On 05 September Sars released two very important documents which you should carefully read at least once. The documents are its Strategic Plan 2016/7 - 2020/2021, and Annual Performance Plan 2016-2017.
In the Strategic Plan 2016/7 - 2020/2021, Chapter 6, it deals with Sars’ Five-Year Priority Initiatives, which deals with five outcomes, Outcome 1: Increased Customs and Excise Compliance.
In the Annual Performance Plan 2016-2017, Chapter 5, it deals with 2016/17 Annual Performance Plan Initiatives and Activities, which deals with five outcomes, Outcome 1: Increased Customs and Excise Compliance.
Reminder: Our Mandate - To collect all revenues due, ensure optimal compliance with tax, customs and excise legislation and provide a customs and excise service that will facilitate legitimate trade as well as protect our economy and society. Our Vision - To administer our tax, customs and excise duties in a manner that encourages fiscal citizenship and increased revenue for the state. Our Mission - To optimise revenue yield, facilitate trade and enlist new tax contributors by promoting awareness of the obligation to comply with South African tax and customs laws, and to provide quality and responsive service to the public.
Observation: It is interesting that SARS distinguishes between “Tax, Customs and Excise”, yet Customs is a Tax as is Excise.
We now deal with, what we believe, to be the most relevant section in the Strategic Plan 2016/7 - 2020/2021, and Annual Performance Plan 2016-2017 that deals with “Customs”.
Strategic Plan 2016/7-2020/2021
Chapter 6, Page 37
Sars’ Five-Year Priority Initiatives
Outcome 1: Increased Customs and Excise Compliance
STRATEGIC RISKS FACING SARS
The risks we need to manage
Commercial fraud on imports
Incidents of import under-declarations not only create leakage of potential Customs duties and Value-added Tax (VAT) but also lead to risks of illicit capital flow and foreign exchange transgressions. We have noted an increase in the abuse of rules of origin, valuation regime and tariff classification.
How we will manage these risks
• Invest in building a stronger and sophisticated transfer pricing, valuation and rules of origin capability in both our systems and people.
• Participate in the trade and international Customs bodies and initiatives with other countries.
The risks we need to manage
Implementation of the Customs Control Act and Customs Duty Act and New Excise Act
Sars is required to make major systems, policy and procedural changes to implement the new Acts. The transition to new infrastructures and systems poses a risk to Sars operational continuity as well as to trade and border facilitation.
How we will manage these risks
• Comprehensive design and planning of legislative implementation of NCAP in alignment with all Sars process and infrastructure requirements.
• Ongoing involvement and co-creation with all stakeholders of the new Customs procedures and processes for NCAP.
• Perform effective testing of all new systems required for implementation, both internally and with all stakeholders.
• Perform effective training and pro-active development of Customs and Excise officers to be competent in the NCAP requirements.
The risks we need to manage
Excise duty risk
Increased incidents of excise fraud and smuggling of excisable goods such as fuel and cigarettes undermine Sars’ efforts to improve compliance and ensure a level playing field for all taxpayers.
How we will manage these risks
• Enhance specific excise risk rules in the Sars risk engines.
• Create a specialised excise capacity within the Customs and Excise regime.
• Increase targeted audits and inspections at the Excise manufacturing points and at ports of entry.
• Introduce Excise markers and assurance mechanisms into the production cycle to help identify and track excisable goods.
Given this mandate and the wider government context in which Sars operates, Sars seeks to achieve five core strategic outcomes. These five core outcomes are: (1) Increased customs and excise compliance
OUTCOME 1: Increased Customs and Excise compliance
Customs and Excise supports the country’s economic competitiveness in an ever-changing and fiercely competitive international trade and business environment, whilst ensuring compliance with the laws governing international trade. The mandate of Customs and Excise is to be the first line of control over the movement of goods across our country’s borders. We also ensure that all excisable goods manufactured and administered within the country are correctly accounted for and compliant with the laws of the state.
For our compliant clients, we want to be a swift and seamless service. For those that do not comply, we want to crack down hard to ensure a fair and level playing field for importers, exporters and the domestic market. We need a balanced approach between measures that, on the one hand, cut red-tape and simplify trade and travel, and, on the other, maintain controls in order to ensure the safety and security of our economy and society. We achieve this by:
• Protecting the economy and society from unfair trade practices and dangerous, harmful as well as unsafe goods. We do this by applying tariffs, taxes and trade remedies; preventing dangerous and unsafe goods from entering or leaving South Africa; preventing smuggling; detecting commercial fraud; administering preferential trade schemes such as African, Growth and Opportunity Act (Agoa) and trade agreements such as the SADC Trade Protocol; enforcing South Africa’s intellectual property rights (IPR) regime at the border; and ensuring compliance with government manufacturing and investment incentive schemes.
• Supporting economic competitiveness by delivering a service to the trading community that is transparent, consistent and predictable. We do this by using modern procedures and technology that minimizes delays at ports of entry. This includes the use of digital Customs processing systems, advanced risk management systems and non-intrusive inspection technology.
• Collecting revenue from a range of duties and taxes on imported and domestically produced goods. We also administer refunds for exported goods and ensure compliance with duty suspension regimes.
• Providing policy support and advice on a range of issues including multilateral trade negotiations, regional economic integration, the negotiation of free trade agreements and industrial incentive schemes.
• Providing trade statistics that support economic planning and the development of trade and industrial policies.
Sars’ Five-Year Strategic Priorities And Focus
For each outcome, Sars has identified a specific focus to emphasise the nature of the work needed over the next few years to achieve the strategic outcomes desired.
OUTCOME 1: Increased Customs and Excise compliance
Our focus is on building world class Customs and Excise capabilities and performance.
What Sars will do to achieve this priority
• Improve control over the flow of all goods and travellers entering and leaving the country.
• Identify, assess and respond to risks more effectively.
• Enhance the quality of inspections and audit to accurately verify identified risk.
• Modernise and align Excise processes and systems.
• Segment our customs and excise base to support compliance and improve service and trade administration.
• Enforce customs and excise compliance through harsh consequences for
repeated non-compliance.
• Develop a professional and disciplined customs and excise workforce.
• Continue to adopt a whole-of-Government approach to improving border
management.
• Improve service and trade administration based on an understanding of our
clients and their needs.
• Implement the new customs and excise legal framework.
Key initiatives
Improve control over the flow of all goods and travellers entering and leaving the country
We will monitor and control the movements of all goods imported, exported and in transit via our ports of entry, and oversee appropriate interventions to mitigate risks and enable the swift continuation of the movement of goods and travellers. We will significantly strengthen our Customs control capability and visibility to manage the risks associated with the increased flow of goods, craft and people.
Sars will:
• Develop the new manifest processing system to replace the manifest acquittal system in line with new international cargo reporting and cargo management standards
• Undertake focused physical verification interventions of goods and compliance checks by leveraging our presence and tools at key check-points at ports of entry.
• Enhance our automated traveller targeting capability at all our ports of entry, to allow for automated risk management of travellers. This also includes better data exchange between the different border agencies.
Identify, assess and respond to risk more effectively
Customs and Excise follows a risk-based approach to fast-track legitimate trade and to target high-risk non-compliant traders, travellers, conveyances and goods. We will continue to improve our ability to identify which goods or travellers should be allowed entry and which should be stopped and checked for security or revenue reasons. SARS will focus on enriching its risk fields, risk rules, and analytical processes that enable the right risk-based triggers of enforcement activities, to minimise losses to the fiscus.
Sars will:
• Develop a segmentation model to profile all traders and clearing agents, thereby creating an entity-based risk model.
• Improve the accuracy of algorithm-identified risk by:
- Improving the amount and quality of data fed into the system, including the use of third-party data from other Customs organisations and other government agencies.
- Refine the risk rules used to detect risk.
- Develop integrated feedback loops for all interventions, including post-clearance inspection and audit activities, to sustain a self-learning system.
• Increase the skills and knowledge of inspectors to better detect and deal with non-compliance.
• Acquire additional detector dogs, roll out Detector Dog Units (DDU) at other Customs centres, and facilitate DDU capacitation of BLNS countries, Zimbabwe and Mozambique.
• Deploy an additional 5 cargo scanners, 2 body scanners and 12 baggage scanners at our key ports of entry.
Enhance the quality of inspections and audit to effectively address detected non-compliance
Inspection and audit are required to verify risk detected. Highly skilled employees with a deep Customs and Excise knowledge are required to accurately identify contraventions against the Customs and Excise Act, and act in the correct manner to manage the risk. These employees will also need to be enabled by systems, processes and tools to effectively conduct their jobs.
Sars will:
• Develop a coordinated inspection, audit and enforcement model to manage the risk model defined during customer segmentation with streamlined processes.
• Enable employees through automated processes, access to live data and electronic central work flow management.
• Leverage technology (i.e. cargo scanners) to increase the coverage of physical inspections and reduce the cost of inspections.
Modernise and align Excise processes and systems
We will integrate excise activities into the new Customs and Excise operating model.
This requires us to enhance the existing electronic platform to improve service standards and build an intelligence-driven risk and audit capability to provide a high standard of oversight to the different types of excise levies.
Sars will:
• Develop new automated excise processing and risk system.
• Review the Excise audit coverage model, audit standards and resource plan to meet Excise requirements.
• Introduce non-intrusive excise assurance systems that enable SARS to track-and trace excise production and warehouse control.
• Upskill Customs officers on Excise.
Segment our Customs and Excise base to support compliance and improve service and trade administration
We will work to segment our clients based on demonstrated compliance and provide differentiated interventions based on this compliance. We will reward and encourage legitimate trade through improved experience and fast processing time for compliant traders, based on a segmentation model. However, we will also review available measures so that consequences are harsh enough to deter non-compliance, which will be applied in a consistent manner nationally.
Sars will:
• Develop a compliance management model that segments clients and accords intervention based on compliance level and history.
• Review non-compliance consequences to make them harsher, including non-financial consequences (e.g. deregistration) and escalation of consequences.
• Provide officers and enable them with data and technology to consistently apply consequences correctly across all offices nationally.
Develop a professional and disciplined Customs and Excise workforce
The ability of Customs and Excise to achieve its mandate directly depends on upon its workforce. It is critical to recruit, train, and retain the exceptional personnel needed to achieve organisational objectives. SARS will enhance the professionalism and discipline of our workforce and instill a sense of confidence and pride in our officers in performing their individual and collective roles. Changes in global supply chains and international trade also mean that we must continuously re-skill and refresh our workforce. Of primary importance is the closing of capability and capacity gaps
through focused skills development and mentoring programs.
Sars will:
• Continue to enhance the professionalism and discipline of our workforce and instil a sense confidence and pride in our officers in performing their individual and collective roles.
• Introduce a rotation policy for front-line officers in support of our anti-corruption efforts and to support career progression.
• Implement the Customs and Excise operating model, organisational structure and embed a culture of professionalism, discipline and service which includes improved resourcing.
• Establish the new Customs and Excise Centre of Excellence to improve the performance of our workforce, ensure consistency and compliance with our operational standards, policies and procedures, as well as hone the skills, knowledge and behaviours that we require.
• Implement national customs and excise training programmes to up-skill employees to the required level.
Continue to adopt a whole-of-Government approach to improving border management
Sars will:
• Initiate the single window concept with all relevant government agencies in line with WCO standards. This will enable clients access to a single electronic platform for all international trade regulatory requirements and enable government agencies to move towards a single intervention when it comes to the inspection of goods.
• Continue to support Government’s creation of the Border Management Agency (BMA). Implementation of this initiative is yet to be finalised.
• Continue to support the establishment of One-Stop Border Posts between South Africa and Mozambique, and South Africa and Zimbabwe.
• Continue to implement the Swaziland and Mozambique pilot of the WCO SACU IT Connectivity initiative.
• Sars will continue to fight against the illicit trade and abuse of illegal substances by supporting the National Drug Master Plan (NDMP). SARS will develop and approve a Departmental Drug Plan by the end of September 2016.
• Support dti as co-chair of the national trade facilitation forum to prepare for the implementation of the World Trade Organisation Trade Facilitation Agreement and our new Customs and Excise legal framework.
Implement the new Customs and Excise legal framework
The Customs Control Act, and Customs Duty Act, 2014 collectively provide an effective legal framework that guarantees prompt, transparent and predictable Customs procedures that enable better control of vehicles, goods and people entering or leaving South Africa. It also makes it easier for our clients to comply.
The development of processes and systems to support the implementation of the Customs Control Act and Customs Duty Act are underway. The subordinate legislation supporting the Acts will be finalised during 2016. Processes and systems will be built and tested incrementally. With the co-operation from the business community, the Acts will be made effective once the system is found to be stable to ensure the minimum impact on the flow of trade and the economy. The phases envisaged for deployment are as follows:
• Phase 1: Registration, Licensing and Accreditation will be ready for implementation by the end of March 2017.
• Phase 2: Reporting of Conveyances and Goods, scheduled for the end of December 2018.
• Phase 3: Declaration Processing, will be ready for implementation by March 2018.
The rewrite of the current excise tax legislation will start in 2017/18.
We have started with a discussion document on the background and context for the excise tax rewrite to elicit comment. The intention is to simplify the current excise tax legislation and to create cohesion with the new Customs legislation by applying a similar legal drafting style. It is expected that the rewrite would take at least two to three years to complete, due to industry-specific complexities that would require
extensive consultations and buy-in and co-operation from clients.
Sars will:
• Develop the IT infrastructure to support the changes to processes as part of New Customs Acts Progamme (NCAP).
• Train employees on new procedures, systems and policies to effectively implement NCAP.
Annual Performance Plan 2016 - 2017.
Chapter 6, Page 22
2016/17 Annual Performance Plan Initiatives and Activities
Outcome 1: Increased Customs and Excise Compliance
Improve control over the flow of all goods and travellers entering and leaving the country
Sars will:
• Continue to monitor and control the movements of all goods imported, exported, and in transit via our ports of entry.
• Undertake two pilot projects in Durban and Johannesburg to refine the Marine and Air modality operating model as well as to identify the next wave of improvement opportunities.
• Implement appropriate and effective interventions to mitigate risks whilst enabling the swift movement of goods and travellers through ports of entry, in line with the KPI to target 13% of declarations.
• Deploy the new manifest processing system to replace the manifest acquittal system in line with new international cargo reporting and cargo management standards by September 2016.
• Conclude the implementation of the new state warehouse barcode inventory management system across state warehouses and acquire additional warehouse capacity for Cape Town and Durban at suitable, cost effective locations by February 2017.
• Design an off-site tracking and management system by December 2016, to reduce the risk associated with goods which are left with shipping companies for a lengthy period.
Identify, assess and respond to risks more effectively
Sars will:
• Review the current case selection capability and automated risk engine with the objective to improve risk management in the customs realm to the next level of excellence. In this regard, a recommendations report will be tabled by the end of February 2017.
• Deploy additional 8 baggage scanners and initiate procurement of two additional cargo scanners during this financial year.
• Commence level 2 of Preferred Trader Compliance Accreditation Programme which comprises the awarding of “Status and Benefits” by 1 November 2016.
• Our intention is to conclude 100 traders by end March 2017.
Enhance the quality of inspections and audit to effectively address detected noncompliance
Sars will:
• Implement an improvement initiative to achieve 50% improvement of non-intrusive inspection capability’s productivity.
• Review the Quality framework for inspections, inclusive of physical- and document inspections and table a recommendations report by end of October 2016.
• Implement a new enforcement workflow module by January 2017 that will enhance traceability of manually-triggered risk interventions initiated by Customs officials at the various ports of entry.
Modernise and align Excise processes and systems
Sars will:
• Commence with the alignment of the Customs and Excise processes to give effect to the new operating model.
• Improve excise skills amongst officers by developing improved standard operating procedures and introduce training interventions to the excise community by the end of November 2016.
• Conclude the study that considers the introduction of a track-and-trace system with the cigarette industry and replace the old diamond stamp, in line with the World Health Organisation Convention for Tobacco Control, by the end of September 2016.
Develop a professional and disciplined Customs and Excise workforce
Sars will:
• Over the next 18 months, increase the professionalism and discipline of customs and excise workforce in a focused manner by aligning SARS with the WCO framework of principles and practices of customs professionalism.
• Undertake an assessment of current customs and excise officers to determine skills gaps, which will inform the required training interventions by the end of October 2016.
• Implement National Customs and Excise Training and Mentorship Programme with a special focus on technical, as well as practical customs and excise skills for core roles, such as Tariff classification, Valuation and Rules of origin, to address critical skills
capability and capacity gaps by the end of March 2017.
• Introduce a pilot rotation approach for front-line officers in support of our anticorruption efforts as well as career progression, by the end of December 2016.
Implement the new Customs and Excise legal framework
Sars will:
• Continue the development of processes and systems to support the implementation of the Customs Control Act and Customs Duty Act. We will develop and implement the processes and systems incrementally and with co-operation and participation from the business community. The Acts will be made effective once the processes and systems are stable to ensure the minimum impact on the flow of trade and the economy. By the end of March 2017, SARS will implement phase 1 of the programme, which comprises Registration, Licensing and Accreditation (RLA).
Continue to adopt a whole-of-Government approach to improving border management
Sars will:
• Initiate the single window concept with all relevant Government departments and relevant stakeholders, in line with WCO standards by 30 June 2016.
• Continue to support Government’s creation of the Border Management Agency (BMA). The implementation of this initiative is yet to be finalised.
• Continue to support DHA in the establishment of One-Stop Border Posts between South Africa/Mozambique and South Africa/Zimbabwe.
• Continue to work with Swaziland and Mozambique to pilot the WCO-SACU IT Connectivity initiative.
• Continue to fight against the illicit trade and abuse of illegal substances by supporting the National Drug Master Plan (NDMP). SARS will develop and approve a Departmental Drug Plan by the end of September 2016.
• Support dti as co-chair of the national trade facilitation forum to prepare for the implementation of the World Trade Organisation Trade Facilitation Agreement and our new Customs and Excise legal framework.
Improve service and trade administration based on an understanding of our clients and their needs
SARS will:
• Re-establish the Customs and Excise Stakeholder forum by end of August 2016.