SOUTH AFRICAN REVENUE SERVICE Tax Administration Reform Case Study Presentation by Mbongeni Manqele Transformation Director And Leonard Radebe General Manager - Operations
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SOUTH AFRICAN REVENUE SERVICETax Administration Reform
Case Study
Presentation by Mbongeni ManqeleTransformation Director
AndLeonard Radebe
General Manager - Operations
Background
In order to meet our Transformation deadline… The project team is finding innovative methods to save time.
Some fun before we start
1996
1996/7
Katz CommissionTax Administration ReformTax Policy ReformFiscal Reform.
SARS as an Autonomous Agency
Integrating Internal Revenue and Customs
1998/9
Harmonising SARS2000
2004
2009
Siyakha 1Conducted a Diagnostic;Set Objectives;
Enhance Revenue Collection through enforcement;Improve effectiveness and efficiency of core business processes through standardisation;Improve customer service and education; andDevelop a high performing organisation.Standardise processesCapacitate SARS via people enablement & role clarityExcluded major technology enhancements
First
serie
s of
chan
ge
Renewed transformation
initiatives
WHERE HAVE WE COME FROM?
SARS Transformation from 1996…
SARS Autonomy
• Establishment of SARS
• Objectives
• Functions
• Powers
SARS ACT (1997)
SARS VOLUMETRICS
1,7 Million Import Transactions
1,8 Million SACU Movements
1851 Total Seizures
68, 775 Consignment
stopped
300, 268 PAYE
Employers
4,3 MillionIndividualTaxpayers
14 Million Passengers
moving through Customs
573, 876 VAT
Vendors
1, 4 Million Corporate Taxpayers
998, 221 Export
Transactions
14 Million Returns Processed
14 600 SARSEMPLOYEES
REVENUE COLLECTION
0
50
100
150
200
250
300
350
400
'97 '98 '99 '00 '01 '02 '03 '04 '05
147 165
184201
220255
282302
354
STAFF PLACEMENTS
KZN 1280
W.C. 1518
E.C. 837
F.S. 611
GAUTENG 2278
CUSTOMS 2540
The Situation
THE BEGINNING OF THE JOURNEY
Diagnostic and Findings
DIAGNOSTIC 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, 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 large.
DIAGNOSTIC AND FINDINGSDIAGNOSTIC AND FINDINGS
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
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
DIAGNOSTIC AND FINDINGS
SARS PERFORMED
SIGNIFICANTLY BELOW ITS FULL
POTENTIAL
SARS Performed Significantly Below Its Full Potential
Strategy is not clearly defined
Organisation structure does not operate
efficiently
Core businessprocesses arevery inefficient
HR practices arein transition, but
are weak
Significant tax gap remains
SARS PERFORMEDSIGNIFICANTLY BELOW ITS FULL POTENTIAL
Strategy is not clearly defined
Organisation structure does not operate
efficiently
Core businessprocesses arevery inefficient
Significant tax gap remains
HR practices arein transition, but
are weak
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
SARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIAL
Strategy was not clearly defined
Organisation structure did not operate
efficiently
Core businessprocesses werevery inefficient
HR practices werein transition, but
are weak
Significant tax gap remains
ORGANISATION STRUCTURESenior management believed that the current structure did not function efficiently
Roles and responsibilities were not clearly defined
within managementbetween Head Office, Regional and Branch Offices
Branches have become “little empires” with significant differences in
performanceprocesses
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
ORGANISATION STRUCTURE
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
SARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIAL
Strategy was not clearly defined
Organisation structure did not operate
efficiently
Core businessprocesses werevery inefficient
HR practices werein transition, but
were weak
Significant tax gap remains
CORE 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 steps
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
CORE BUSINESS PROCESSES
SARS CURRENTLY PERFORMED SIGNIFICANTLY BELOW ITS FULL POTENTIAL
Strategy was not clearly defined
Organisation structure did not operate
efficiently
Core businessprocesses werevery inefficient
HR practices werein transition, but
were weak
Significant tax gap remains
HR 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 shortages
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
HR PRACTICES
SARS CURRENTLY PERFORMS SIGNIFICANTLY BELOW ITS FULL POTENTIAL
Strategy was not clearly defined
Organisation structure did not operate
efficiently
Core businessprocesses werevery inefficient
HR practices werein transition, but
were weakSignificant tax
gap remains
HR PRACTICES
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
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
Efficiency and fairness in administrationeffective management and decision makingefficient processesclear 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
RESULTANT STRATEGIC GOALS
OUR TRANSFORMATION AGENDA
Diagnostics
SARS Transformation Agenda
Resultant Strategic Goals
WHAT SUCCESSFUL TRANSFORMATION WOULD LOOK LIKE
WHAT SUCCESSFUL TRANSFORMATION WOULD LOOK LIKE
Changed the physical environmentChanged the culture and collective mindsetRe-engineered business processesEnabling technologyChanged demographic profile of our workforceChanged leadership ethos and structureChanged organisational structure
THE BIRTH OF SIYAKHA
OBJECTIVES 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.
THE NEW SARS’ BUSINESS CHALLENGETHE NEW SARS’ BUSINESS CHALLENGE
Reducing the tax gapImproving taxpayer and other stakeholder service (importers, exporters, intermediaries, etc)Reducing the costs of complianceImproving the protection of the economyFacilitating legitimate trade
CENTRALISED ENFORCEMENTCENTRALISED 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.
PROCESS FOCUSPROCESS 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.
BETTER CUSTOMER EXPERIENCEBETTER CUSTOMER EXPERIENCE
Better customer experiences with heightened taxpayer respect for the way we interact with themEnhanced human capacity in better skilled, motivated and empowered people
PEOPLE PROCESSPEOPLE PROCESS
Building professional working environmentsProviding people with necessary toolsBuilding cross functional teamsCreating a sense of positive direction through engagement
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
Audit prioritisation based on risk profiling
Move to electronic filing for majority of revenue collected
Flatten organisation structure and organise in teams
Human Resourcesperformance based team incentives
performance measures linked to appropriate staffing levels
KEY INITIATIVES
42 BRANCHES
CENTRALISATION
BUSINESSPROCESS PEOPLE
CHANGE MANAGEMENT
TECHNOLOGY AND
SYSTEMSINFRASTRUCTURE
OUR CHANGE MANAGEMENT INITIATIVE
OUR SUCCESS STORY
Leadership buy-in and commitmentEmployee buy-in and support
Large scale interventions
THANK YOU
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