SOUTH AFRICAN REVENUE SERVICE Tax Administration Reform Case Study
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1 SOUTH AFRICAN REVENUE SERVICE Tax Administration Reform Case Study Presentation by Mbongeni Manqele Transformation Director And Leonard Radebe General Manager - Operations
2 Background
3 Some fun before we start In order to meet our Transformation deadline The project team is finding innovative methods to save time.
4 WHERE HAVE WE COME FROM? 2009 Katz Commission Tax Administration Reform Tax Policy Reform Fiscal Reform Harmonising SARS 1996/7 1998/9 First series of change 2000 SARS as an Autonomous Agency Integrating Internal Revenue and Customs 2004 Renewed transformation initiatives 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. Standardise processes Capacitate SARS via people enablement & role clarity Excluded major technology enhancements SARS Transformation from 1996
5 SARS ACT (1997) SARS Autonomy Establishment of SARS Objectives Functions Powers
6 SARS VOLUMETRICS 1,7 Million Import Transactions 14 Million Returns Processed 1, 4 Million Corporate Taxpayers 998, 221 Export Transactions 1851 Total Seizures SARS EMPLOYEES 4,3 Million Individual Taxpayers 573, 876 VAT Vendors 1,8 Million SACU Movements 300, 268 PAYE Employers 68, 775 Consignment stopped 14 Million Passengers moving through Customs
7 REVENUE COLLECTION '97 '98 '99 '00 '01 '02 '03 '04 '05
8 STAFF PLACEMENTS KZN 1280 W.C E.C. 837 F.S. 611 GAUTENG 2278 CUSTOMS 2540
9 The Situation
10 THE BEGINNING OF THE JOURNEY Diagnostic and Findings
11 DIAGNOSTIC 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, 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
12 DIAGNOSTIC AND FINDINGS Weak Human Resource practices, affecting in particular the training and development of staff, and the creation of a performancedriven management culture; and A poor service culture in delivering services aligned to the needs of taxpayers, traders and the public at large.
13 DIAGNOSTIC AND FINDINGS The majority of branch office staff work in either processing or compliance functions, 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
14 DIAGNOSTIC AND FINDINGS 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 Executives
15 SARS PERFORMED SIGNIFICANTLY BELOW ITS FULL POTENTIAL
16 SARS Performed Significantly Below Its Full Potential Strategy is not clearly defined Organisation structure does not operate efficiently Core business processes are very inefficient HR practices are in transition, but are weak Significant tax gap remains
17 SARS PERFORMED SIGNIFICANTLY BELOW ITS FULL POTENTIAL Strategy is not clearly defined Organisation structure does not operate efficiently Core business processes are very inefficient HR practices are in transition, but are weak Significant tax gap remains
18 STRATEGY 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 taxpayers
19 SARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIAL Strategy was not clearly defined Organisation structure did not operate efficiently Core business processes were very inefficient HR practices were in transition, but are weak Significant tax gap remains
20 ORGANISATION 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
21 ORGANISATION STRUCTURE 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 efficient
22 ORGANISATION 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 Customs
23 SARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIAL Strategy was not clearly defined Organisation structure did not operate efficiently Core business processes were very inefficient HR practices were in transition, but were weak Significant tax gap remains
24 CORE BUSINESS PROCESSES Core processes were not efficient Process duplication existed between tax types Many processes were performed at subscale locations
25 CORE BUSINESS PROCESSES 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 steps
26 CORE 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 times
27 SARS CURRENTLY PERFORMED SIGNIFICANTLY BELOW ITS FULL POTENTIAL Strategy was not clearly defined Organisation structure did not operate efficiently Core business processes were very inefficient HR practices were in transition, but were weak Significant tax gap remains
28 HR PRACTICES Current state of HR was a legacy of historic SARS practices Employee morale was low Allocation of employees to functions was suboptimal
29 HR PRACTICES 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 shortages
30 HR 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 parts
31 HR PRACTICES SARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIAL Strategy was not clearly defined Organisation structure did not operate efficiently Core business processes were very inefficient HR practices were in transition, but were weak Significant tax gap remains
32 SIGNIFICANT TAX GAP REMAINS Between 25 and 30 percent of businesses in South Africa where not paying taxes, while the majority of the population - who where marginalised in the past - had not been incorporated in the system. - Pravin Gordhan, SARS Commissioner
33 RESULTANT 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
34 RESULTANT STRATEGIC GOALS 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 policies
35 OUR TRANSFORMATION AGENDA Diagnostics Resultant Strategic Goals SARS Transformation Agenda
36 WHAT 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 structure
37 THE BIRTH OF SIYAKHA
38 OBJECTIVES 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.
39 THE NEW SARS BUSINESS CHALLENGE Reducing the tax gap Improving taxpayer and other stakeholder service (importers, exporters, intermediaries, etc) Reducing the costs of compliance Improving the protection of the economy Facilitating legitimate trade
40 CENTRALISED ENFORCEMENT Compliance Centres have resulted in scarce expertise being identified, enabling experience sharing among staff, this has also led to risk methods and audit systems being standardised and adopted and deployed across all tax types.
41 PROCESS FOCUS Fundamental shift from a silo-based product approach to a functional and process driven view. Taxpayer Service Centres, supported by Call Centres and Processing Centres, enable frontline staff to focus on meeting the needs of all taxpayers.
42 BETTER CUSTOMER EXPERIENCE Better customer experiences with heightened taxpayer respect for the way we interact with them Enhanced human capacity in better skilled, motivated and empowered people
43 PEOPLE PROCESS Building professional working environments Providing people with necessary tools Building cross functional teams Creating a sense of positive direction through engagement
44 KEY INITIATIVES Concentrate registration, assessment, collection and audit processes Develop centrally coordinated taxpayer service strategy Break product silos and introduce standardised process irrespective of tax type
45 KEY INITIATIVES Audit prioritisation based on risk profiling Move to electronic filing for majority of revenue collected Flatten organisation structure and organise in teams Human Resources performance based team incentives performance measures linked to appropriate staffing levels
46 42 BRANCHES
47 CENTRALISATION
48 OUR CHANGE MANAGEMENT INITIATIVE BUSINESS PROCESS PEOPLE CHANGE MANAGEMENT INFRASTRUCTURE TECHNOLOGY AND SYSTEMS
49 OUR SUCCESS STORY Leadership buy-in and commitment Employee buy-in and support Large scale interventions
50 THANK YOU
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