SARS about South Africa’s greylisting? He had a recent interaction with the International Monetary Fund (IMF). One of its positions was that South Africa had a number of functional institutions, which was one of the reasons why it was weathering a very difficult storm. SARS was definitely one of those institutions. It was pleasing to see the progress that SARS made. As an institution, it was very important to the economy and contributed positively. 

Mr N Kwankwa (UDM) thanked SARS for the presentation. It was pleasing to see the improvements that took place at SARS over the last few months and years. How do loadshedding and the energy crisis affect the tax base in numbers and revenue terms? Were strategies in place to broaden the tax base by onboarding the informal economy with a strategy that would resonate with it? A large number of Africans were employed in the informal economy and were reluctant to formalise. In the past, he was part of a drive to encourage people to register. Immediately after the people registered a company or closed corporation, they naturally had to file their tax returns etc. They would panic the moment they received tax messages from SARS, because they did not know what to do. There was also a cost attached for them to receive that service, because they would have to get advice from tax practitioners. In most cases, they could not visit the branches themselves, because the nature of their businesses requires them to be physically present all the time. If SARS was to attract the informal sector of the economy, the approach had to be more friendly and supportive, so that when they received messages from SARS, it did not feel like they were receiving a message from a prosecutor. People understood the service SARS provided to the country and the importance of its mandate to the country. By understanding, prioritising and having a direct strategy for the informal economy, SARS could arrive at a solution for broadening the tax base. 

He agreed that if the underfunding of SARS was not addressed, it would lead to it being inefficient in a few years like other government entities. Perhaps this discussion needed to be had, because the more underfunded SARS was, the more difficult it would be for it to discharge its mandate and maintain the levels of efficiency that enabled it to deliver at its current level. He was bitterly disappointed that even post-COVID-19, SARS continued to use its appointment system, which was anti-poor. He knew of many instances where senior citizens took taxis from Alice to East London in the Eastern Cape, just to get a tax clearance, only for them to be told they should make appointments using their mobile devices. They could not just walk into a SARS branch. To travel from Alice to East London, the return cost was R200, which was 10% of the social wage that the senior citizen received. The problem was that they were turned away and told they should use their cellphones to make appointments. How many senior citizens and people who were semi, if not illiterate, know how to use mobile phones? 

The previous Wednesday, he was at SARS in Cape Town and had to stand outside. Some people came for tax clearances, wanted to register, and were turned away. He had to yell at people for them to be attended to. But guess what was happening? They were told [to go] by staff members. These were ordinary people. Another citizen came from Port Elizabeth, and others came from Khayelitsha, all being turned away because they wanted tax clearances. These people were told to find someone who had a smartphone, so that person could download their tax clearance. Is that not a breach of confidentiality regarding an individual’s tax information? This was through the refusal of the staff members to help people who were queuing. He ended up using his own cellphone to download people’s tax clearances. He had to yell at people so SARS staff members allowed people into the branch so they could obtain whatever they required. He had the names of some of the people he helped. The country could not have a SARS that was elitist. The way he experienced it over the past few months was that it catered for the needs of the middle class, the needs of those with access to technology, but not the poor. 

There was an incident of a gentleman who came from Delft; he was a senior citizen and never knew how to make an appointment using his mobile phone. He asked his son to do it for him. His son made the appointment and forwarded him the SMS with all the reference numbers. But guess what? He was not helped, because he never came with the cellphone used for the appointment, although all the information was contained in his cellphone. Imagine how inconvenient this was for ordinary people who could not access SARS. Those who came without appointments were told to keep a distance from the main entrance, as if they had to comply with COVID-19 regulations. This was not the ideal customer service the Committee wanted. When he looked at some of the services done in 2019, the Service Charter Index etc., he asked himself what the sample for the Service Charter was. If this was the experience of the people as he heard their frustrations outside the SARS branch, then the sample used for the Service Charter did not cater for their voices. It most probably catered for the voices of those with access to online platforms, who could engage SARS using their cellphones. 

The other issue was the appointment system. The appointment system via cellphone, even if it was done online, SARS naturally gave a deadline. This was acceptable, but often the appointment received online was usually a month or so after the deadline. People said they thought its appointment system would be linked to the correspondence they received. These people could not meet their deadlines, because of their appointments, which were after the deadline. From a customer service perspective, those things needed to be addressed. Otherwise, the experience of ordinary South Africans was extremely terrible when interacting with the branch. He was also chased away even though he was helping people. It was unheard of that South African citizens were blocked from accessing a state institution meant to provide a service to them. It was wrong that there could be a situation, like the one in Cape Town, where nobody was inside the branch. There was one person, and those people were not allowed in and SARS closed at 3:30 pm. The senior citizen from Delft was turned away, and Mr Kwankwa said he had to fight for the other one from Port Elizabeth. The service had to be tailored and differentiated for the people. He accepted that some of the services required could be more complex, therefore an appointment system could be used. He thought SARS could learn from what banks do where they had self-service terminals outside, assisted by an official. This would be where most of the services people required like tax registrations and clearances, which were what people required in most cases, could be dealt with. It could have a self-service portal outside with an official to assist people ensuring queues moved quickly, so there were no delays. It was incredibly frustrating. The senior citizens mentioned earlier from Alice had to travel to East London three times. That was R600 per person, just to get a tax clearance. When SARS said it was building a smart and modern SARS, the Committee needed to know what this meant. It was good that SARS was modernising, but the rest of the population could not be left behind. 

He agreed that when it came to public confidence, there was an increase in trust that the people had in SARS. However, there was still room for improvement. People should not panic when they receive a message from SARS. They should not view SARS as a prosecuting authority. They should know that the minute they received any communication from SARS, if they reacted immediately, they could be assisted. 

Occasionally, he had to hold for 90 minutes to get through to the correct call centre agent. People terminated the call whenever he tried to explain, and he was transferred from pillar to post. For him to be attended to on a simple query, he had to hold for 90 minutes. Imagine a person who did not have the privilege he had, because of the support Parliament provided him. When a call was terminated before the conversation was concluded, the system could not work. In modernisation, the delivery channel needed direct interventions to ensure it was responsive to the needs of the people. The service level the people received needed to be exactly what they were meant to receive. 

Acting Chairperson Abraham said she was happy that Mr Kwankwa had joined the meeting and thanked him for his contribution. 

Ms M Mabiletsa (ANC) thanked the Chairperson. She also thanked the Commissioner and SARS employees for improving people and employee engagement. However, she was worried. The underfunding SARS experienced would cause problems, because it impacted its ability to maintain current modern technology. In future, if the technology was not maintained, it would not be able to function very well. 

SARS struggled to replace critical skills. It lost 515 employees with critical skills [slide 94]. This was way too much. On employee engagement, how was SARS going to maintain its status? It was problematic that it lost 515 employees. SARS was a way of engaging the people. It had to engage with people and so did its employees. It needed to find a way to ensure it did not lose these critical skills. It needed to replace the lost employees. 

Mr G Skosana (ANC) thanked the Chairperson and greeted everyone in the meeting. He joined the other colleagues in welcoming the presentation. SARS had a good story to tell. The Chairperson normally said credit should be given where it was due. The Committee appreciated the work done by SARS. There was a 7% growth in revenue collected. This should be commended, especially during this critical time. The Committee also commended SARS on the 9% increase on refunds paid out. That was also very important to taxpayers, who were affected and deserving. It went a long way in assisting them in addressing some of their challenges in this sluggish economy. The Committee appreciated this. It also appreciated the increased attitude towards compliance from the taxpayers' side. SARS achieved 68.8% of its overall targets. This was impressive. It spent 100% of its allocated budget. However, in this case, there was room for improvement in ensuring its expenditure was aligned with its budget. In future, the Committee would appreciate seeing a situation where 100% expenditure of the budget equalled 100% of the targets achieved. The Committee needed to consider the issue of the funding gap that SARS raised, highlighting that it was underfunded. SARS argued that its funding increase was below the increase in the CPI. If Parliament did not look into this, it would have negative implications in the future, as indicated by Ms Mabiletsa. 

The Committee welcomed the fact that SARS received an unqualified audit opinion, with no material findings on irregular, fruitless and wasteful expenditure. However, he agreed with the Commissioner that there was still a long way to go, especially in broadening the tax base. He believed some people were not part of the base, but should be with paying taxes. For some, it was attributed to ignorance. For others, it was deliberate. SARS had a long way to go in addressing that. The Commissioner indicated steps were being taken to deal with the illicit economy. Is SARS moving with the necessary speed in dealing with the matter of an illicit economy? As a country, that was where more revenue was being lost. 

Ms Abraham thanked Mr Skosana and hoped everybody had an opportunity to engage with the presentation. If there were still Members who wanted to contribute, follow-ups would be allowed after the SARS response. 

SARS response 
Mr Kieswetter thanked Ms Abrahams for facilitating the questions. He would respond and then direct some to his colleagues. The director of customs would speak briefly on the vehicle trade and how the ITAC process worked with the administration work it did. In reference to the specific matter raised by Dr George, the matter had been to court, SARS fully complied with the court finding and this was a matter of public record. SARS responded to that as a parliamentary question. It was happy to follow up if there were further questions on that matter. 

Broadening the tax base was a moving target. Every time a new job was created, the tax base changed. Every time a job was lost through retrenchment, the tax base changed. Every time someone moved into South Africa, whether they were an entity on an individual, the tax base changed. Every time someone emigrated, the tax base changed. SARS’s biggest concern was those who tried to remain ‘below the radar’ and engaged in economic activity but did not register. It had ‘ghost registrations’, where people registered employees purely to defraud the fiscus. This was an inordinately challenging issue. For him to give assurance that the tax base was 100% complete, SARS had to be connected to every economic activity in South Africa. It had limited capacity. It did its own data harvesting from domestic sources, with access to the registered properties, vehicles, deeds etc. It then compared that to its tax register to see whether everyone who was economically active was registered. It had seen successive years of growth in the tax base. In the previous year, SARS had 1.7 million additional taxpayers on its register, many of whom were individuals looking for work and came to register. A significant amount of them were active taxpayers. In the previous year, that work alone delivered R7.8 billion. Through the exchange of information with foreign jurisdictions, SARS automatically exchanged information about South Africans who had financial assets abroad. By using data modelling, SARS selected taxpayers to ensure they were fully registered and disclosed their offshore activities for tax purposes. This was also to ensure foreign exchange regulation compliance. SARS became aware of around 26,000 taxpayers who had economic activities above R1 million, but were not registered for taxes. Those were two examples of what SARS did. 

In the past, through the work it did in conjunction with the Davis Tax Committee, SARS said the tax gap in South Africa was easily between R200-R300 billion. In other words, there was R200-R300 billion which SARS believed it was not collecting, because either it did not have all economic activities on register, or because not all taxpayers were fully compliant. 

The informal economy was a nightmare. It was not something that only SARS could fix. Every individual and business entity in South Africa had to have a unique digital identity. Conducting any economic activity without a digital identity should not be possible. There should be automatic registration of every economically active individual or entity. This ranged from taxi drivers to spaza shop owners or informal vendors working from their homes in the townships. It was impossible for SARS to keep track of that. SARS had appointed an executive dedicated to the small, medium and micro enterprises (SMMEs) segment. For the present year, as could be seen in the APP, SARS had set a target to develop a compliance programme focussed on the informal segment in hopes of paying greater attention to it. The compliance programme was not just about the enforcement of the laws. There were three objectives. The first was to help taxpayers understand their obligation. SARS did this with educational and outreach programmes and webinars. The second objective was to ensure it was easy for taxpayers to fulfil their obligation. He understood what was being said about SARS dropping the ball. There were many occasions where SARS dropped the ball, but he was pleased to announce that the work done in the last few years reduced the need for taxpayers to visit SARS branches. The number of branch visits fell from over five million taxpayers pre-COVID-19, to less than 1.4 million taxpayers in the last year it reported. The examples that were mentioned pained him. He was equally devastated when a senior citizen had to travel and be turned away. SARS needed to work harder. Currently, its footprint is constrained. He visited the SARS branch in Worcester two months before and some of the taxpayers there were exactly as described by Mr Kwankwa. They were pensioners notified that they had outstanding penalties they needed to pay. Some came from as far as the west coast in Saldanha Bay to go there. It was a vexing problem for him. He could not sit and give the Committee a sad answer. He needed to give his commitment that all these issues were vexing. He also stood in the queues and spoke to taxpayers to try and understand their issues. SARS had made progress, but it had a long way to go. 

He asked if Dr George could restate his questions on the sugar tariff and greylisting. He would ask Mr Johnstone Makhubu, Chief Revenue Officer (CRO), SARS, to speak about the impact of loadshedding. The appointment system was working. The flip side of the coin was the indignity of long queues when people came to its offices unannounced, especially during the filing season, which was during the winter months. By giving people the opportunity to make appointments, it minimised the length of time they had to spend in queues. Yet, when people arrived unannounced, SARS did everything in its power to help them. SARS was as frustrated as the Committee. It could not tinker or fine-tune the system any longer. It had to do a fundamental review of its service model. SARS has done a lot of work to date, including retraining all its service consultants and contact centre agents to try and address some of the issues correctly raised. He would ask a colleague to give a sense of how SARS dealt with taxpayer service. 

Ms Mabiletsa had posed a question on how underfunding impacted SARS' ability to maintain current modern technology. He could not underscore more, that if SARS did not make the appropriate investment into technology and data science, it would continue to fall behind. SARS could not attract staff if it could not offer competitive remuneration packages. It brought young data analysts and scientists into SARS, but they got attracted by the banks and the insurance companies and SARS struggled to make counter offers. SARS had lost a majority of the 515 critically skilled people, because it could not always match the remuneration they were offered in the private sector. 

He assured Mr Skosana that SARS spent every cent that it had. The APP said it held itself to a 5% variation on the budgeted expenditure, but every year for the last four years, it spent every cent. He completely supported the point raised on the illicit economy—SARS needed to do more. However, SARS on its own was not enough; it was a necessary, but insufficient agency to address the illicit economy. Its interdependencies included the entire financial services sector. The gold leaf tobacco it reported on, highlighted the formal bank involved in all these transactions. SARS met with the banking council of South Africa and said that banks could not do a “tick-the-box” approach for compliance. Banks had to do substantive risk management. It was not enough to report a suspicious transaction to the Financial Intelligence Centre (FIC) and then say it was reported. SARS would continue to take up this battle with the financial institutions in South Africa. In its own house, the FIC, the South African Police Service (SAPS), Hawks and National Prosecuting Authority (NPA) were struggling. These were all state agencies, with whom SARS had a keen interdependency to ensure the perpetrators of economic and financial crimes were brought to book. SARS set itself the high target that the quality of case files it handed over to the NPA was of such a nature, that they were ready to prosecute. It previously reported that, of the 94 cases the NPA took to court, it had 92 successful convictions and over 75 years of total imprisonment. SARS would continue to do this work. Illegality was a much bigger problem than SARS. It was a disease that afflicted the entire society. SARS would do what it could. He asked Mr Beyers Theron, Head: Border Operations, Port Entry and Customs Compliance, SARS, to talk about vehicle movement across borders, how it worked and how it failed. 

Mr Theron said there was no problem for any second-hand vehicle or any vehicle from neighbouring countries to be on South African roads. When it came to its neighbours, they would follow the temporary importation process (TIP) and would receive a three to six month permit to drive that vehicle on South African roads, which it would then check. In the context of the BELN countries (Botswana, Eswatini, Lesotho and Namibia), customs did not have the TIP process, but the principles remained the same. People could come in with their vehicle, drive around, use it for holidays or business, and return to where they came from. If a South African citizen wanted to buy a second-hand vehicle and import it into the country, they had to follow a clearance process. In that clearance process, they needed to have a clearance permit from ITAC for a second-hand vehicle. ITAC did issue these permits, but was very hesitant to do so. It would issue these permits, for example, a vehicle that was modified for someone in a wheelchair, or if it was an electric vehicle etc. in general, it was very stingy with issuing these permits. A customs declaration would accompany the permit, which would be required to register the vehicle in South Africa with a registering authority. One of the things that caused the matter referred to end up in court, was the fact that the detention process took very long. SARS had jacked that up significantly so it could move over to seizure much sooner. 

Mr Makhubu said SARS closely followed the work of the Council for Scientific and Industrial Research (CSIR) on monitoring the losses experienced with loadshedding. It knew the first tax product that would take a knock because of loadshedding was a value-added tax (VAT). It closely monitored this. It looked at how much energy it took to generate the Gross Domestic Product (GDP) it reported on. Based on that, it computed what the impact on tax revenues would be, if it lost a certain amount of gigawatt hours in the economy. The Commissioner indicated that around R60 billion was estimated to be lost because of loadshedding in 2022. There was an immediate effect and a lag effect. The lag effect most likely came from corporate income taxes, because it still had the first submission of provisional payments in June 2023. It felt a part of the R60 billion was lagging and would materialise in the current financial year, starting with the first provisional payments. SARS continued to refine its position on this. However, it was the VAT that felt it first as sales declined, but also corporate income tax as it got declared bi-annually. 

The Commissioner spoke on Mr Kwankwa’s question on service levels. He said he had missed him for some time, but thought he got the gist of what he said. He would appreciate a one-on-one with him, because he sensed he was on the ground and could give valuable feedback. He would work in his office. He would appreciate the opportunity to sit down with him and see SARS service through his eyes. He handed over to one of the regional directors to share his approach to taxpayer service. 

Mr Nathaniel Mabetwa, Regional Director: Forum Chair, SARS, thanked Mr Kwankwa for his input. He could see that he was very passionate about service. SARS was also the same. SARS believed that one unhappy taxpayer was one too many, so it took this very seriously. It would be good for the Commissioner to sit down with Mr Kwankwa to get the details he referred to. 

The Commissioner had mentioned quite a bit about the taxpayer service, specifically the appointment system, so he would not go into detail on that. It was safe to say that SARS did not turn back any taxpayer who did not make an appointment. As much as the appointment system worked to ensure increased efficiency in queue management etc., taxpayers that came to the branch without an appointment were assisted nonetheless. He thought it was important to mention that. 

On the kiosks that Mr Kwankwa mentioned, this was important because they spoke to the self-help process that it wanted to encourage taxpayers to carry out. It rolled out kiosks in different branches and was in the process of increasing the number of these kiosks. In the previous week, SARS had recorded 2,499 interactions through these kiosks. These were available at the branches. Going forward, they would be available outside business hours, so taxpayers could use them any time. 

Mr Kwankwa’s last point was on the need to differentiate between different sorts of taxpayers. SARS was doing so. Some taxpayers were tech-savvy, and were then allowed to go to the self-help area to access the systems it made available to carry out self-help activities within the branch. They brought their own devices and could carry out any activities they needed to carry out at the branches. Then there were pensioners and anyone else that needed help. It was something SARS looked at seriously; if it had any service offering shortcomings, it made sure it recovered. SARS had a long way to go and would continue to improve. He looked forward to more interaction with Mr Kwankwa to ensure SARS got to the bottom of some of the issues he raised. 

The Commissioner made a final point on taxpayer service. Currently, SARS has 36 self-service terminals in the field. It budgeted to expand that. Over the next 12-18 months, SARS aimed to have up to 200 self-service terminals in the field. It also had mobile tax units. It needed to look at expanding its fleet of mobile tax units, so that it could serve remote communities on a rotational basis, so they did not feel the need to travel. Some examples mentioned by Mr Kwankwa could be exceptions, but every exception deserved attention, hence the proposed sit down with Mr Kwankwa. He asked Dr George to repeat the questions on greylisting and sugar. 

Follow-up discussion 
Dr George said the tariff on sugar was complex and he read it several times to understand it. It was calculated by comparing the actual traded price over a 20-day period with a fixed reference price, with the addition of a real exchange number for the Rand against the currencies of major trading partners, adjusted for relative inflation rates. That was quite clear. However, he has read about the implementation of the tariff in the newspaper. Apparently, this implementation took four to six weeks from triggering the formula that SARS implemented. ITAC then approved it, and SARS implemented it. According to the newspapers, this process took up to 34 weeks. Does SARS have a standard procedure for this process and monitor its implementation, so there is certainty in the industry? It seemed to be causing a lot of consternation. He wanted to know what that process was and whether it worked effectively. If it was taking so long, he asked why that was the case. 

South Africa recently got greylisted. He wanted to know whether other tax authorities had additional interactions with SARS after South Africa’s greylisting.

Acting Chairperson Abraham asked the Commissioner if she could also ask a few questions, so he could respond to all the questions. She joined the Members who commended the work that SARS did and appreciated its responses to Mr Kwankwa’s questions, which reflected practical challenges that ordinary people faced. She appreciated that SARS wanted to have a further engagement with him. The issues he raised were a sample of the practicality of what ordinary people, especially the illiterate and senior citizens, faced. She wanted SARS to acknowledge what the staff attitude usually was on these issues. At senior level, the Committee could appreciate what SARS culture was as an organisation, but it found that, in some cases, people were treated differently. She listened to the labour relations within the organisation, but asked if there were challenges with labour relations. “If so, what have you done to try and mitigate those challenges?” 

She raised the issues of corruption that occurred, like state capture, personal protective equipment (PPE) tender audits etc. It was a good thing that these funds came back to the state. She wanted to check if there was a different way of dealing with them so that SARS could say what was done with the money retrieved and if there was a different way of dealing with those issues. When SARS spoke about internal controls, she asked what kind of internal structures it had. For example, did SARS have an internal audit desk to assist with issues raised in the Auditor-General’s (AG) opinion? She saw SARS had an unqualified audit opinion, which was good. However, was SARS looking at graduating towards a clean audit? If so, what was being done about that? Were bursaries available from SARS at other institutions, especially higher education institutions, for students who wished to follow a tax-related career path?

From a service perspective, Mr Kwankwa thanked the SARS team and the Commissioner for acknowledging instances where the people were failed. He thanked SARS for the willingness to look into the matter and try and address it. He would take the Commissioner up on his offer. Without belabouring the point, it was not just one or two of them. He had the same experience, without explaining what he went there to do. He went there to do his parliamentary duties, because several people from Gugulethu were complaining, as was the case with the East London branch. It was possible that some of the staff members took advantage of the appointment system, because people were being turned away. That was why he made an example of the self-service terminal. If they were turned away, they could use the self-service terminal, but if they were not allowed near the entrance, they had no way of accessing those terminals because they were immediately turned away. This could be discussed later. He agreed that dealing with the challenges that faced the informal sector needed a comprehensive approach, involving different departments and various stakeholders. There should be commitment. The Committee was committed to playing any role as a stakeholder. In its report, SARS cited over a million VAT vendors, but at times the Members read different reports and analyses about the extent and level of VAT fraud that occurred. In some cases, people were charged for defrauding the state using the VAT system. Was there a credible document that could show the Committee the trends and to what extent SARS can deal with this problem? This would be ideal compared to relying on external sources. Because the Committee dealt with these matters almost on a daily basis, it needed to know whether SARS was winning or losing the battle on fraud. He suggested that tax morality could be something SARS needed to deal with at an academic level. If it was part of the civic education model or module that the state wanted to introduce, SARS should include tax morality and financial literacy issues. This would be made mandatory, so people understood the role they had to play and why there was a revenue service. This would ensure it was not the prerogative of the few who studied finance or pursued a career path in finance. He said he encouraged and supported the Commissioner on the mobile tax units. They would address the challenge of people travelling long distances to access services. There needed to be consistency and predictability so that when politicians did constituency work, they could communicate about them. He was frustrated at most of South Africa’s provinces being rural provinces. Without enough support and SARS reaching out to them, people could not access the services or do what was expected of them as taxpayers and potential taxpayers. 

SARS follow-up response 
The Commissioner asked Mr Franz Tomasek, Head: Legislative Policy Tax, Customs and Excise, SARS, to speak on the tariff on sugar, policy formulation and the challenges in administration. He would also speak on the cycle of work between ITAC and SARS. 

Mr Tomasek said an extensive process was required to adjust the sugar tariff. It started with ITAC who, in consultation with the South African Sugar Association, determined whether the factors were triggered. This would lead them to send a submission to the Minister of Trade, Industry and Competition, who considered it and forwarded the submission to the Minister of Finance. The Minister of Finance fairly quickly forwarded that to SARS. SARS was responsible for preparing the actual notes that gave effect to the adjustment. It would then send that submission to National Treasury, with those adjustments and the notice that needed to be signed with all the supporting documentation. National Treasury was responsible for reviewing the application of the formula and ensuring it was all right. It then went to the Minister of Finance for the signature of the actual notice that gave effect to the change. It was then returned to SARS, which arranged for publication in the government gazette. This outline of the process SARS ran through illustrated the fact that there were several role players responsible for various aspects. He hoped this gave the Committee some insight on why changes sometimes did not go as quickly as was wanted.

The Commissioner told Dr George that SARS was often caught at the tail end once the policy was in place and there was an implementation date. SARS needed to recalibrate according to this date and adapt its administration system to administer the policy. If Dr George thought the policy formulation was long and complex, the Commissioner assured him that, given SARS resources and time constraints, preparing to respond and administer policy changes was a massive task. So far, SARS had not dropped any balls on that, but getting there was an inordinate task. 

South Africa is a member of the OECD Forum for tax administrators. The previous week, SARS had attended a meeting with its counterparts to share, discuss and benchmark their performances against each other. On the whole, SARS could hold its head high amongst its peer revenue administrators. South Africa was respected. It restored a very constructive and positive relationship with other tax authorities in the last few years. It held its own fairly well amongst its peers internationally. The FIC and NPA worked with their counterparts, but he could not really speak on that. However, he could speak on SARS and its relation to its own agencies within government. It had room for improvement to work and collaborated more effectively. SARS had missed the mark on actions to avoid the greylisting. It should introspect and be honest in saying that some missteps were avoidable. The opportunity was to learn from that and improve its interagency relationship within South Africa. 

The nature of relationships with trade unions was always characterised by tension and competition. He was pleased to say the relationship SARS had with its trade unions was really positive. He met with them in February to update them on what SARS was doing to improve employee relationships. SARS engaged them as real and constructive partners and shared its financial challenges. Its incredible performance was delivered in the context of it being unable to implement its wage agreement and honour wage increases. For a short while, it faced industrial action. Throughout that, SARS remained connected. The Commissioner had met with the unions again on the previous Monday morning as they were now entering a round of negotiation. He took them into confidence on SARS financial framework. He was encouraged that SARS could build a real partnership with them over the last few years, not one where they tried to outsmart each other. He accepted that the leadership of organised labour was an important stakeholder contributing to SARS' wellbeing and success. 

One of the slides highlighted that SARS recovered R4.4 billion from criminal and illicit activities, which included half a billion of state capture money. It raised assessments to the value of R4 billion in the previous financial year. It had ongoing activities, and 42 active tax projects with 540 investigations valued at R2 billion. There was a lot of work happening there. Progress was slow, but it was steady. SARS began freezing assets and raising additional tax assessments. It recovered money that was lost to the fiscus. That was not necessarily all the money lost to the economy. It relied on the asset forfeiture unit within the NPA and the Special Investigating Unit (SIU) forfeiture mandate.

He asked the head of SARS internal audit unit, Ms Refilwe Khoza, to speak on controls and its four lines of defence and the assurance it had within SARS. On the topic of working with higher education institutions, he referred to Dr Rebone Gcabo, Chairperson: Enterprise Enablement Cluster and EXCO Member at SARS, to speak about its taxpaying experience, including engagements with learning institutions and other sectors of society. He assured the Committee that since SARS was given a bit more money, it set aside R32 million for bursaries in the current year. It had 250 graduates in training, and 250 service consultants where it would ordinarily take people with tertiary education. SARS had made an exception and allocated a few of these slots for individuals who passed matric and who it believed could be invested in. SARS was really trying to cover the broad spectrum to make a small contribution towards a massive growing concern in the area of youth unemployment. It was the little it could do, but he believed every little bit helped. 

The Commissioner said he was pleased to announce that SARS revenue accounts received a clean audit in the previous financial year. SARS was diligently looking at a few other areas where it would focus on, which were areas that would take it from a qualified to an unqualified report. He would ask Ms Khoza to talk about its internal controls framework and structure and then move to Dr Rebone to talk about taxpaying education. 

When he arrived at SARS in 2019 and conducted his field visits in the offices, he met people in the office and asked them what they did. These people said they worked for the mobile tax division. When he asked why they were in the office, they would say they did not have money for petrol. It was as absurd as that. SARS started addressing that. It believed by expanding its footprint on self-service terminals and mobile tax units. It could address the issues Mr Kwankwa so aptly and correctly pointed out. SARS had to acknowledge that it dropped the service ball far too often and needed to work harder to address those issues, which was why his invitation (for one-on-one discussions) stood. 

By using data science and data analytics, machine learning algorithms and artificial intelligence (AI), SARS made a significant dent in tax fraud attempts. He spoke about more than R80 billion of impermissible or fraudulent outflows in his presentation. The most significant component was preventing that fraud. He committed to providing the Committee with a more comprehensive report on how it experienced the phenomenon of fraud and what it was doing to address and mitigate fraud, so that risk to the fiscus was minimised. Once submitted, the Committee could discuss the report with SARS at any time in the future. 

Ms Khoza confirmed that the internal audit was within SARS. To protect its independence and objectivity, it functionally reported to the audit and risk committee, which had no SARS members. One of the key drivers was combined assurance. When it realised an environment as big as SARS had risk, management or the audit and risk committee needed assurance that the risks were being managed. They also needed assurance on internal controls. With its different assurance providers, SARS had the first line. This was when management was responsible for implementing internal controls and managing risk. In the second line of defence, management was responsible for monitoring to ensure that the internal controls were adequate and effective. The third line was the internal audit. This was where it was independent and ensured the monitoring was done and the first line was implementing adequate and effective internal controls. The fourth line was the AG. The AG was also independent and looked at the adequacy and effectiveness of the internal controls. SARS continuously engaged with the AG to assess where they could rely on each other’s work. It has worked so far. On the financial statement where the internal audit reported, all the controls required were being implemented. It gave assurance on that. On the fourth line, it sat with the AG and looked at the SARS internal controls. Those were the areas it implemented to make sure. The APP highlighted a key performance indicator on unqualified financials. It built this within SARS, so that everyone within SARS was responsible for implementing internal controls. 

The Commissioner said that on another day, SARS should engage with the Committee on how sometimes, with the current environment of Treasury procurement regulations and the Public Finance Management Act (PFMA) did not enable SARS to deliver, because it created a risk-averse culture. The easiest way to get a clean audit was to do nothing. SARS believed it should shift its focus to hard deliverables and not necessarily narrow compliance. That was a subject for another day. He just wanted to register his concern about that. He handed over to Dr Gcabo, who headed up SARS taxpayer engagement and knowledge research area. 

Dr Gcabo said SARS had recently launched a programme called ‘Fiscal and Financial Literacy’, which sought to help the schools, learners and the population understand tax morality. It segregated the programme by life experiences, covering everybody and not leaving anybody behind. Its entry-level focused on school leavers and university students who were finishing. This was because they would soon become workers and SARS wanted to start with them early on. Tax morality was one of the themes of the programme. It was important to begin there, so it could educate others about the theme. Once it was done with the theme, it educated them on the process of SARS, like how they could register. The value chain of SARS got implemented there. 

To help people with financial literacy, SARS had a partner which hosted an annual “money smart week”, where this same population group was educated on understanding finance and policies. Once someone understood their financial decisions, they could understand their tax obligations. This was quite critical. SARS also collaborated with the Department of Education on curriculum development, because it was at the end of the cycle when the old curriculum was designed. SARS also partnered with the Department of Education on a recurring annual programme so it could get involved instead of starting over. That was the collaborative approach SARS investigated. When it monitored the impact, it would see the benefits. It had a specific web facility with learner and teacher sites. The teachers could access teaching materials and the learners could access educational materials. The material was simplified to make tax interesting. 

The Commissioner said most of the questions were dealt with, but SARS was ready to respond to any further questions if required. He thanked the Committee for the opportunity to engage. SARS found the engagement enriching and it valued the guidance and feedback it received. It remained committed to serving South Africa and to being held accountable by Parliament. The Commissioner closed by re-confirming the invitation extended to the Committee and the Select Committee to visit Pretoria, where SARS could take them into its command centre. It would then demonstrate how it tried to connect its nerve system throughout the country. It would work with the Chairperson to find a convenient date. He personally wanted to be present at such a visit and would work with the Chairperson to achieve that. Additionally, SARS welcomed the engagement with Mr Kwankwa. 

Closing remarks 
Acting Chairperson Abraham thanked the Commissioner and asked if the Chairperson had returned. She thanked the SARS team, the Committee, and National Treasury. The Committee wanted to support the interaction SARS would have with Mr Kwankwa, so it also benefited from the interaction. She wanted the officials to arrange the interaction so if there were any costs attached, and they could assist. If possible, it could include one or two Members in the process. She wanted the majority of the citizens to enjoy the benefits of that interaction. The practical things raised were a sample of what was happening to the majority of South Africans. The Committee supported that and wanted to expand on it. 

Mr Kwankwa agreed they were colleagues and this should be approached collectively to get as much information from the different constituencies as possible. This would ensure a comprehensive discussion about service issues. 

Acting Chairperson Abraham thanked him for his willingness to work collectively and enhance the Committee’s work. The following week was a period of constituency work, where the Committee could also proactively interact with its SARS branches to bring more content to the interaction, making it a Committee programme. 

The Committee was navigating an uneven economic recovery and it appreciated the role SARS played. Organisations like SARS should prioritise issues of fighting crime and corruption. The Committee appreciated that SARS was in that space. It needed this to happen so the citizenry could see. South Africa had an enlightened citizenry where people saw where their money went. Hence, sometimes they would be reluctant to participate in tax issues, because they saw where the leaks were. When the country had institutions that carried the mandate of the state and, in this instance, fought crime and corruption and brought back dividends, it meant it was headed in the right direction. She thought there were two areas where the Committee needed to assist SARS. The first was the issue of increasing the tax base. SARS indicated that it was not always possible to pick up the additional funds that were there. In its interaction with National Treasury, the Committee needed to look for solutions on what could be done to have an automatic way of identifying new economic activities. SARS did a lot of work. If there were things it could not do, because of funding, the Committee needed to engage with National Treasury and support it. There was a lot the Committee still needed to discuss with SARS. The question of the widows and the plight of the widows was not necessarily finished. Members met with the widows in KwaZulu-Natal (KZN) and came back with some of the issues raised. The Committee needed more time to sit down with the representatives of the widows. It needed to thoroughly listen to their cries, with SARS amid that forum. This would ensure some of their problems are answered. Some of them did not know that it was their own actions that complicated their tax life. The Committee needed to talk about those things, amongst others. Time was of the essence, hence the need to make time. The Committee appreciated that SARS was still open to this visit. That interaction would be formalised by the Chairperson and Committee staff. She thanked all the Committee members for being present and engaging in the meeting. She also thanked the Commissioner and SARS. She thanked the parliamentary staff that was always present. She saw some officials in the Minister’s office, present in the meeting. This demonstrated how seriously the Minister’s office took the issues, so its principles could always be on board even if they were not physically in the meeting. As the Committee prepared to have other interactions, it hoped that SARS would continue to contribute towards improving lives and rooting out corruption. 

The meeting was adjourned.