SOUTH AFRICAN REVENUE SERVICE ANNUAL REPORT 2013 - 2014 Presentation to the Standing Committee on Finance 14 October 2014
Introduction - Highlights for the Year • SARS Annual Report for the year ending 31 March 2014. • Progress against the SARS Strategic Plan and Annual Performance Plan tabled on 14 May 2013.
For the year under review • Revenue Collected: – SARS collected R900 bn; – R1.0 billion in excess of the revised target of R899 bn; – Representing 26% of GDP. • Resources used: – SARS total expenditure - 0.97% of the total tax revenue – in line with international trends; – The staff complement 14 137 • The tax register – 21.4 million in total; – Comprising 16.8 million individual taxpayers • Returns received – Over 6 million income tax returns for the year; – Over 2.7 million VAT returns; – Over 4.7 million PAYE returns; – Nearly 24 million lines of customs declarations; – SARS processed all personal income tax returns in an average of less than one day. • Dealing with exceptions – Nearly 1.8 million audits of various types, and – 333 investigations into possible serious tax and customs offences. – Debt grew by R386 million
International Relations In pursuit of its mandate, SARS continued to foster and expand ties with tax and customs administrations and international organisations • Base Erosion and Profit Shifting (BEPS) Project: – The tax base is threatened by corporations shifting profits to locations with low or no income tax – This concern is underlined by SARS’ involvement in the BEPS project of the Organisation for Economic Co-operation and Development (OECD) – SARS continued to co- chair the OECD’s Task Force on Tax and Development • eCustoms Network: – SARS launched a pilot project with Swaziland and Mozambique – To establish a IT network that links regional customs authorities – Will enable the electronic transfer of information between customs authorities • African Tax Administration Forum (ATAF): – SARS continued to chair ATAF – To strengthen tax administration in our region and the continent, a number of training workshops and conferences were conducted – These activities are aimed at: → Improving Africa’s ability to mobilise domestic revenue → Combat international harmful tax practices Source : SARS Annual report p.12, 47
International Relations • Global Forum on Transparency and Exchange of Information for Tax Purposes: – South Africa supports this initiative to make the world more tax transparent, i.e. to ensure taxpayers pay their fair share around the world – The forum consists of 122 member jurisdictions and is chaired by SARS’ chief legal officer, Mr. Kosie Louw • World Trade Organisation (WTO): – SARS participated in the WTO’s Ninth Ministerial Conference (Bali, December 2013) – The Agreement on Trade Facilitation was adopted – SARS is an active member of the World Customs Organisation • Foreign Account Tax Compliance Act (FATCA): – Negotiations concluded to establish an electronic interface with the Internal Revenue Service (IRS) – To exchange data in compliance with the USA FATCA • On the African continent, SARS continued to work with the Southern African Development Community (SADC) and the Southern African Customs Union (SACU) Source : SARS Annual report p.12, 39
Areas where we did not meet our goals for 2013/14 Achievement against target Commentary on performance The main reason for the higher than 14.5% Of cargo declarations targeted expected alert ratio is the following: • Rate of exchange – the reference prices (against a target of 12%) on clothing and textiles were periodically adjusted according to the new rate of exchange. This resulted in an increase in the number of alerts. • Increased focus on clothing, textiles and tyres The modernisation of VAT make it easier for VAT 56.9% VAT returns filed on time taxpayers to submit their returns and to (0.7% decline) improve the accuracy of its VAT register. However, despite an initial improvement filing compliance among VAT vendors remains a concern. The increased scrutiny on old refunds VAT refunds processed within an average submitted in current year as well as refunds of 31.7 working days (against a target of held back due to Investigations caused the 21 working days) refund turnaround time to be high. Source : SARS Annual report
SARS collected a record R900 billion in 2013/14, continuing its high-growth trajectory… Total tax revenue collected R billion Total tax revenue 900 814 743 SARS 674 625 599 has 573 achieved 496 +11.6% p.a. 417 double- 355 114 127 147 165 185 201 220 252 282 302 digit revenue collection growth since 1994 Source : SARS 2013/14 Annual report pg. 17 SARS internal data
SARS collected a record R900 billion in 2013/14, continuing its high-growth trajectory… Annual growth in tax collections Percentage (%) 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 South Africa (RHS) 17.5% 18.8% 15.6% 9.1% -4.2% 12.6% 10.2% 9.6% 10.6%
% Revenue per tax type in 2013/14 (p17) Customs Duty, Other, 4.9% Fuel Levy, 7.4% 4.9% STC/DT, 1.9% PIT, 34.5% VAT, 26.4% CIT, 19.9% Source : SARS 2013/14 Annual report pg. 17
Tax to GDP ratio trendline Tax to GDP ratio R billion 900.0 % 900 45.00% 813.8 800 742.7 40.00% 674.2 700 35.00% 625.1 598.7 572.8 600 30.00% 500 25.00% 400 20.00% 300 15.00% 200 10.00% 100 5.00% 0 0.00% 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Total tax revenue Tax to GDP ratio Source : SARS 2013/14; Annual report pg. 18
…Overdue debt as a percentage of revenue…. Overdue Debt 100 000 25% Debt Excluding Admin Penalties, 90 000 Estate Duty, Small Business Amnesty Levy and Donations Tax 80 000 20% 70 000 Debt Including Admin Penalties, Estate Duty, Small Business Amnesty 60 000 15% Levy and Donations Tax 50 000 Debt Including Admin Penalties, 40 000 10% Estate Duty, Small Business Amnesty Levy and Donations Tax as % Of 30 000 Revenue Debt Excluding Admin Penalties, 20 000 5% Estate Duty, Small Business Amnesty 10 000 Levy and Donations Tax as % Of Revenue 0 0% Source : SARS 2013/14; Annual report pg. 31
Outcome 1 : Increase customs compliance Performance and organisational highlights Customs revenue amounted to R176 billion* (R1.5 billion above target) Preferred trader programme 2015 traders have been audited to date * Customs Revenue consists of Import VAT, Customs Duties, Miscellaneous customs & excise and Incandescent light bulb levy. Source : SARS 2013/14; Annual report pg. 20,21
Outcome 2 : Increase tax compliance Performance and organisational highlights Tax Revenue (Excl. Customs) amounted to R724.2 billion (R435 million below target) PIT R310.9 billion (12.4% growth) CIT R179.5 billion (11.6% growth) VAT R21 billion (8.7% growth) Taxpayer register Total SARS register - 21.4 million registered taxpayers and traders (9.8% increase) Income Tax for Individuals register, 16.8 million (8.8% increase) Filing on time PIT 91.53 % (5.4% improvement) Source : SARS 2013/14; Annual report pg. 25-39
Outcome 2 : Increase tax compliance Performance and organisational highlights Declaration Compliance Total audit cases completed 1.8 million (14% increase) 267 Criminal prosecutions received a guilty verdict Filing season 6.1 million returns received in filing season – 7.7% higher than 2012/13 99.85% income tax returns assessed within 24 hours 94.98% income tax refunds paid within 72 hours of submission Source : SARS 2013/14; Annual report pg. 25-39
Outcome 3 : Increase ease and fairness of doing business with SARS Performance and organisational highlights Assisted Government to prepare for introduction of the TAA by implementing a formal communications structure with the Ombuds office eFiling enhanced by introducing a facility that enables taxpayers to submit supporting data from third parties Source : SARS 2013/14; Annual report pg. 40-43
Outcome 3 : Increase ease and fairness of doing business with SARS Performance and organisational highlights Electronic links with the Companies and Intellectual Property Commission (CIPC) and Department of Home Affairs (DHA) established – enable it to validate entity details with information held by these State agencies Tax Clearance Certificates (TCCs) process transformed from a predominantly manual process to a taxpayer-driven, self-help, electronic process Source : SARS 2013/14; Annual report pg. 40-43
Outcome 4 : Increase cost effectiveness, internal efficiency and institutional respectability Cost of revenue collection % R Tax revenue Cost to tax revenue ratio billion Most countries’ ratio ranges around the international benchmark of 1%, with USA at a low of 0.6 % and 900 1.5% Germany at a high of 1.5%. Brazil and Russia’s ratio is 900 also around 1%. 800 1.4% 814 700 1.3% 743 674 600 1.2% 625 599 500 1.1% 400 1.0% 300 0.9% 0.97% 200 0.8% 100 0.7% 0 0.6% 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Source : SARS 2013/14; Annual report pg. 44-47
Human Capital numbers and Employment Equity ratios have remained stable Human Capital and Employment Equity % 60% PDI in mgmt > 58% 2010/11 50% 2011/12 2012/13 40% Women ratio 2013/14 = 62% 30% 20% Women in mgmt ~ 41% 10% 0% Disability rate = 1.99% African Coloured Indian White Source : SARS 2013/14; Annual report pg. 63-65
Thank you
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