Innovation Hub 1 Innovation Hub 28 & 29 November 2019 Version 2 The SARS Innovation Journey Presentation at the 13 th Annual Public Sector Innovation Conference Speakers: Paulo Carreira (SARS Innovation Hub) & Sello Mtshali (SARS IT Innovation and Strategy)
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Innovation Hub 1Innovation Hub
28 & 29 November 2019
Version 2
The SARS Innovation Journey
Presentation at the 13th Annual Public Sector Innovation Conference
Speakers: Paulo Carreira(SARS Innovation Hub)
& Sello Mtshali
(SARS IT Innovation and Strategy)
Presenter
Presentation Notes
Introduce Paul Carreira Manage the Innovation Hub – the unit that manages foresighting and design-thinking
Innovation Hub 2
SARS at a glance
Innovation Hub 3
SARS’ Mandate
SARS derives its mandate from legislation (SARS act No. 34 of 1997)
To make provision for the efficient and effective administration of the revenue collecting system of South Africa.
1. Tax Administration Act, 20112. Income Tax Act, 19623. Customs and Excise Act, 19644. Value-Added Tax Act, 19915. Transfer Duty Act, 19496. Unemployment Insurance
Contributions Act, 20027. Skills Development Levies Act, 19998. Mineral and Petroleum Resources
Royalty Act, 20089. Securities Transfer Tax Act, 2007
10. Diamond Export Levy (Administration) Act, 2007
12. Empl0yment Tax Incentive Act, 201313. Merchant Shipping Administration and
Contributions Act, 2013
SARS administers a diverse range of legislation
Presenter
Presentation Notes
Important to understand SARS, before talking about the SARS journey SARS is an independent organ of state, but reporting to the Minister of Finance Mandate anchored in legislation
Innovation Hub 4
USE DATA FOR INSIGHTS, RISKS
& IMPROVED OUTCOMES
MODERNIZE SYSTEMS TO
PROVIDE SEAMLESS
ONLINE DIGITAL SERVICES
DEVELOP AN ENGAGED, AGILE
& DIVERSE WORKFORCE
CREATE AWARENESS,
CLARITY & CERTAINTY
WORK WITH & THROUGH STAKE
- HOLDERS TO IMPROVE TAX
SYSTEM
MAKE IT EASY & SIMPLE TO
COMPLY
MAKE IT HARD TO NOT COMPLY
USE RESOURCES EFFICIENTLY TO
DELIVER QUALITY
OUTCOMES & EXCELLENCE
BUILD CREDIBILITY,
PUBLIC CONFIDENCE &
TRUST
SARS’ strategic objectives for 2024
Core Business
Future Core
Business
Enabling
Outcome
Innovation Hub 5
SARS by the numbers
Source: SARS Annual Report 2018-2019 (31 March 2019)
2019/2020: R1.42-trillion, revised to R1.37-trillion
2018/2019
13,200 employees
Presenter
Presentation Notes
Huge volumes
Innovation Hub 6Source: SARS Annual Report 2018-2019 (31 March 2019)
A view of SARS’ tax base
Presenter
Presentation Notes
Have 26m taxpayers Only 44% of total population Unclean registers
Innovation Hub 7
Central Processing Operations
(Tax)
Customs Processing
Hubs
Audit(Tax and Customs)
Debt (Tax and Customs)
Contact Centre
(Tax and Customs)
(4)
Branch Operations
Tax(53)
Mobile Tax Units
(15)
Self Service/A
TM
Suit-cases(60)
AssistedSelf
Service
CustomsBranches
(64)
Sea Ports(11)
Airports(13)
Land Border Posts(27)
Rail
Excise Branch Offices
(13)
Audit(Tax and Customs)
Debt (Tax and Customs)
An overview of SARS’ deployment model
SARS Head Office
Approx. 12300 employees
Presenter
Presentation Notes
SARS is a complex tax, customs and excise business Geographically spread Multiple channels
Innovation Hub 8
The SARS Innovation
Journey
Innovation Hub 9
Siyakha Transformation
Programme
Building the foundation
• Diagnostic
• Concentrate high volume work
• Standardise and baseline processes
• Address infrastructure
• Train and redeploy people
1999 - 2003
Preparation for the Modernisation
Programme
Building Capacity
• Create a process engineering (design) and Information Management competency
• Invest in technology
• Secure change partners
• Enhance operational management capabilities
2004 - 2005
Customs &Excise
Tax
Service
Support
Risk
Modernisation Programme
Enabling our processes through
technology
• Determine a scientific fact base
• Adopt 80/20 prioritization
• Listen to the voice of the customer
• Automate processes
• Use an iterative approach
2006 - 2014
“5x5 “
Operating ModelProgramme
Enterprise Restructuring
• Diagnostic
• Enterprise Operating Model Restructuring
• Continuation of the modernization programme
2015 - 2018
Key
focu
s ar
eas
Them
e
Vision 2024Programme
Disruptive Innovation
• Reprioritisation of modernization efforts in alignment with the SARS 2024 strategy and objectives
2019 - Current
SARS’ change journey since 2000
Innovation Hub 102000 2001 2005 2007
Perc
enta
ge G
ain
in E
ffic
ienc
y
Year2015
Operating Model Programme2015 - 2018
Fact base
Siyakha Phase I: DiagnosticJan 2000 –
Jun 2000
Siyakha Phase II: KZN Pilot detailed
planning & Implementation
Jul 2000 - Dec 2001
Siyakha Phase III – VI:
Regional implementations
2002 – 2005
SARS Modernisation Programmes2007 – 2014
Organisational Concentration and
Process Enhancements
IT Enabled ProcessReengineering
Pilot
SARS’ change journey looked at differently (1999 – Current)…
Operating Model Restructuring
SARS 2024
2015
SARS 2024 Programme
2019 - Current
Building the foundation Focus on restructuring
Build Modernisation Capacity and Introduce Automation
Disruptive Innovation
Build capacity
Innovation Hub 11
Diagnostic based on
data analytics
Selection of
projects based on the 80/20 principle
Design Build Transfer
Design and Build Operationalisation Analysis and Selection
Scoping
Phasing & stabilization
of newly implemented
processes
Baselining of processes
and continuous
improvement
Narrowing the scope Laser focus on deliveryEver broadening nature
of implementation
SARS’ iterative approach to innovation
Internal and external co-creation
Innovation Hub 12
753
2004
1. eFiling2. PIT and PAYE
reform3. Return Scanning4. Automated
workflow5. Call Centre6. IVR7. Document
Tracking
1. Single registration2. CIPC integration3. Customs core system
replacement 4. DHA modernisation5. Complaints
Management6. Tax practitioners
registration7. CIT modernisation8. MobiApp
1. SAP financial modules for own and revenue accounts
1. PIT return pre-population using 3rd party data
2. PIT and VAT risk engine
3. Electronic signature pads
4. Branch Queue Management System (BQMS)
1. VAT modernisation2. Customs risk engine3. Tax Clearance Status4. Trusts modernisation5. ETI6. EDI gateway for
2. PIT Filing - 94% return processed in 5 seconds in 2016 vs. 180 days in 2006
3. PAYE volumes – 11m to 31.3m
4. 55.48% refunds paid within 48 hours in 2016 vs 3% in 2006
Presenter
Presentation Notes
Highlights X12 electronic volume increase PIT Filing - 94% return processed in 5 seconds in 2016 vs. 180 days in 2006 PAYE volumes – 11m to 31.3m 55.48% refunds paid within 48 hours in 2016 vs 3% in 2006
Innovation Hub 14
Our modernisation results: Customs
We made SARS more efficient
Source: SARS Strategic Plan 2016-2017 – 2020/21
Highlights
1. 6.05m declarations in 2015 vs. 1.9m in 2006 (x3)
2. Average of 2 hours in 2006 vs 89% in 22 minutes in 2015
Presenter
Presentation Notes
Highlights 6.05m declarations in 2015 vs. 1.9m in 2006 Average of 2 hours in 2006 vs 89% in 22 minutes in 2015
Innovation Hub 15
Our modernisation results: 2019 Filing Season results as at 22 November 2019
Source: SARS Strategic Plan 2016-2017 – 2020/21
1. 1 431 764 less returns received in 2019 (4,296,731 returns in 2019 compared to last year’s 5,728,495).
2. 65.36% of all returns received this year have come via the digital channels
3. 868 471 auto-assessments were issued.
4. PIT Ops Audit inventory is 68 762 lower year on year, with significant increases in hit rates.
5. 49.75% reduction in service complaints
6. 41.08% reduction in disputes
If you have not done so already, please don’t forget to file your tax return by 4 December 2019.
Innovation Hub 16
Lessons learnt1. Innovation is hard work and can’t only be done between 8:00 and 16:00, Monday to Friday.
2. Innovation must be strategic and driven from the top by accountable business leaders/owners. SARS innovates the most when it has stable political and institutional leadership
3. The creation of dedicated internal innovation capabilities and the securing of competent long-term innovation partners greatly enhances the chances of innovation success. Procurement should not be on the innovation critical path.
4. Innovation requires on dedicated, diverse, highly skilled, and well paid resources, with competent managers/leaders who are not afraid to make decisions with an enabling governance framework.
5. Use data to identify and understand the real business problems (root causes), where to start innovating and to help making prioritisation decisions (80/20).
6. Design for the future (true innovation, as opposed to incremental improvements); large transactional volumes; multiple smaller phase (not big bang); usability (customer experience); and from the perspective of the customer/user. Involve all stakeholders in the conceptualisation of the designs upfront.
7. Collaborate or co-create with external stakeholders/partners (incl. customers) in the design, development and testing of innovative solutions.
8. Bring employees and customers on the innovation journey by making them part of the solution and not the problem.
9. There will always be innovation non-believers, but most people actually want to embrace innovation.
Innovation Hub 17
The SARS of the Future
Innovation Hub 18
“Government is the ultimate monopoly. And monopolies, as any economist will tell you, often
breed complacency and a lack of innovation.”
Gavin Newsom, Governor of California
“When the rate of change outside is more than what is inside, be sure that the end is near.”
Azim Premji
Presenter
Presentation Notes
Ask the audience to reflect on these two concepts Innovation and data are at heart of all modern tax administrations In SARS’ case, the only way to deal with increasing volumes and complexity and reducing resources is to innovate Innovation is critical in remaining relevant and being able to successfully execute SARS’ mandate
Innovation Hub 19
A smart, modern SARS with unquestionable integrity, trusted & admired
1. Stakeholders are engaged ethically and beyond reproach 2. Use technology and data to build an intelligent organization 3. Evolve our staffing model towards high value knowledge & service work4. Become an Employer of Choice with a high performing, engaged
workforce
SARS’ vision for 2024
SARS exists to serve the HIGHER PURPOSE ofenabling Government to build a democratic state that fosters sustainable economic
growth and social development in the interest and wellbeing of all South Africans
Internally, we
1. Achieve substantially our strategic intent of Voluntary Compliance 2. Benchmark against the best among our peers internationally 3. Regain public trust and confidence 4. Provide the financial resources for Government to deliver
Externally, we
Innovation Hub 20
While the SARS corporate strategy is informed by national directives, the divisional strategies and enterprise performance evaluation, this consists primarily of incremental improvement initiatives, in contrast with the innovation strategy that is informed by global innovation trends and imply radical changes that influence the corporate strategy.
Radical changes based on innovation trends
Incremental improvements based on performance measures and
strategic objectives
Enterprise Performance Evaluation
National Directives
Innovation Strategy
& Foresighting
SARS Corporate Strategy
Divisional Strategy
What is the role of innovation in SARS?
Innovation Hub 21
Prog
ress
Time
Present day
Trajectory based on past growth rate
Trajectory based on present growth rate
Trajectory taking exponential growth rate into account
Accurate prediction
Future SARS
Inaccurate prediction
Incorrect prediction
Predicting the future SARS requires a new way of thinking
Presenter
Presentation Notes
Change is exponential therefore the design thinking needs to be exponential
Innovation Hub 22
Artificial Intelligence
Additive Manufacturing
Augmented Reality
Automation
Blockchain
Cloud Technology
Demand for Customisation
Digitization & Big Data
Geospatial Technology
Globalisation
Industry consolidation
Internet of things
Knowledge Worker
Change drivers affecting SARS
Innovation Hub 23
Change drivers affecting SARS
Regulatory landscape Resource scarcity
Sharing Economy Social Media
Urbanisation Industry redefined
Changing nature of work
Competition for Talent
Concentration of wealth
Mass migration
Next Gen Workforce
Innovation Hub 24
Taxation at source
Mega-trends affecting SARS
Big data
Auto derive and asses
Customised digital offerings
Globalisation of Tax and Customs
Future worker and work environment
Future of government services
The changing nature of production
Hyper connected smart devices and social media
Innovation Hub 25
International drive towards real time taxation at source based on hyper-connected electronic transactional information and payments. (electronic invoicing, digitization of currencies, crypto-currencies, moving to a cashless economy, sharing economy).
• The periodic nature of tax will gradually phase out and the focus of taxation will change from direct to indirect/consumption tax over time.
• Real time access to financial transactional information in electronic format will make the deduction of tax at source a manageable reality. It will require changes to the SARS tax framework.
• Gradual shift from direct to indirect taxation
• Real time access to information challenges the legacy view that taxation should be reactive and periodic in nature for most tax products.
• The historic view that most taxes need to be periodic in nature was a natural consequence of the administrative effort it took to compile return information and submit it with the corresponding supporting documents.
• This view is now challenged by the availability of information and the ease of processing. Tax is becoming a close to real time function.
Disruptive Impact Additional Information
Mega-trend: Taxation at source
Presenter
Presentation Notes
Explain what data SARS has at its disposal Real time taxation Cashless and real time monitoring of payment gateways Shift from direct to indirect taxation
Innovation Hub 26
• Data is becoming the oil or digital gold of the new world resulting in a high level of tax transparency.
• Knowing and understanding the taxpayer/trader using AI and automation becomes critical in servicing, and managing taxpayer/trader risk. The cash (and shadow) economy stands in the way of the availability of perfect information to SARS
“Big data is at the foundation of all of the megatrends that are happening today, from social to mobile to the cloud to gaming.” – Chris Lynch
SARS relies on complete and truthful declaration of financial transactional information by the entity.
SARS relies on data and requires no additional information to be declared or submitted by the entity.
No
avai
labl
e in
form
atio
n &
dat
a Perfect information &
data available
Manually intensive operations
Extensively automated operations
SARS is progressing over time to arrive at extensively automated operations
Disruptive Impact
Additional Information
Data comes in many forms. It may be structured or unstructured, and it may be generated by organizations themselves or obtained from third parties. Big data refers to the huge and increasing volume of the data now available, as well as the variety and the velocity at which it can be processed.
Mega-trend: Big Data
Click information button to view additional sides on Big Data
Presenter
Presentation Notes
1 & 2nd party data usage core to SARS’ business Regulatory registration authority No registration – cradle to grave Auto subscription to products
Innovation Hub 27
• The OECD highlights four key ingredients that are necessary for successful pre-population of citizens’ tax returns: comprehensive third-party reporting systems; high-integrity taxpayer identifiers; effective use of technology; and a compatible legislative framework that, for example, does not include high levels of deductions that are not visible during the pre-population process.
• Improvements to the amount and quality of data available should not only be used to better identify non-compliant taxpayers for targeted audits, but also to reduce the rate of false positives, so that compliant taxpayers are less frequently subjected to the cost and inconvenience of an audit. Improving taxpayer services should also extend to easier compliance processes, helpful customised advice and greater real-time transparency over tax affairs.
• Key features: Pre-population of taxpayer returns using near perfect data, SARS auto - assesses returns based on third party data and e-Audits for salaried taxpayers
• The tax world is moving from ‘taxpayer/vendor submits and SARS checks’ to ‘SARS issues the assessment based on data collected and taxpayer/vendor confirms/queries the assessment’ - a fundamental shift.
True digitalisation has to be revolutionary, considering not only how taxpayers do their filing, but what is taxed, and how SARS can leverage big data to complete, verify and audit taxes without filing being done. Pre-populating returns with information gathered from second and third parties fundamentally changes the structure of trust and the direction of review, with taxpayers and practitioners now working to review and challenge the work of SARS.
Disruptive Impact
Additional Information
Mega-trend: Auto derive and assess
Presenter
Presentation Notes
Pre-population of taxpayer returns using perfect data SARS auto - assesses returns based on third party data Taxpayer accepts or disputes E-Audits for salaried taxpayers
Innovation Hub 28
• Users want an easy to use, technology (usability) enabled engagement that saves costs and time that they can relate to. Super consumers are at the head of the adoption curve, have higher expectations and have an incredible influence on the rest of the users, which tend to perceive them as experts and value their opinions. This class of users are on the rise. Super consumers demands education, products with embedded behavioural design and are empowered to customise and personalise their tax experience.
• Digital methods are known to be substantially cheaper for governments to operate than the various analogue or partially-analogue methods. One Australian estimate showed that for every AUD1 spent on digital service provision, the same service would cost AUD16 to process over the phone, AUD32 to deal with by post and AUD42 in person (digital channels are 16x cheaper).
• On the other side of the efficiency equation, digitalisation can aid in reducing tax avoidance and evasion, by providing additional tools for analysing tax data and identifying omissions.
• Super consumer taxpayers/vendors/traders want a simplified approach to tax/customs and want to be treated as partners with differentiated, personalised service and support.
• Value for taxes statements
Disruptive Impact
Digital offerings are the specific solutions and services that deliver on a company's digital value proposition. The benefits of a successful digital transformation include growth in revenues, undying customer loyalty and perceived level of service, and the ability to continuously deliver on the SARS mandate and corporate strategy through technology.
Additional Information
Mega-trend: Customized digital offerings
Presenter
Presentation Notes
Taxpayers to become super consumers /users of tax products Taxpayers want to know what value they get for their taxes – value statements Taxpayers want to be educated in taxation Move to mobile and digital continues Increasing customization Usability for taxpayers Costs effective -x16 cheaper than other channels
Innovation Hub 29
The rise of economic interconnectedness between countries requiring improvements in information and data sharing, international cooperation, governance and legal agility (globalisation, partnership model, regulatory landscape, industry consolidation, International Audits).
• Tax systems, and particularly international taxation arrangements, can struggle to keep pace with globalisation and market liberalisation. Most of today’s tax arrangements were developed in an era when tax authorities could rely upon exchange controls, highly regulated capital markets and technological constraints to protect them from the negative fiscal effects of global activities.
• The rate of international economic change is outpacing our ability to adapt.
Disruptive Impact
Additional Information
Mega-trend: Globalisation of Tax and Customs
• These barriers to cross-border activities protected tax authorities from the full implications of the interaction between national tax systems. While corporations globalised, tax authorities remained constrained by national frontiers.
• Key features: Sharing of information, Global taxation of entities and competition for taxation
Presenter
Presentation Notes
Sharing of information Global taxation of entities Competition for taxation
Innovation Hub 30
The changing nature of work will fundamentally impact the ability of Revenue Authorities to source and retain increasingly scarce talent (4IR skills, multiple short-term contracts, continuous learning, multiple simultaneous employers). The future working environment will require increased flexibility (remote work and location).
• The future SARS worker will differ from the current one and we need to start upskilling and employing new and scarce skills.
• The general trend will be for more technical and data orientated skills. The routine and mundane or repetitive work will be increasingly automated and this will require resources to be more flexible and multi skilled to perform functions as, when and where needed.
• It will be required that all employees buy into a continuous learning philosophy. With an ever changing environment, learning is not once off and continues indefinitely.
• SARS needs to build and sustain a workforce adept in advanced data analysis, possessing and a blend of business, mathematics, and computer science expertise
• Key features: Competition for talent, new types of knowledge worker and reskilling of existing workers, new contracting models and work on tasks model and agile workspaces or working from home
Disruptive Impact
Additional Information
Mega-trend: Future worker and work environment
Presenter
Presentation Notes
Competition for talent New types of knowledge worker and reskilling of existing workers New contracting models and work on tasks model Agile workspaces and working from home
Innovation Hub 31
Digital identity management, data and AI will enable governments to increasingly become more pro-active and efficient through consolidated ‘single view’ government service delivery. There is only one channel…a digital channel.
• Effective identity management and a complete single view of customer becomes non negotiable…
• A single view of customer compiled from internal and external data feeds to form comprehensive view of the client. Some governments are legislating to extend their powers to obtain information from an ever wider range of sources. The UK Government, for example, extended HMRC’s data-gathering powers to include business intermediaries and electronic payment providers — similar to what is seen in Australia.
• Provide proactive or preventative government services (i.e. Debt)
• Artificial intelligence will become the new user interface to SARS, but requires the correct information architecture to be in place.
• A governmental digital identity to bind all governmental services together has become increasingly popular with all the digitally advanced nations in the world.
Disruptive Impact
Additional Information
Mega-trend: The future of government services
Presenter
Presentation Notes
Proactive government Single view of citizen Digital ID Shared government infrastructure Consolidation of govt services/platforms and branches
Innovation Hub 32
• This includes concepts like rapidly expanding e-Commerce and 3D printing, changing global tax jurisdictions, super fluid markets, industry redefined, rebalanced global system and global supply chain.
• Changes to the global economy is posing new challenges to revenue authorities around the world and requires changes to the current tax frameworks.
• Key features: Changes in value chains and business models. Example - Existing industries will decline (i.e. petrol/diesel vehicles – Carbon Tax) and other new ones will be created (Electric automated vehicles –Electricity Levy). Changing Tax frameworks. This affects the taxation and legislation pertaining to these industries
• Understanding new industries and being able to maintain revenue streams is paramount
The nature of production and the marketplace for goods and services are changing, impacting Revenue, Customs and Excise administrators. Internationally there is a growing drive to cut out the middleman and reduce friction in the supply chain.
Disruptive Impact
Additional Information
Mega-trend: The nature of production
Presenter
Presentation Notes
Changes in value chains and business models Existing industries will disappear (i.e. petrol/diesel vehicles – Carbon Tax) and other new ones will be created (Electric automated vehicles – Electricity Levy) Changing Tax frameworks This affects the taxation and legislation pertaining to these industries
Innovation Hub 33
• The overwhelming majority of the taxpaying public is web enabled using a smart device.
• SARS should move aggressively ahead with its modernisation of our digital offering to taxpayers without fear that online access and smart device penetration in South Africa will constrain the initiative to the extent that we should hold off in pursuing this objective.
• Key features: Connection of devices gives to monitor economic activity, especially in the informal and illicit economies.
• If you don’t put smart devices and social media at the centre of your designs you will fail.
Hyper connectivity and smart device usage are becoming the norm globally and in South Africa. Digital channels and social media is becoming the primary manner in which Revenue Authorities access, educate and engage with taxpayers/traders (internet of things, AI, automation).
Disruptive Impact
Additional Information
Mega-trend: Rise of hyper connected smart devices and social media
Presenter
Presentation Notes
Move to mobile and digital
Innovation Hub 34
Mobile Omni channel
Increased 1st &
2nd party data integration
Big Data (information)
• Increased national & International stakeholder engagement and collaboration
• Increased information exchange• More agile legal structures
• No annual filing (Auto assessment)
• AI is the new UI
• New digital offerings
• No SARS specific product registrations (leverage off digital identity management)
• Pro-Active client engagement
• No Branches• Shift to integrated
government services
• Audit becomes largely redundant
• Debt largely disappears
• Machine Learning /Predictive Analytics for risk engines
• Cryptocurrency & Block chain for Customs
• Contact centre & digital virtual agents & agents working remotely
SARS resources and skills
looks different
Changes in the tax
framework
Consolidated Single View
What do these mega-trends mean for SARS in the future