SOUTH AFRICAN REVENUE SERVICE - World Bank

1 SOUTH AFRICAN REVENUE SERVICETax Administration ReformCase StudyPresentation by Mbongeni ManqeleTransformation DirectorAndLeonard RadebeGeneral Manager - OperationsBackgroundIn order to meet our Transformation The project team is finding innovative methods to save fun before we start19961996/7 Katz Commission Tax Administration Reform Tax Policy Reform Fiscal as an Autonomous Agency Integrating Internal REVENUE and Customs1998/9 Harmonising SARS200020042009 Siyakha 1 Conducted a Diagnostic; Set Objectives; Enhance REVENUE Collection through enforcement; Improve effectiveness and efficiency of core business processes through standardisation; Improve customer SERVICE and education; and Develop a high performing organisation.

2 Standardise processes Capacitate SARS via people enablement & role clarity Excluded major technology enhancementsFirst series of changeRenewed transformation initiativesWHERE HAVE WE COME FROM? SARS Transformation from Autonomy Establishment of SARS Objectives Functions PowersSARS ACT (1997)SARS VOLUMETRICS1,7 Million Import Transactions1,8 Million SACU Movements1851 Total Seizures68, 775 Consignment stopped300, 268 PAYEE mployers4,3 MillionIndividualTaxpayers14 Million Passengers moving through Customs573, 876 VAT Vendors1, 4 Million Corporate Taxpayers998, 221 Export Transactions14 Million Returns Processed14 600 SARSEMPLOYEESREVENUE COLLECTION050100150200250300350400'97 '98 '99 '00 '01 '02 '03 '04 '05147165184201220255282302354 STAFF 2278 CUSTOMS2540 The SituationTHE BEGINNING OF THE JOURNEYD iagnostic and FindingsDIAGNOSTIC AND FINDINGSDIAGNOSTIC AND FINDINGS Lack of a clearly defined strategy which could shape and guide the activities of the organisation The existence of a significant tax gap.

3 Which denoted the REVENUE effect of non-compliance and organisational inefficiency Inefficient and non-standardised Core business processes, leading to an organisational structure that functioned sub-optimally Weak Human Resource practices, affecting in particular the training and development of staff, and the creation of a performance-driven management culture; and A poor SERVICE culture in delivering services aligned to the needs of taxpayers, traders and the public at AND FINDINGSDIAGNOSTIC AND FINDINGSDIAGNOSTIC AND FINDINGS The majority of branch office staff work in either processing or compliance functions.

4 Although a significant portion of their time is currently taken up with taxpayer SERVICE functions On average up to 50% of the REVENUE staff time is taken by ad hoc taxpayer SERVICE tasks The Processing Centres and Compliance Offices should each be concentrated to the super centres Processing Centres should be located in large out of town one storey buildings while Compliance Offices can be located in current SARS buildings In assessing the impact of concentration on a typical office the staff demographics need to be considered These Processing Centres and Compliance Offices will form separate business units reporting to ExecutivesDIAGNOSTIC AND FINDINGSSARS PERFORMED SIGNIFICANTLY BELOW ITS FULL POTENTIALSARS Performed Significantly Below Its Full PotentialStrategy is not clearly definedOrganisation structure does not operate efficientlyCore businessprocesses arevery inefficientHR practices arein transition.

5 Butare weakSignificant tax gap remainsSARS PERFORMEDSIGNIFICANTLY BELOW ITS FULL POTENTIALS trategy is not clearly definedOrganisation structure does not operate efficientlyCore businessprocesses arevery inefficientSignificant tax gap remainsHR practices arein transition, butare weakSTRATEGY Senior management did not believe that a clear strategy existed and was understood by the organisation Taxpayer strategy had not been clearly defined and communicated to taxpayersSARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIALS trategy was not clearly definedOrganisation structure did not operate efficientlyCore businessprocesses werevery inefficientHR practices werein transition.

6 Butare weakSignificant tax gap remainsORGANISATION STRUCTURE Senior management believed that the current structure did not function efficiently Roles and responsibilities were not clearly defined within management between Head Office, Regional and Branch Offices Branches have become little empires with significant differences in performance processes Customs and REVENUE as were two separate organizations, duplicating a number of activities where synergies were possible The structure was too bureaucratic, with too many layers of management and too narrow spans of control Senior management decision-making was efficientORGANISATION STRUCTUREORGANISATION STRUCTURE SARS was organized around functions, not around processes SARS was not sufficiently customer focused The law administration function was treated differently by REVENUE and by CustomsSARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIALS trategy was not clearly definedOrganisation structure did not operate efficientlyCore businessprocesses werevery inefficientHR practices werein transition.

7 Butwere weakSignificant tax gap remainsCORE BUSINESS PROCESSES Core processes were not efficient Process duplication existed between tax types Many processes were performed at sub-scale locations Processes did not prioritize work Process efficiencies varied significantly between offices, due to lack of adequate performance targets/measures Processes were fragmented, and contained too many handoffs and too many stepsCORE BUSINESS PROCESSES Processes retained high levels of duplicative, manual tasks that had to be automated Information flows/hand-offs between processes was not efficient Internal processing delays resulting from non-prioritization and lack of training resulted in long wait timesCORE BUSINESS PROCESSESSARS CURRENTLY PERFORMED SIGNIFICANTLY BELOW ITS FULL POTENTIALS trategy was not clearly definedOrganisation structure did not operateefficientlyCore businessprocesses werevery inefficientHR practices werein transition.

8 Butwere weakSignificant tax gap remainsHR PRACTICES Current state of HR was a legacy of historic SARS practices Employee morale was low Allocation of employees to functions was sub-optimal Recruiting was not performed on a systematic basis Performance management system was in the process of implementation but not understood or standardized Training was not adequately addressing the key skills shortagesHR PRACTICES Retention among key functions was problematic A strong career path did not exist for a number of core functions Compensation was not linked to performance Key functions most at risk for defection, were paid significantly below their private sector counter partsHR PRACTICESSARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIALS trategy was not clearly definedOrganisation structure did not operateefficientlyCore businessprocesses werevery inefficientHR practices werein transition, butwere weakSignificant tax gap remainsHR PRACTICESSIGNIFICANT TAX GAP REMAINS Between 25 and 30 percent of businesses in SOUTH Africa where not paying taxes.

9 While the majority of the population - who where marginalised in the past - had not been incorporated in the system. - Pravin Gordhan, SARS CommissionerRESULTANT STRATEGIC GOALS High levels of compliance across the taxpayer base High levels of taxpayer SERVICE Broadening tax base through taxpayer education Responsible enforcement and border and industry protection Efficiency and fairness in administration effective management and decision making efficient processes clear and unambiguous policies and procedures Motivated and competent Human Capital that is also representative of the broad SOUTH AFRICAN society Pro-active collaboration with RSA Government in influencing taxation legislation and

10 PoliciesRESULTANT STRATEGIC GOALSOUR TRANSFORMATION AGENDAD iagnosticsSARS Transformation AgendaResultant Strategic GoalsWHAT SUCCESSFUL TRANSFORMATION WOULD LOOK LIKEWHAT SUCCESSFUL TRANSFORMATION WOULD LOOK LIKE Changed the physical environment Changed the culture and collective mindset Re-engineered business processes Enabling technology Changed demographic profile of our workforce Changed leadership ethos and structure Changed organisational structureTHE BIRTH OF SIYAKHAOBJECTIVES OF SIYAKHAOBJECTIVES OF SIYAKHA Enhance REVENUE Collection through enforcement; Improve effectiveness and efficiency of core business processes through standardisation; Improve customer SERVICE and customer education; Develop a high performing organisation; Structural change in terms of physical and organisational infrastructure; Capacitate SARS via people enablement and role clarity, and excluded major technology enhancement.