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Basic Building Blocks of SARS Domestic Resource Mobilisation

Aidan Keanly

South African Revenue Service

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THE FIRST STEPS……

Remember…..Remember….. Every country is very differentEvery country is very different

Understand Understand YOURYOUR particular environment particular environment

Customise by looking at three basic questionsCustomise by looking at three basic questions• What’s NEW?What’s NEW?• What’s the TRUTH?What’s the TRUTH?• What’s the RIGHT thing to do?What’s the RIGHT thing to do?

33SA TAXBASE

ECONOMIC ENVIRONMENT

GO

VT

. TA

X P

OL

ICY

LE

GIS

LA

TIO

N

GO

VT

. PO

LIC

Y

IMP

AC

T

Performance

Process

CompetencyFacilities &

Layout

Organisation

Application Equipment

Delivery Vehicle

Culture

Strategy

SARS Integration Blueprint

WARNING – DO NOT GO HERE!!!!

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Performance

The arrangement of tasks / activities within the organisation

Process

StaffFacilities &

Layout

Organisation

The key elements and structure of the organisation

All competencies related to the process in terms of knowledge, skills, professional qualities

All facilities to support Architecture

I.e. buildings, layout, size, capability, requirements, standards, supply services I.e. waterThe software

required to satisfy business needs

Application Equipment

All equipment needed for architecture

The hardware and software required by the chosen applications

Delivery Vehicle

Culture

Group behaviors needed to work in the future I.e norms, values, group behavior

Clear picture of:• SARS role in SA• What need to be

achieved• Changing need of

stakeholders• Services and

methods of reaching taxpayers

Strategy

Achieving target measures on key strategic and operational dimensions

Definitions

To define how people, process and technology will interact and create a Business Case and implementation plan to show when and how targeted value can be obtained

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BUILDING BLOCKS OF SARS DMR

Political will, support and air-cover Required legal framework Functioning institution (process not products) Know your market and segment Involve all stakeholders Change management Manage donor support and advice Measurement of success

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TAX GAP IN SOUTH AFRICA

Tax Gap in South Africa between 15% and 30% Capital flight (unrecorded and untaxed illicit leakage of

capital and resources) estimated at 6.6% of GDP Approach by SARS to address leakages;

• Policy reform and International collaboration• Enhancement of administrative efficiencies to optimize

compliance of formal economy taxpayers• Education and outreach to informal economy• Risk Management

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SARS COMPLIANCE MODEL

Enfo

rcem

ent

Enfo

rcem

ent Service

Service

EducationEducation

Environmental Environmental Knowledge and Knowledge and UnderstandingUnderstanding

Effective Effective SegmentationSegmentation

Risk Risk AssessmentAssessment

Customer Customer AwarenessAwareness

Focus on making compliance Focus on making compliance

easier for taxpayers by easier for taxpayers by

improving service and reducing improving service and reducing

the administrative burden.the administrative burden.

Deter and catch non-compliant Deter and catch non-compliant

taxpayers. Credible, legitimate taxpayers. Credible, legitimate

and firm enforcement, with and firm enforcement, with

appropriate sanctions, will appropriate sanctions, will

discourage tax evasion.discourage tax evasion.

Broadening tax base by educating Broadening tax base by educating

the public about their tax obligations. the public about their tax obligations.

It’s recognised that there is a low It’s recognised that there is a low

awareness of responsibilities of awareness of responsibilities of

fiscal citizenship. fiscal citizenship.

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VOLUNTARY COMPLIANCE BASED ON

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Key to this approach is to ensure that taxpayers/traders understand obligationsKey to this approach is to ensure that taxpayers/traders understand obligations

make it as easy as possiblemake it as easy as possible for those trying to comply for those trying to comply

make it very hard for thosemake it very hard for those trying to avoid paying their fair share trying to avoid paying their fair share

improve serviceimprove service improve enforcementimprove enforcement

Some taxpayers/traders Some taxpayers/traders will always try to comply will always try to comply

whether effective whether effective enforcement exists or enforcement exists or

not - people who not - people who believe in doing the right believe in doing the right

thing thing

some taxpayers/traders some taxpayers/traders will not comply whether will not comply whether effective enforcement effective enforcement

exists or not – the exists or not – the criminals criminals

The goal of voluntary compliance The goal of voluntary compliance is to influence the undecided is to influence the undecided

majority who will choose one way majority who will choose one way or the other based upon how well or the other based upon how well

we implement this strategywe implement this strategy

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SpecialIndividuals Businesses and SOEIntermediaries

SEGMENT TAX BASE DUE TO ECONOMIC DISPARITY

Traders (Trade inter-mediaries)

Tax practitioners

EmployerEmployeras agentas agent

11

22

1010

StandardStandard

Complex

SITEandbelowthreshold

44

55

33

Formalbusiness

Large

Informalbusiness

88

77

66

Government NGOs &PBOs

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1010

SARS ADOPTED A LEADERSHIP MODEL BASED ON KEY BEHAVIOURAL COMPETENCIES

1010

HigherHigherPurpose &Purpose &IntegrityIntegrity

Higher Purpose & IntegrityHigher Purpose & IntegrityChampioning the MandateChampioning the MandateResponsibility Social ImpactResponsibility Social Impact

Empowering DeliveryEmpowering DeliveryDriving ExcellenceDriving ExcellenceMobilising TeamsMobilising Teams

TransformationTransformationDeveloping othersDeveloping othersBuilding SustainabilityBuilding SustainabilityLeveraging DiversityLeveraging DiversityInfluencing OthersInfluencing Others

InsightInsightConceptual ThinkingConceptual ThinkingAccurate Understanding Accurate Understanding HumilityHumility

Source Hay GroupSource Hay Group

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POLICY STEPS TO ADDRESS TAX GAP

International Tax Amnesty International Tax Amnesty Small Business AmnestySmall Business Amnesty Legislative amendmentsLegislative amendments

• Residents worldwide income• 3rd Party data requirements• Scheduling of provisional payments• Increased obligations on employers • Penalty regime• Voluntary Disclosure

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SUMMARY AND CONCLUSION

Compliance drives sustained SARS when GFC kicked inCompliance drives sustained SARS when GFC kicked in Exponential increase in e-channels Exponential increase in e-channels Improved refund methodology and turnaround timesImproved refund methodology and turnaround times Systematised deferment & agreements to assist Systematised deferment & agreements to assist

taxpayerstaxpayers Widening of tax net through Risk Management via 3Widening of tax net through Risk Management via 3 rdrd

party validationsparty validations Better collections from Medium and Small companiesBetter collections from Medium and Small companies Containment of suspicious VAT refunds & prosecutionContainment of suspicious VAT refunds & prosecution Significant improvement in provisional payments of Significant improvement in provisional payments of

individualsindividuals