Last month Minister of Finance Mr Pravin Gordhan announced that he had appointed retired Gauteng Judge President Bernard Ngoepe
as the Tax Ombud in accordance with section 259 of the Tax Administration Act,
No 28 of 2011 (‘the TAA’). The Minister
indicated that the Tax Ombud’s office is intended to provide taxpayers with a
low-cost mechanism to address administrative difficulties that cannot be
resolved by the South African Revenue Service (‘SARS’).
In terms of section 14 of the TAA, the
person appointed as Tax Ombud is required to have a good background in customer
service, as well as tax law, and the Minister confirmed that Judge Ngoepe has
sound experience in exercising impartiality as well as the necessary knowledge
in how best to balance the powers and duties of SARS and the rights and
obligations of taxpayers.
The role of the Tax Ombud appointed by Minister of Finance, Pravin Gordhan ( above), is to address complaints made about service or procedural matters and ease frustration
Clearly, it will take time for the Tax
Ombud’s office to become fully functional in that it will be necessary to
appoint staff to that office and create the necessary infrastructure so that
the Tax Ombud’s office can perform the functions provided for in the TAA.
It must be noted that the Tax Ombud is
accountable to the Minister of Finance and not to the Commissioner: SARS.
In terms of section 15 of the TAA, the
staff of the office of the Tax Ombud must be employed in terms of the South
African Revenue Service Act, No 34 of 1997, and be seconded to the office of
the Tax Ombud at the request of the Tax Ombud in consultation with the
Commissioner.
The Tax Ombud’s office has not been created
to deal with legal disputes between the taxpayer and the Commissioner, as
well-defined processes already exist to deal with objections and appeals.
The Tax Ombud is charged with reviewing and
addressing any complaints made by a taxpayer regarding a service matter or a
procedural or administrative matter arising from the application of the
provisions of any tax Act administered by SARS in terms of section 16 of the
TAA.
The Tax Ombud is not empowered to review
legislation or tax policy, SARS’ policy or practice generally prevailing, other
than to the extent which it relates to a service matter or procedural or
administrative matter arising from the application of the provisions of a tax Act
by SARS or a matter which is subject to objection and appeal under a tax Act,
except for an administrative matter relating to such objection and appeal or a
decision of or proceeding in or matter before the Tax Court.
The Tax Ombud’s office in South Africa has
been modelled on the Tax Ombudsman in Canada and the Taxpayer Adjudicator in
the United Kingdom. Thus, the mandate of
the Tax Ombud’s office in South Africa is very similar to that conferred on the
Tax Ombudsman in Canada and the Taxpayer Adjudicator in the United Kingdom.
Section 16 of the TAA prescribes the
mandate of the Tax Ombud and the manner in which that mandate is to be
discharged, which requires the Tax Ombud to:
·
Review a complaint and, if
necessary, resolve it through mediation or conciliation;
·
Act independently in resolving
a complaint;
·
Follow informal, fair and
cost-effective procedures in resolving a complaint;
·
Provide information to a
taxpayer about the mandate of the Tax Ombud and the procedures to pursue a
complaint;
·
Facilitate access by taxpayers
to complaint resolution mechanisms within SARS to address complaints; and
·
Identify and review systemic
and emerging issues related to service matters or the application of the
provisions of the TAA or procedural or administrative provisions of a tax Act
that impact negatively on taxpayers.
Before a taxpayer proceeds to the Tax Ombud
it is necessary that they exhaust the complaint resolution mechanisms within
SARS. This requirement is found in most
countries where a Tax Ombud or similar office exists.
During 2002, the SARS Service Monitoring
Office (‘SMO’) was launched with a view to assisting taxpayers facing
administrative difficulties with SARS.
The SARS website indicates that, prior to a complaint being lodged with
the SARS SMO, the taxpayer is required to give the SARS branch office or
contact centre that is responsible for their affairs an opportunity to deal with
an issue before raising it with the SSMO.
Thus, the taxpayer is required to log a complaint with the SARS contact
centre, and, if that does not resolve the matter within a reasonable time, to
then request that the SSMO investigate the matter. Now that the Tax Ombud is soon to be operational,
it would appear that taxpayers will need to exhaust internal processes at SARS
first, which includes the procedures set out above, before they proceed to the
Tax Ombud. SARS did indicate that they
would clarify the complaint resolutions mechanisms which taxpayers are required
to follow before proceeding with their complaints to the Tax Ombud. To date, this does not appear to have taken
place.
In terms of the TAA, the Tax Ombud may
review any issue falling within his or her mandate on receipt of a request from
a taxpayer. It must be noted that the
Tax Ombud may not investigate a matter that arose more than one year before the
day on which the Tax Ombud is appointed, unless the Minister requests the Tax
Ombud to do so.
Section 18 of the TAA provides that the Tax
Ombud may determine how a review of the taxpayer’s complaint is to be conducted
and determine whether a review should be terminated before completion.
In reviewing the taxpayer’s complaint, the
Tax Ombud must consider such factors as the age of the taxpayer’s request or
issue, as well as the amount of time that has lapsed since the taxpayer became
aware of the problem and the nature and seriousness of the issue, and,
importantly, whether their request was made in good faith, as well as consider
the findings of other redress mechanisms with respect to the taxpayer’s
request.
Where there are compelling circumstances
that the Tax Ombud may consider the taxpayer’s request for assistance,
particularly where the taxpayer‘s request raises systemic issues, or by
exhausting the other complaint resolution mechanisms within SARS will cause
undue hardship to the taxpayer, or exhausting the complaint resolution
mechanisms is unlikely to produce a result within a period of time that the Tax
Ombud considers reasonable.
In terms of section 19 of the TAA, the Tax
Ombud is required to report directly to the Minister and submit an annual
report to the Minister of Finance within 5 months of SARS’ financial year and
submit a report to the Commissioner quarterly or at other intervals as may be
agreed by the Commissioner and the Tax Ombud.
Importantly, the annual report prepared by the Tax Ombud must be tabled
in the National Assembly and, thus, the office of the Tax Ombud is subject to
parliamentary oversight.
The Tax Ombud is required to resolve all
issues falling within their mandate at the level at which they can be most
efficiently and effectively resolved, and must, in achieving this objective,
communicate with SARS’ officials identified by SARS. It must be noted that the Tax Ombud’s
recommendations are not binding on taxpayers or SARS. This provision, set out in section 20 of the
TAA, has been criticised by some commentators on the basis that the Tax Ombud
lacks teeth and that the recommendations of the Tax Ombud will not necessarily
be followed by SARS.
However,
internationally, the office of the Tax Ombud does not have the power to compel
the revenue authority to adhere to the recommendations made by the Tax
Ombud. This is particularly true in the
case of the Tax Ombudsman in Canada, the Taxpayer Adjudicator in the United
Kingdom and the Taxpayers’ Advocate in the United States of America.
The Tax Ombud does not operate as a court of
law and therefore does not have the power to issue binding decisions or deliver
judgment on a matter, as is the case with the Tax Court or other courts in
South Africa. The Tax Ombud is required
to review complaints received from taxpayers and to facilitate the resolution
thereof by engagement with the taxpayer and SARS.
It is interesting to note that, during June
this year, Canada’s Tax Ombudsman and Minister of National Revenue jointly
announced the addition of a new right to the Canadian Taxpayers’ Bill of Rights
to protect taxpayers wishing to complain about the Canada Revenue Agency
without fear of reprisal. This right was
inserted as a result of Canadian taxpayers being afraid to invoke their rights
as taxpayers and lodge complaints with the Tax Ombudsman. This right should go some way in addressing
this concern.
When complaints are lodged against the
Canada Revenue Agency, that Agency may, depending on the outcome of a
complaint, give further reasons for decisions, correct a misunderstanding,
omission or oversight, offer an apology to a taxpayer or make changes to a
policy or procedure or make changes to systems or applications, review its
service standards or consider further staff training to prevent recurrence of
problems in the future.
Insofar as the Taxpayers’ Adjudicator is
concerned, that office can request Her Majesty’s Revenue and Customs to
apologise to a taxpayer and also to meet additional costs which a taxpayer has
incurred as a direct result of HMRC’s mistakes or delays, to reimburse
taxpayers for costs such as postage, telephone calls or the costs of
professional advice.
Alternatively, the
Taxpayers’ Adjudicator may require the HMRC to make a small payment to a
taxpayer to recognise any worry and distress suffered by that taxpayer. It is unfortunate that the Tax Ombud in South
Africa does not currently have the statutory power to direct that SARS should
reimburse a taxpayer for costs caused as a result of SARS’ inefficiencies.
In addition, the Taxpayers’ Adjudicator’s
website indicates that the HMRC has accepted all of the recommendations made by
the Adjudicator, even though the Taxpayers’ Adjudicator’s office has no legal
basis on which to require HMRC to adhere to its recommendations.
It is hoped that the creation of the office
of Tax Ombud will go some way in alleviating the frustrations currently
experienced by taxpayers in their dealings with SARS and that this office will
be fully functional shortly.
Dr Beric Croome is a Tax Executive at Edward Nathan Sonnenbergs Inc. This article first appeared in Business Day, Business Law and Tax Review November 2013. Image of Minister of Finance Pravin Gordhan from www.treasury.gov.za
