South African Revenue Service Strategic Plan 2007/08 – 2009/10: briefing

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Finance Standing Committee

14 May 2007
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Meeting report

FINANCE PORTFOLIO COMMITTEE
15 MAY 2007-05-15
SOUTH AFRICAN REVENUE SERVICE STRATEGIC PLAN 2007/08 – 2009/10: BRIEFING

Chairperson: Mr N Nene (ANC)

Documents handed out:
South African Revenue Service Strategic Plan: 2007/08 – 2009/10 (available later at www.sars.org.za)

South African Revenue Service Strategic Plan PowerPoint presentation

Audio Recording of the Meeting


SUMMARY
SARS reported on its operational deliverables, challenges and strategic and organisational processes. The briefing focused on the transition to simpler, electronic tax returns and a more automated assessment system for taxpayers. Challenges ahead are improve its current processing which is largely manual and paper intensive, playing a role in implementing the new social security and the wage subsidy and increased focus on border security and customs.

MINUTES
Commissioner Pravin Gordhan of the South African Revenue Services (SARS) and his team briefed the Committee on its Strategic Plan. His team consisted of Mr E Kieswetter (Chief Operating Officer), Mr I Pillay (Enforcement and Risk), Mr L Wort (Communications and Corporate Relations), Ms M Mokwena (Compliance Risk), Ms J Padiachy (Office of the Commissioner), Ms G Ravele (Government Relations), Mr Oupa G Magashula (Corporate Services), Mr B Hore (Strategy, Modernisation and Technology), Mr M Matlwa (Business Centre), Mr L Radebe (Customs), Mr N Mabetwa (Operations Strategy and Business: Projects) and Mr V Shabalala (Deputy Chief Operations Officer: Standards and Performance Analysis)

Commissioner Gordhan highlighted short term and long term operational deliverables, challenges and reported back on strategic and organisational processes within SARS. The briefing focused on the transition to simpler, electronic tax returns and a more automated assessment system for taxpayers.

Discussion
The Chairperson noted that the social security tax is still in its policy formulation stage and asked whether any funds were set aside at this stage to ensure its successful implementation. Commissioner Gordhan indicated that they will have a clearer understanding of the scope of a social security tax and the direction SARS will take within the next three to four months.

Mr I Davidson (DA) asked to what extent problems are anticipated given skills shortages within the context of a SARS modernisation agenda. He noted that the modernisation programme would demand considerable skills. Commissioner P Gordhan indicated that standard operating procedures are being mapped to ensure the necessary skills are available for delivery. SARS intend to set up a talent and recruitment centre which will map skills and look for the critical skills required. The SARS Training Academy will be further developed. International best practices are being used to inform skills development within SARS. Career development for tax professionals and customs professionals are being introduced in SARS to improve employee commitment. 

Mr I Davidson (DA) asked to what extent problems are anticipated given skills shortages within the context of a SARS modernisation agenda. He noted that the modernisation programme would demand considerable skills. Commissioner Gordhan indicated that standard operating procedures are being mapped to ensure the necessary skills are available for delivery. SARS intend to set up a talent and recruitment centre which will map skills and look for the critical skills required. The SARS Training Academy will be further developed. International best practices are being used to inform skills development within SARS. Career development for tax and customs professionals is being introduced in SARS to improve employee commitment. 

Mr S Marais (DA) and Mr Davidson asked how realistic and achievable the timeframes of the SARS strategic plan are. The SARS representative indicated that timeframes are realistic and achievable. Timeframes for delivery will be evaluated on a regular basis. 

Mr Johnson noted that SARS collect significant revenue and therefore need to be sufficiently funded to ensure that it can do its job. Commissioner Gordhan indicated that the Finance Portfolio Committee had previously considered if the SARS allocation should be a percentage of the tax revenue collected. International best practice supports this notion, which guarantees some independence for the tax collector.

Mr M Johnson (ANC) expressed his appreciation for the good work SARS is doing. He raised the issue of governance within SARS and asked why there are not a board of directors to guide the activities of SARS. The Commissioner said that the Minister has a major input with regards to operational issues as well as policy direction. He indicated that a board is only useful when there are not regular meetings between the Minister and a tax collection agency. Within South Africa, regular management meetings are held between SARS and the Minister and therefore a board of directors system is not necessary. There are also outside advisory perspectives from a Human Resource Development, Information Technology as well as an Audit Committee, which informs the activities of SARS.

Mr K Maloto (ANC) asked if the digitisation of paper documents is a priority for this year. He asked when the backlog problem in Bellville would be addressed. Mr E Kieswetter (SARS) indicated that SARS intend to be fully digitised within three to five years. Although hand written forms will still be in use, digitisation will minimise onerous information capturing by SARS. A pilot project was started in an Alberton SARS office whereby all hand written forms will be scanned in bulk.

Simplification of tax return forms was raised by Mr Maloto. He noted that SARS would greatly rely on third party information. It was enquired to what extent third party information will be verified if it is not the taxpayer who confirms accuracy of information. Mr E Kieswetter replied that accuracy of information will be ensured by having follow ups to verify information. SARS are currently experiencing formatting issues. These will be resolved soon in conjunction with other processes that has been simplified and automated based on international best practice.

Clarification regarding the discussions between the National Treasury and SARS about the Southern African Development Community (SADC) protocol was also required by Mr Maloto. Mr L Radebe (SARS) replied that the intention is to establish a SADC Union by 2012. There are regular meetings between SARS and other government department to further the establishment of a SADC Union.

Mr Maloto asked how SARS are preparing for the 2010 Soccer World Cup in South Africa. The SARS Commissioner said that SARS had already met to determine their responsibilities for the Soccer World Cup. New systems are envisaged which includes facial recognition technology for security purposes and a one-stop border post.

Mr S Marais (DA) indicated that there is a need to simplify the provisional taxpayer form which is difficult to complete. SARS indicated that an assessment for tax forms is being developed which aims to simplify.

Mr Y Bhamjee (ANC) indicated that the success of SARS is dependent on sufficient funding. SARS need to brief the Portfolio Committee to ensure that it gets the necessary resources in order to do its job. Commissioner Gordhan made a distinction between normal operations and the modernisation programme and indicated that about R1 billion is available for the modernisation programme. SARS had already started to work in some areas of the modernisation service programmes.

Mr Bhamjee asked what the Key Performance Indicators (KPIs) of SARS are for this year. He indicated that it would be easier for the Portfolio Committee to support SARS when difficulties arise if the Committee have KPIs to support any recommendations. Commissioner Gordhan noted that they aim to formulate their KPIs in a way that will make it easier for the Finance Portfolio Committee to monitor them.

Mr B Mguni (ANC) asked if SA is taking along its neighbours in terms of the free trade area envisaged in SADC. Commissioner Gordhan indicated that there is significant co-ordination within SADC. SARS are doing a lot of capacity building within SADC countries with the aim to develop similar integrated systems. The objective of co-ordination is to ensure that nobody within SADC loses out in this process.

Mr Mguni stated that 40% of South Africa’s neighbours get their revenue from tariffs. He asked how much revenue neighbouring countries will lose if SADC establishes a common trading zone. The Commissioner indicated that the tax bases in neighbouring SADC countries are not fully developed. The challenge that liberalisation pose is to broaden the tax base.  

Mr M Johnson (ANC) asked clarification on the information pertaining to counterfeit goods which are smuggled into South Africa. Commissioner Gordhan indicated that there is some information available regarding counterfeit goods but that more information is needed. 

Mr I Davidson (DA) said that the International Monetary Fund in 2005 expressed concern regarding SA’s ability to forecast revenue income on a consistent basis. Commissioner Gordhan indicated that there is a need to formalise structures for revenue estimation. An organisational structure had been established with the objective to improve revenue estimation. The South African Reserve Bank, National Treasury, Statistics South Africa and SARS are represented on this Committee.

Mr Davidson also indicated that SARS’s debt is relatively high compared to other international countries. He asked what the debt of SARS is and also what percentage of debt is recoverable. Mr Pillay (SARS) replied that the debt book was reduced but a lot more still needs to be done. Mr Pillay indicated that recent legislation provides SARS with more leverage to write off debt. Within the new framework debt can be categorised as recoverable or non-recoverable portions. Debt management is dependent on other SARS processes like the assessment process. Digitisation of the assessment process will also improve debt management. Commissioner Gordhan added that there is a shift away from debt management to account management. It is envisaged that tax officers will become account managers as opposed to debt managers. SARS officers will be responsible for a certain number of taxpayers and would need to ensure that information and collection are adequately dealt with. SA is in line with international benchmarks with regards to debt management.

Mr K Maloto (ANC) asked if the risk management module of SARS is adequate and whether there are any areas that need to be attended to. Commissioner Gordhan replied that the current risk management module is an improvement on what had been done previously. It is expected that the modernisation programme will be able to improve risk management.

Mr Marais indicated that people with disabilities sometimes struggle to process their tax forms at SARS. SARS needed to accommodate the needs of people with disabilities. The Commissioner indicated that SARS aimed to accommodate the needs of disabled people and are prepared to improve systems to achieve this objective.

Mr Asiya (ANC) asked if SADC countries have tax organisational structures similar to SARS. Commissioner Gordhan indicated that most SADC countries have similar structures to South Africa. South Africa co-operates closely with its SADC counterparts and also does capacity building in some SADC countries.

The meeting was adjourned.

 

 

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