SOUTH AFRICAN REVENUE SERVICE
MEDIA RELEASE NUMBER 16 OF 2000

1 JUNE 2000

SARS COMMENTS ON THE AUDITOR GENERAL'S MEDIA RELEASE ON PERFORMANCE AUDIT COMPLETED AT SARS

The South African Revenue Service (SARS) has noted the performance audit report tabled today in parliament by the Auditor General. In response to this report of the Auditor General, and the News Release issued, SARS would like comment as follows.

SARS has consistently been improving its audit capacity by upgrading its existing skills and recruiting additional auditors, and will continue to do so. During the past years, SARS has undertaken the following initiatives to address the issues raised in the AGÊs report.

• The process of recruiting and appointing an additional 100 auditors was initiated earlier this year. Over the next three years, SARS will increase its audit capacity by recruiting a total of 504 additional auditors. Furthermore, the recent changes to the registration threshold for VAT vendors will reduce the number of cases on register by an estimated total of 60 000. This reduction of number of vendors on register, coupled with the employment of additional auditors, will significantly reduce the workload per auditor.
• A new audit policy will be introduced by the end of June 2000 to facilitate a new risk based approach to selecting and auditing cases. New audit programs and an audit handbook are being finalised to standardise the audit process. In line with this new audit policy, SARS has started with integrated audit teams covering all the taxes.
• In the last financial year, about 98 000 criminal summonses were issued by SARS to prosecute tax offenders (including VAT). The success rate of the service of summons varied from 79% in KwaZulu Natal and the Western Cape to about 62% in Mpumalanga, with a conviction rate of 88% in JHB and Bellville and a national average of about 68%.
• SARS dedicated courts - in Johannesburg and Bellville - have been established to further enhance the prosecution of tax offenders. The JHB court has, thus far, collected more that R2.2 million in fines and more than R30 million in outstanding taxes including VAT.
• More than 40 lawyers were employed over the past 2 years to assist with the collection of outstanding debts.
• SARS has embarked on a number of compliance campaigns. These have generated additional revenue estimated at about R800 million to R1 billion, with an improvement in tax compliance and an increase in the tax base as an added benefit.
• SARS has initiated a number of liquidations / sequestration followed by the execution of available property to recover outstanding amounts. A new liquidation policy will be introduced by SARS in August 2000, requiring SARS to be more proactive in liquidating non-compliant entities. In his regard, SARS is already in the process of appointing its own panel of attorneys, liquidators and accountants.

• As part of the ongoing transformation project, SARS will introduce several initiatives that will fundamentally transform Customs operations. These initiatives will address most of the historical deficiencies, including those raised in AGÊs report tabled in parliament today. The initiatives will include the review of Customs operational including policy on temporary import permits, review of policy on removal of goods in bond and /or transit, the centralisation and automation of Manifest Acquittal and Bill of Entry process, and other initiatives.
• The quality of work submitted by some of the clearing agents to SARS has directly contributed to the high rate of rejections regarding import bills of entry, as noted by the AGÊs report.
• At the request of the Textile Federation, the target of 20% examination of textile and clothing cargo was reached during the period August 1999 to November 1999. The detained consignments requiring adjustment was 24% and the total revenue collected from these detentions totalled R3 926 201.88. In line with the world trends of trade facilitation, SARS is moving towards a risk based approach when stopping consignments.

ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
PRETORIA