Presentation to the Standing Committee on Finance

01 July 2014

2014/15-2018/19 STRATEGIC PLAN & 2014/15 ANNUAL PERFORMANCE PLAN

Agenda

• SARS Mandate

• Highlights of SARS business

• SARS Strategy

• Strategic outcomes

2

SARS mandate

• Collect all revenue

• Ensure compliance with tax and customs law

• Customs service – revenue, manage borders and trade

• Advise Minister of Finance

• Advise Minister of Trade and Industry

3

Core outcomes of SARS strategy

4

Compliance is at the core of SARS strategy

• The Compliance Strategy seeks to:

– encourage voluntary compliance

– establish an uncomplicated system that deals fairly with those in it and minimises leakages

– increase its focus on bringing those outside the system into it

5

Compliance levers

• Education

– Taxpayers that are aware of their rights and obligations are more likely to comply

• Service

– Providing a professional, fair and efficient service promotes compliance

• Enforcement

– Credible enforcement promotes fairness and deters non-compliance with tax laws

6

Levers in action

• Differentiate among sectors of the taxpayers

• Breadth, depth and leverage

• Collaboration with other government institutions

• Ensure integrity of SARS systems and people

7

Revenue

Segment Mgt.

Channel Mgt.

Enforcement Service

Tax & Customs Compliance

Education

People Capability

Strategy map for SARS core strategy

8

Compliance challenges in the medium term

• Trends have shown improving compliance levels

• Slower economic growth will place pressure on the projected revenue collection

• Global trends of tax base erosion and profit shifting through aggressive avoidance and evasion schemes

• Growing illicit economy – e.g. cigarette smuggling

• Growing disquiet about government spending

9

Therefore

• Maintain and improve public trust in SARS

• Maintain and improve compliance levels

• Respond to non-compliance early

• Increase capability to interdict illicit trade

• Combat unacceptable avoidance

• Enhance collaboration with other government institutions

10

SARS business at a glance

1. Education 2. Service 3. Enforcement

Education Registration

Licensing Deregistration

Filing Declaration

Payment

Dispute Management

Receivable Management

Audit & Investigations

Judicial Process

Co

re p

roce

ss

Legislation & mandate

Education & Outreach 2013/14

Education

campaigns 4

Campaigns

to

Employers 2 096

Employees 2 144

Campaigns

through

Co-locations 1 441

MTU's 647

Points of

service 5 720

Interventions

at

Schools 234

Branches 574

Visited Institution/

organisation 3 516

Footprint:

• Branches 51

• Mobile Tax Unit 9

• Ports of entry 34

Capability to handle 4 channels (electronic, telephonic, postal and walk-ins)

Pieces of legislation - 22

Total Register – 25 mil (20.3 mil active)

• Individuals (active): 17 mil

• Companies (active): 3 mil

• Trusts (active): 0.3 mil

Number of filing transactions – 25 mil

Queries addressed – 10 mil

Tax entities audited (compliance audits) – 1.8 mil

Revenue collected – approximately R900 bn.

Number of visitors to branch offices – 6.38 mil (2012/13)

Operating expenses – 0.97% of revenue collected

Headcount – 14 137 (2013/14)

MTU served approx 720,000 people

In-depth audits 19568

Investigations concluded 333

Court cases supported 267

11

12

2014/15 2015/16 2016/17

Revenue 993 650 1 095 100 1 208 720

Nominal growth % 10.4% 10.2% 10.4%

Source: 2014 Budget

SARS Budget 9,440 9,899 10,509

Increases Y-o-Y -1% 5% 6%

Expected Inflation (MTEF) 5.6% 5.5% 5%

Over the medium term, SARS must collect…

13

Over the medium term, funds SARS will receive…

8238 757

8832 010

9457 969

10133 459 9534 393 9440 321

9898 708

10508 911

-

2000 000

4000 000

6000 000

8000 000

10000 000

12000 000

2013-14 2014-15 2015-16 2016-17

Ran

d V

alu

e R

'000

Year

Projected Cost ENE Allocation

Revenue composition 2013/14

Marginal tax rate

1994/95 1995/96 2010/11 2011/12 2012/13

PIT % 43% 45% 40% 40% 40%

CIT % 40% 35% 28% 28% 28%

14

310.9 , 35%

179.5 , 20%

237.8 , 26%

44.1 , 5%

127.6 , 14%

Personal Income Tax

Companies Income Tax

Value Added Tax

Customs duties

Other taxes

Revenue growth 1994-2014

15

97.4

186.0

404.6

662.8 723.8

16.4

34.3

90.9

151.1

176.0

113.8

220.3

495.5

813.8

899.8

-

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1 000.0

1994/95… ...2000/01… ...2006/07 2012/13 2013/14

Tax Customs

11.5%

Priorities…

• Enhance technical capability of staff

• Single registration of taxpayers across government

• Implement Customs Bills and WTO trade facilitation

• Refined approach to taxpayer segments (e.g small business)

• Regulation of intermediaries

• Improved management of complaints

• International exchange of taxpayer information

• Border management

16

Thank You!

17