CONTENTS
1. INTRODUCTION2. REVENUE : TO DATE3. REVENUE TARGET 2003/44. COMPLIANCE STRATEGY
• EDUCATION• SERVICE• ENFORCEMENT• CUSTOMS
5. THE FUTURE
REVENUE : 2002/03
Budget Estimate: R268.5 billion
Feb. 03 Revised Estimate: R280.1 billion
Revised is R11.6 billion above Budget Estimate
This is attributed to: • real growth in the economy • higher than expected inflation• greater corporate earnings particularly
commodities sector, and• improved administrative efficiency
R 'billion 1997/8 1998/9 1999/0 2000/1 2001/2 2002/3
Target 164.2 179.2 193.9 212.2 234.0 268.5
Collections 165.3 184.4 200.2 219.6 249.2 280.1
Above target 1.1 5.2 6.3 7.4 15.2 11.6
Total additional collections 46.8
Achievements for the past six years
TREND - INDIVIDUAL TAX RATES
1998/9 1999/2000 2000/01 2001/2 2002/3 2003/4Lowest personal bracket 31,000 33,000 35,000 38,000 40,000 70,000 Lowest marginal rate 19% 19% 18% 18% 18% 18%Highest personal bracket 120,000 120,000 200,000 215,000 240,000 255,000 Highest marginal rate 45% 45% 42% 42% 40% 40%Number of brackets 6 6 6 6 6 6Primary rebate 3,515 3,710 3,800 4,140 4,860 5,400 Additional rebate 2,660 2,775 2,900 3,000 3,000 3,100 Tax threshold under 65 18,500 19,526 21,111 23,000 27,000 30,000 Tax threshold 65 and over 31,950 33,717 36,538 39,154 42,640 47,222
TREND – CORPORATE TAX RATES
1995/6 96/7 - 98/9 99/00 - 01/02 2002/3 2003/4
Company rate 35% 35% 30% 30% 30%STC 25.0% 12.5% 12.5% 12.5% 12.5%Combined rate (100% distribution) 48.0% 42.2% 37.8% 37.8% 37.8%Combined rate (33.3% distribution) 39.3% 37.4% 32.6% 32.6% 32.6%
REVENUE COMPARISON
TAX 2002/3 2003/4 % Change
Individuals 93.2 96.7 3.8
Companies 54.9 65.9 20
STC 6.3 8 27
Tax on Retirement Funds
6.9 6 -13.8
Taxes on Property 5.3 5.9 10.4
VAT 70.6 81 14.7
Customs 9.5 11.0 15.8
Excise 10.3 11.4 10.5
Advalorem Excise 1.0 0.3 -67.2
Fuel Levy 15.2 16.3 7.5
KEY PRINCIPLES OF COMPLIANCE STRATEGY
• BALANCE BETWEEN EDUCATION, SERVICE AND ENFORCEMENT;
• TAXPAYER CONDUCT DETERMINES ADMINISTRATION RESPONSE
• “CRADLE-TO-GRAVE” APPROACH
• THE DRIVERS OF REVENUE
COMMITTED COMPLIANCE
CAPITULATIVE COMPLIANCE
CREATIVE COMPLIANCE
CREATIVE COMPLIANCE: AVOIDANCE (GAAR)
CREATIVE COMPLIANCE: EVASION
NON-COMPLIANCE:
EVASION
Incentivise; accredited clients
Monitor (lesser degree); examine; incentivise
Monitor: inspect
Monitor; Legal action to challenge; “compliance checks”
Monitor; legal action; investigate
Identify; legal action; prosecute; investigateE
DU
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TThe Compliance Behavioural Model
Education
Service
Encourage filing
Pre-en
gag
emen
t
Pre-filin
g
Filing Assessing Internal / External examinations and inspections
Financial investigationsCriminal investigationsProsecutions
Subscription - registration
Receive & update information
Payments
Calculate and measure liability i.r.o declaration by customer
Examine Inspect InvestigateCriminally investigate
CollectProsecute
Educate
Com-municate
Adver-tise
Service
Risk-profiling
Service & Engagement
Revenue Target
Macro economic factors
Tax gap strategies
Assessing efficiencies and quality
Anti avoidance measures
Legislative loopholes
DRIVERS OF REVENUE
OVERVIEW OF SERVICE
• Customer centricity
• Multiple channels of Interaction
• First time resolution of queries
• Creating a service culture
SERVICE
• Launched SARS Service Monitoring Office• New dedicated tax exemption unit for public
benefit organisations and other entities• Released discussion document on
Taxpayer Service Charter• New rules for tax courts and settlement of
disputes• Introduce an advance ruling system
SERVICE
Going forward:• One stop service to the largest companies • Additional call centre capacity• Simplified tax returns for individuals• Provide assistance to taxpayers with filing
process• Integrated channels• Relationship Managers at every branch• Regulation of professionals –
• Tax practitioners• Customs accreditation
Processing and Assessment
Efficient and high quality processing capability:• Timely submission of tax returns• Improved turnaround times• Improved quality of assessments• No backlogs• Continuous improvement of processes• Introduce appropriate measurement instruments• Reduce costs and increase efficiencies• Implementation of duty at source
• Tobacco; 1 October 2002• Spirits and beer; 26 February 2003• Oil; 2 April 2003
PRINCIPLES OF ENFORCEMENT
• High visibility eg outstanding returns
• High frequency of contact
• Optimal geographic coverage
• Targeted sector/industry campaigns
• Third party data matching
• Intelligence and Risk Assessment
TECHNIQUES
• Segmentation
• Risk Profiling
• Data Mining
• Matching complexity of skills
• Single view of tax payer
THIRD PARTY INTERFACES• Natis (traffic authorities)• Deeds office (property transactions)• Websec (Link directors to companies)• Movement control (Movement in and out of the country)• ITC (Credit bureau)• FIC (Financial Intelligence Center)• Internet• Mapnet (Property search)• Aircraft Register• Yacht register• Interaction with other agencies such as SAPS, Scorpions
& Commercial Branch
ENFORCEMENT ACTIONS
REGISTRATION:• Create awareness of obligation to register• Penalties and prosecution for failing to
register • Reduce number of unregistered taxpayers• Migrate towards single registration for taxes• Initiate specific tax base broadening
programs– Using third party information– Street visits
FILING
• Provide assistance to taxpayers with filing process
• Revision of extension regime
• Quicker action against filing defaulters
• Penalties and prosecution for non – filers
ENFORCEMENT ACTIONS (cont)
ENFORCEMENT ACTIONS (cont)
Audit• Risk based approach• Introduce segmentation of the taxpayer base• Enhanced field audit presence• Proper reporting and statistical analysis of audit
results• Special audit teams focussing on areas of
serious non-compliance• Higher penalties on PAYE defaulters• Increase skilled audit capacity
ENFORCEMENT ACTIONS (cont)
INVESTIGATION
• Proactively identifying criminal investigation cases through intelligence; industry analysis• Enhanced cooperation with other government
agencies• Strengthen investigation and prosecution capacity• Special focus on organised crime• Targeted campaigns iro high risk areas –
• illegal beer and wine production• Ghost exports• Counterfeit products
ENFORCEMENT ACTIONS (cont)
COLLECTIONS
Introduction of automated debt management system• Special focus on old debt• Proactive management of new debts• Enhancing outbound call centre capacity• Outsource certain categories of debt collection• Extension of appointment of agents for payment of
tax to other taxes• Making shareholders of liquidated companies
personally liable for failed companies tax liabilities• Making withholding agents directly liable for taxes
MEASURES TO ADDRESS TAX AVOIDANCE
• Disclosure of tax avoidance structures• Limiting losses from secondary trades• Extension of general anti-avoidance
principles to other tax acts• Transfer duty avoidance utilising nominee
transactions• Extension of anti-connected person loss
rules• 200% penalties for PAYE transgressions• Penalties for non-royalty payments
CUSTOMS PRINCIPLES
• Prevention of trade in prohibited goods
• Effective administration of trade programmes
• Transparent, quick and consistent facilitation of legitimate trade
• Risk targeting
• Segmentation according to risk
• Reduction of non-tariff barriers
CUSTOMS ENFORCEMENT
• Enhanced visible enforcement through: Raising examination rate to between 5% and 6% Increased post-clearance inspections Industry task teams for sensitive sectors like liquor, tobacco,
electronics, motor and textile and clothing Increased drug detection, especially at JIA Increased detection of trade in protected species like abalone Detection of illegal export of currency Implementation of an improved risk management system Collaboration with customs compliant traders, agents and their
organisations (accreditation), including organised labour. Enhanced control and assurance security of export cargo
• Long history of shifting funds offshore illegally
• Many individuals wish to repatriate their foreign assets and regularise their affairs
• Any individual not subject to investigation by SARS or Exchange Control Department may apply
• Application submitted from 1 May until 31 October 2003
• Full and proper disclosure of offshore income, assets and liabilities
• Assets repatriated to South Africa – 5% once-off levy
• Disclosed assets kept offshore – 10% once-off levy
• Declared assets below Excon limits – 0%
FOREIGN EXCHANGE AMNESTY
FOREIGN EXCHANGE AMNESTY CHARGE
International Benchmarking
The charge levied for the repatriation of funds held illicitly offshore has varied widely internationally. Particularly interesting are the German and Maltese models where the charge increases as the window period for the amnesty draws to a close.
Country Year Charge
France 1982 25%
France 1986 10%
Germany Proposed 25%, 35%
Ireland 1993 15%
Italy 2001 2.50%
Italy 2002 5%
Malta 2002 3%, 4%, 5%
Russia Proposed 13%
• Benefit –
• No civil and criminal liabilities in respect of contraventions until 28 February 2002
• No taxes and interest on failure to disclose gross income or capital gains on or before that date
• Excon violations – apply with authorised dealer
• Income tax violations – apply with SARS on condition that return for 2003 tax year must be submitted disclosing all foreign income and income tax on foreign income during that year must be paid
FOREIGN EXCHANGE AMNESTY (2)
• A joint SARS/SARB call centre is planned to assist individuals with queries relating to the foreign exchange and related income tax amnesty
• A guide setting out the application form and procedures to be followed will be published on the SARS website and will be made available at SARS branch offices
• Draft legislation will be developed before the end of March and be made available by Minister for comment
FOREIGN EXCHANGE AMNESTY (3)
The enduring challenge for SARS:• Sustain performance in revenue collection
• Consolidate and deepen efficiency gains• Improve quality of service and education to
taxpayers• Improve levels of compliance and reduce the tax
gap• Expand the tax base and create scope for
reducing the burden to taxpayers
CONCLUSION