Tax Ombud provides exemplary service to taxpayers

Minister of Finance Tito Mboweni has credited the the Office of the Tax Ombud (OTO) with having been “exemplary in delivering a much-needed service to taxpayers” that provides a “free, independent and impartial avenue” in handling taxpayer complaints and restoring public confidence in the South African Revenue Service (Sars).

This will help promote “a healthy balance” between Sars’s powers and duties and taxpayers’ rights and obligations, he says.

Mboweni gives recognition to the Tax Ombud for maintaining its credibility in an era when “the economic slowdown, growing unemployment, crime and, lately, damning findings against government departments” is becoming normal.

The recently released Tax Ombud March 2019 Annual Report discloses that taxpayer complaints increased to 4 822 (2018: 3 652). A total of 11 957 queries were received, 2 043 complaints were resolved, and 99.27% recommendations were implemented by Sars.

Not all taxpayers are aware that Sars’s internal complaints resolution mechanisms must be exhausted before the ombud may be contacted.

This resulted in 95% of taxpayer complaints being rejected by the ombud.

The top 10 tax refunds paid to taxpayers through the intervention of the ombud exceeded R35 million.

New systemic issues

These issues result in undue hardship for taxpayers:

  • The disallowance/partial disallowance by Sars of the objection against the Administrative Penalties letter does not include the date of the notice. This makes it difficult for taxpayers to lodge an appeal within the prescribed turnaround time.
  • There have been discrepancies in the Pay-As-You-Earn (PAYE) and Statement of Account systems for the past 10 years. This results in a taxpayer reflecting as non-compliant, and banks may be appointed as agents to collect the ‘debt’. Taxpayers who are “non-complaint” cannot obtain a tax clearance.
  • Duplicate tax numbers have been issued under one identity number. This has adversely impacted taxpayers waiting for a directive for a severance/lump sum payout.
  • A trend has developed in Sars incorrectly invalidating the Notice of Appeal.
  • Sars disallowed a retirement annuity fund contribution without any prior notice, including failure to request supporting documentation.
  • Sars has failed to issue a letter of findings following completion of the verification. The assessment notices do not provide sufficient information to explain any revisions.
  • Sars has issued administrative penalties on taxpayers who are not required to submit income tax returns because they are earning below the threshold. Many of these taxpayers were forced to follow the remission objection processes to coerce
  • Sars into remitting these penalties.
  • Sars has given incorrect reasons for invalidating the remission of penalties.

Ongoing systemic issues

Below are some of the ongoing systemic issues:

  • Delay in payment of refunds.
  • Sars incorrectly allocating taxpayer payments.
  • Taxpayers adversely affected by employers’ non-compliance with employee tax certificate (IRP) legislation.
  • Sars’s inconsistency in providing taxpayers with time lines for finalisation of audits/verifications.
  • Holding victims of identity theft liable for tax debts.
  • Sars not adhering to dispute resolution turnaround times.
  • Sars providing insufficient information on disallowance of objection letter (administrative penalties).
  • Sars incorrectly invalidating the Notice of Objection and the Notice of Appeal.
  • Sars makes decisions without taking cognisance of information provided during verification/audit.
  • eFiling systems error (profile transfer between tax practitioners).
  • Sars’s debt management final demand template has not been updated per the amendment to the Tax Administration Act.
  • Incorrect correspondence provided relating to condonation of late filing of objection.
  • Refunds paid into wrong bank accounts.
  • Sars not being able to provide proof of correspondence sent to (but not received by) taxpayer.

In the five years of its existence, the OTO has made great strides in educating the public about their tax rights and obligations, and working closely with Sars to address systemic issues that are adversely impacting taxpayers.

Full independence yet to be attained

Still struggling to gain full independence from Sars, the ombud can now make appointments on its own (not through Sars) and its budget is determined by the minister (not Sars). However, the ombud does not yet have structural (juristic) independence, as it relies on Sars for supporting governance, fiduciary and administrative functions.

This prevents it from becoming a member of the International Association of Ombuds.

It has requested approval from the minister of finance to be established as a juristic entity.

The OTO is pressing for amendments to the Tax Administration Act to enable it to carry out its mandate “independently, impartially and expeditiously”.

It is also advocating for a comprehensive taxpayers’ bill of rights, which will improve the accountability of Sars and support an improved tax administration system.