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SARS ANNUAL REPORT 2014/15

Presentation to STANDING COMMITTEE ON FINANCE (SCOF) 13 October 2015

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• Honourable Members of the Standing Committee on

Finance (SCOF), I respectfully present to you the

2014/15 SARS Annual Report

• Section 55 of the PFMA and chapter 28 of the

Treasury Regulations (28.2) requires SARS to submit

this report each year

• The preparation of this report by SARS is also in line

with the national treasury guidelines for the

preparation of annual reports

INTRODUCTION

OUTLINE

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• Operating Context (slide 3)

• SARS performance at a glance (slide 4)

• Key Revenue Highlights and Trends (slides 5,6)

• Key Operational Highlights (slides 7,8)

• Progress on Key Initiatives As Per 2014/15 Annual

Performance Plan (slides 9,10)

• Performance Against Pre-determined Objectives (slide 11)

• Key Governance Highlights (slide 12)

• Key Human Resources Highlights (slides 13,14,15,16)

• Key Financials Statements Highlights (slide 17)

Global and local economic factors… Difficult global economic conditions

Local economy continued to be constrained by negative growth factors i.e.

High unemployment levels

Energy constraints

Constrained business growth

Proliferation of illicit trade activities

Sophisticated nature of avoidance schemes

Key organisational challenges Negative media coverage of SARS dominated the news throughout the year

Questionable conduct of certain senior SARS employees

Resignation of key members of SARS senior executives

OPERATING CONTEXT

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SARS PERFORMANCE AT A GLANCE

(p14)

4

KEY REVENUE HIGHLIGHTS AND TRENDS

(pp15-17)

Revised revenue target for 2014/15 was R979 billion

• Total revenue collected was R986.3 billion, and

Tax revenue accounted for R808 billion (R5.1 billion above target)

Customs revenue accounted for R178 billion (R2.2 billion above target)

• We exceed revised target by R7.3 billion

• And this performance represents a 9.6% increase vs

2013/14 revenue collection performance

• Representing 25.7% of GDP

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KEY REVENUE HIGHLIGHTS AND TRENDS

(p20, pp27-30)

Tax revenue accounted for R808 billion and was R5.1 billion above target

• CIT (which constitutes 18.9% of the total revenue collection) increased by 4%

• PIT (which constitutes 35.9% of the total revenue collection) grew by 13.2% (R3.2 billion above revised estimate) due mainly to above inflation wage increases

• VAT (which constitutes 26.5% of the total revenue collection) increased by 8.9% despite a slow down in consumer spending

Customs revenue accounted for R178 billion and was R2.2 billion above target

• Vat on imports accounted for more than 70% of the increase and the rest of the increase is attributable to customs duties

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KEY OPERATIONAL HIGHLIGHTS

(pp27-43)

• Taxpayer register

Total SARS taxpayer register - 23.1 million registered taxpayers and

traders (8.1% increase)

Individuals (PIT) register, 18.2 million (8.4% increase)

• Completed 1.9 million audit cases vs 1.8 million cases in 2013/14

• Successfully prosecuted 214 criminal cases

• 13.39% of cargo declarations physically inspected against a target of

11%

• 204 million sticks of contraband cigarettes worth more than R110

million seized

• 22 tons of illicit cigarettes were destroyed….

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KEY OPERATIONAL HIGHLIGHTS

(pp27- 46)

• Filing season performance

5.3 million returns received during the filing season – lower than 2014/15

due to increased threshold for submission

95.7% Income Tax returns assessed within 3 seconds

98% Income Tax refunds paid within 72 hours of submission

• 97% first time resolution of service request calls

• Our contact centers assisted over 4.6 million taxpayers and

more than 8 million taxpayers visited our branch offices during

2014/15

• We engaged 217 schools and involved more than 80 000

learners in workshops

• 5000 educators engaged on tax matters and tax morality

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PROGRESS ON KEY INITIATIVES AS PER OUR

2014/15 ANNUAL PERFORMANCE PLAN (pp20-26)

• Procured 10 baggage scanners and 2 fixed cargo scanners

Installed a new end-to-end integrated fixed cargo scanner at the Durban

Harbour (with X-ray technology and dual radiation scanning)

• Upgraded our state warehouse facilities at Beit Bridge

(completed), Pretoria (completed), Cape Town, Musina,

Lebombo, OR Tambo International Airport

• Implemented a modernised trust system to better manage the

compliance of trusts

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PROGRESS ON KEY INITIATIVES AS PER 2014/15

ANNUAL PERFORMANCE PLAN…

(pp44- 46)

• A new dedicated Complaints Management Office (CMO) was

established and a new complaints management system developed to

effectively and efficiently deal with taxpayer complaints

• Further enhancements introduced to the Single registration system

• Further enhancements introduced to the Tax Clearance Certificate

system

• 138 Small business desks introduced into the SARS branch network

• Implemented several measures to enable SARS to administer the

FATCA inter-governmental agreement between South Africa and USA

• Completed the first phase of our operating model review

• Opened 2 new branch offices in Mitchells Plain and Soweto

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PERFORMANCE AGAINST PREDETERMINED

OBJECTIVES (pp56-61)

• SARS achieved 16 of the 23 set performance targets for the

2014/15 year

• The following key performance targets were not achieved and

explanations for non-achievement are provided: • % of cargo declarations targeted

• VAT refunds average processing time

• Increase in electronic manifest submission

• VAT refunds processed within 14 days

• Debt book as a percentage of revenue

• Leadership effectiveness index

• Employment Equity: Disability

• No material findings on usefulness and reliability of reported

performance information

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KEY GOVERNANCE HIGHLIGHTS (pp63-67)

• Actions initiated to strengthen governance and decision

making:

Modernisation Programme review

Review of the SARS operating model

New procurement committee – National Bid Adjudication Committee

established to strengthen procurement process

Initiated a review of “Delegation of Authority Framework”

• Establishment of the SARS Advisory Committee by the

Minister

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KEY HUMAN RESOURCES HIGHLIGHTS

(pp 79-87)

• Kept the SARS staff complement stable at 13 978 employees

(previous year was 14 137)

• Leadership effectiveness survey among senior and top

managers was 86.53% (previous year = 85.25%)

• Employee engagement results improved to 66.42% (previous

year 64.09%)

• We welcomed over 400 graduate trainees into the SARS

employment

• Employment equity improved in most areas (race, gender),

but we are still below the disability target

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Employment Equity: Racial Profile %

Disability rate = 1.95%

KEY HUMAN RESOURCES HIGHLIGHTS

(p84)

0%

10%

20%

30%

40%

50%

60%

African Coloured Indian White

2011/12

2012/13

2013/14

2014/15

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Employment Equity:Black Workforce Profile

KEY HUMAN RESOURCES HIGHLIGHTS

(p84)

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BLACK > 70%

Employment Equity: Female Workforce Profile

KEY HUMAN RESOURCES HIGHLIGHTS

(p84)

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Women ratio = 61.63%

Women in mgmt ~ 48.52%

FINANCIAL STATEMENTS HIGHLIGHTS

(pp104-105)

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Thank you

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