The Office of the Tax Ombud was created on 1 October 2013 and celebrates its fifth anniversary in October this year. The office was created to deal with taxpayers’ complaints which could not be resolved by taxpayers using the South African Revenue Service’s internal complaints processes.
The Office has a degree of independence as it reports to the Minister of Finance and can appoint its own staff without having to consult SARS. In addition, the office is funded by a budget approved by the Minister and not SARS.
Before taxpayers can lodge a complaint with the Ombud they must exhaust SARS internal complaints procedures unless compelling circumstances exist. To determine if compelling circumstances exist, it must be established if the complaint raises systemic issues or exhausting SARS complaint procedures will cause undue hardship to the taxpayer or is unlikely to produce a result within a period of time the Ombud considers reasonable.
The question that must be addressed is what constitutes a systemic issue. During August 2018 the Ombud published a list of twenty items that constitutes systemic issues. If a taxpayer encounters a systemic issue they do not need to exhaust SARS internal mechanisms first before filing a complaint with the Ombud.
The systemic issues are the following:
· Delay in refunds in certain specific cases – the Ombud deals with twelve categories in this regard:
o Failure to link submitted documentation requested by SARS to the main file
o The unwarranted placing of Special Stoppers
o Using the filing of new returns as an excuse to block refunds;
o Delay in the lifting of stoppers and lack of a timeframe for doing so
o Refunds for one period being withheld while an audit/verification is in progress on another period
o Using historic returns to delay the payment of refunds
o Raising assessments to clear unallocated credits
o Requesting further information during an audit
o Assessments successfully, but refund still not paid out
o Raising assessments prematurely;
o Debt set-off not withstanding a request for suspension of payment
o Verification assigned to the auditor but not finalised within the prescribed timeframe
· Incorrect allocation by SARS of payments made by taxpayers
· Taxpayers being affected by employer’s non-compliance with legislation relating to IRP5s
· Inconsistency by SARS in providing taxpayers with timelines for finalisation of audits/verifications
· Victims of identity theft being held liable for tax debts
· Non-adherence by SARS to dispute resolution turnaround times
· SARS’s failure to take information at its disposal into account, specifically relating to information requested during audit/verification and objection procedures
· SARS taking collection steps when legally barred from doing so
· SARS’s failure to take information at its disposal into account, specifically relating to the tax compliance system and the “pin” on the client’s profile indication tax compliance status (TCS)
· Non-adherence to legislative requirements in respect of final demand and third party appointment in terms of section 179 (5) of the Tax Administration Act
· Numerous follow-ups by taxpayers without being advised of the escalation process (unless the taxpayer was represented by a tax professional)
· Pay-As-You-Earn Statement of Account issues relating to, inter alia, the reconciliation of the account specifically when recovering a debt
· Numerous follow-ups relating to situations where SARS issues duplicate income tax numbers under one identity number (unless the taxpayer was represented by a tax professional)
· SARS incorrectly invalidating the notice of appeal
· SARS revising an assessment without issuing any prior communication
· SARS revising an assessment without issuing a letter of findings
· Refunds paid into wrong bank accounts
· E-filing profile hijacking
· Delay in e-filing profile transfer between tax practitioners due to as system error
· Dispute resolution e-filing/system issues
It is anticipated that taxpayer complaints will get to the Ombud quicker than before as, if the complaint is systemic in nature, taxpayers do not need to adhere to SARS internal complaint mechanisms.
The Ombud has become an important means of redress for taxpayers who have encountered problems in their dealings with SARS. It is hoped that in time the independence of the office will be enhanced and greater powers conferred on the office as is the case in other countries.
Areas in which the Tax Ombud should have more power are:
· In the United States, the Taxpayer Advocate, an office similar to the Tax Ombud, can issue Taxpayer assistance orders directing the Internal Revenue Service to refrain from taking action against taxpayers in certain well-defined cases. It is unfortunate that, in South Africa, the Tax Ombud does not, at this stage, have a similar power.
· Another problem that still needs to be addressed is the issue of legal assistance for indigent taxpayers. In the United States, taxpayers can go to Low Income Taxpayer Clinics for assistance with their tax affairs. It is hoped that, in time, something similar will be introduced in South Africa.
· The Ombud does not have the power to award wasted costs to taxpayers as is the case in some jurisdictions and hopefully in time this will be considered.
The SARS Service Charter has been published and this should assist the Ombud in evaluating how SARS is meeting the timeframes specified therein.
The Tax Ombud must be commended for the work done by the office since 2013 in educating taxpayers about taxpayers’ rights and addressing the administrative complaints in the tax arena. Hopefully, government will accept the recommendations of the Davis Tax Committee on Tax Administration and formally legislate the proposed Taxpayer Bill of Rights to further entrench taxpayers’ rights in South Africa.
Congratulations to the Office of the Tax Ombud and its staff on reaching its fifth anniversary and wishing the office every success in its endeavours in the future in addressing taxpayers’ administrative complaints and teaching taxpayers about the rights they have when interacting with SARS.
Dr Beric Croome is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, October 2018.