Income Tax and Vat Consequences of E-Tolls

Introduction

The levying of tolls for the use of certain highways in Gauteng, the so called e-tolls, took effect on 3 December 2013.  

It is therefore appropriate to consider the income tax consequences arising from the payment of e-tolls in those cases where an employee is reimbursed for business travelling or is provided with a vehicle owned by their employer or where an employee receives a travelling allowance to finance the expenditure incurred whilst travelling on the employer’s business.  

In addition, brief reference will be made to the income tax consequences facing fleet owners and cartage contractors.

Reimbursement at prescribed rate

An employer may decide not to provide an allowance for travelling to their employees nor a company owned vehicle and instead reimburse staff for the actual distance travelled on the business of the employer.  

Where an employee travels on the employer’s business and does not exceed 8 000 kilometres during a year of assessment and the employee does not receive any other compensation from the employer in the form of a further allowance or reimbursement, the prescribed rate per kilometre, which may be paid without attracting income tax,  is R3.24.

The rate per kilometre was set before e-tolls became effective and future regulations governing the amount payable by an employer to an employee for travelling on the employers business should be clarified to provide that the employer may reimburse the employee in respect of the cost of e-tolls.  

Currently, the rate per kilometre fixed for purposes of section 8(1)(b)(iii) of the Income Tax Act, No. 58 of 1962 (‘the Act’) provides that the amount of R3.24 may only be paid without any adverse tax consequence arising when no other compensation in the form of a further allowance or reimbursement is payable by the employer to the recipient of the reimbursement at the specified rate.  

The payment of the allowance is also not subject to VAT as a fringe benefit in terms of section 18(3) of the VAT Act.

Company Owned Vehicle

Where the employer owns or leases a motor vehicle and makes that available to an employee the employee will be subject to fringe benefits tax on the value and usage of that vehicle in the manner set out in paragraph 7 of the Seventh Schedule to the Act.

In principle, the employee is subject to fringe benefits tax at a rate of 3.5% of the determined value of the motor vehicle for each month for which the employee is provided with the use of the vehicle by their employer.  

The determined value of the vehicle for fringe benefits tax purposes is normally the cash cost thereof, including VAT.  In the event that the motor vehicle, at the time of acquisition, is the subject of a maintenance plan, the rate of fringe benefits is reduced to 3.25% of the determined value of the motor vehicle on a monthly basis.

In the case of an employer owned vehicle, the vehicle will be owned by the employer and thus the employer will be liable to pay the e-tolls to the extent that the motor vehicle in question travels on tolled highways.

The employer will be entitled to deduct the cost of e-tolls as an expense incurred in the production of income in that it relates directly to the provision of the motor vehicle by an employer to an employee for purposes of its business. 

The employer will, so long as the travelling was for the purpose of making taxable supplies and they receive a valid tax invoice which complies with the provisions of section 20 of the Value-added Tax Act, Act No. 89 of 1991,(‘VAT Act’), be entitled to recover the VAT paid on the e-tolls as an input credit when submitting its VAT returns to SARS. 

Where the employee retains accurate records of business distance travelled it will be possible to reduce the taxability of the fringe benefit by taking account of the ratio of business kilometres to total kilometres travelled by the employee. 

Furthermore, where the employee pays for certain expenses relating to the motor vehicle, the value of the taxable fringe benefit may be reduced by taking account of the business kilometres travelled as a proportion of the total kilometres travelled during the tax year. 

In accordance with the provisions of the Fourth Schedule to the Act the employer is required to deduct PAYE on 80% of the value of the fringe benefit arising from the use of the employer owned vehicle unless the employer is satisfied that at least 80% of the employee’s travel is related to the business of the employer. In these cases the PAYE deduction is based on 20% of the value of fringe benefit in question.

Employee Owned Motor Vehicle

In this case the employee will receive an allowance as part and parcel of their remuneration package with the result that the travelling allowance received will be subject to PAYE such that 80% of the allowance paid per month will attract PAYE.  

Where the employer can be satisfied that 80% or more of the travelling undertaken by the employee is for business purposes only 20% of the allowance paid will attract PAYE.

It is essential for the employee to retain a log book recording distance travelled on the business of the employer and the nature thereof so that they may determine the total business kilometres travelled during the tax year and that portion of travelling with constitutes private travel for which no deduction is available.

When the employee completes their annual tax return they will be entitled to claim expenditure regarding the motor vehicle against the allowance received by taking account of actual business kilometres travelled during the tax year.  

The taxpayer is entitled to use either actual costs incurred in respect of operating the motor vehicle during the tax year or alternatively may rely on the table of costs prescribed by the Minister of Finance.

Where the employee chooses to claim expenditure based on actual expenditure incurred they will be entitled to take account of the cost of insurance, maintenance and other direct costs relating to the operation of the motor vehicle including fuel, depreciation on the motor vehicle and the cost of e-tolls.  

The table of costs prescribed by the Minister takes account of the fixed cost attributable to the motor vehicle which is an attempt to recognise the depreciation in the value of the a motor vehicle depending on the cost thereof as well as the fuel cost and maintenance cost.  

The table of costs currently in existence does not take account of the cost of e-tolls. 

The table of costs is unlikely to be amended because e-tolls are only applicable on certain highways in Gauteng and not in South Africa generally. 

The alternative for the employee is to seek the reimbursement of the actual e-toll costs incurred from the employer in respect of business travelling. 

This will be neutral for tax purposes from the employee’s point of view. 

The employer should be entitled to claim the reimbursement of e-toll costs as a deduction for income tax purposes under section 11(a) of the Act.

Where an employer reimburses an employee who travelled for taxable business purposes for e-toll costs that employer will be entitled to recover the VAT relating thereto even though the tax invoice will be issued in the name of the employee and not in the name of the employer. 

This is based on the provisions of sections 16(2)(a) and 54 of the VAT Act which regulates the position of input tax borne by an agent on behalf of their principal.  

Also, section 20(5) of the VAT Act does not require that the name, address and VAT registration number of the employer be reflected on a tax invoice where the consideration for the supply does not exceed R5 000.

Fleet owners and cartage contractors

Those businesses which own a large number of vehicles, such as the car rental companies will face an increase in their operating costs as a result of the introduction of e-tolls. 

Similarly, the transport contractors will experience an increase in their costs of moving goods around the country as a result of the imposition of e-tolls. 

The cost of e-tolls are directly related to the business conducted by such taxpayers and will be deductible under section 11(a) of the Act.

Where the affected businesses are registered for VAT, they will be entitled to recover the VAT incurred on the e-tolls if the vehicles were used in the course of making taxable supplies and so long as they are in possession of a valid tax invoice which meets the requirements of section 20 of the VAT Act.

The introduction of e-tolls will no doubt result in an increase in the cost of goods transported by road which will ultimately be carried by the consumer in South Africa. 

Conclusion

Where an employee receives a reimbursement of travelling at a rate not exceeding the amount specified by the Minister of Finance it may be possible to seek the reimbursement of e-toll costs without adverse tax consequences. 

However, it would be preferable if the rules regulating such reimbursement are clarified in this regard. 

In the case of a company or employer owned vehicle, the employer will be liable to pay the e-tolls and should be entitled to deduct that cost as a deduction for tax purposes.  

No adverse tax consequences should arise in so far as the employee is concerned who is subject to fringe benefits tax on the usage of the motor vehicle in any event.

In those cases where an employee receives a travelling allowance to finance the cost of travelling on the employer’s business a decision will need to be made whether to claim the actual expenditure incurred regarding the motor vehicle, including the cost of e-tolls or to rely on the table of prescribed costs as set out by the Minister of Finance from time to time.

Those businesses which own a fleet of vehicles for renting out to clients or which own trucks to transport goods around the country will face an increase in costs which will, no doubt, be recovered from their clients. 

The cost of e-tolls will be deductible for tax purposes in terms of section 11(a) and the VAT element should be recoverable where the business is registered for VAT purposes and the vehicle is used for taxable business purposes. 

Dr Beric Croome, Tax Executive, Edward Nathan Sonnenbergs Inc. This article first appeared in Business Day, Business Law and Tax Review, February 2014.

Celebrating Juta Law's 160 years of Publishing Excellence

To conclude the Southern African Law Teachers’ Association Conference 2014 held at the University of the Witwatersrand, Juta's Law Publishers hosted a Gala Dinner at the Wanderers Club to celebrate 160 years of publishing excellence.

The keynote speaker was Justice Edwin Cameron, 

who spoke on why law teachers today have the critical task of 
teaching students the importance of the rule of law.

Thank you to Juta for an enjoyable evening.

Edmund Beerkwinkel (Manager Juta), myself, my TAX LAW Editor, Marlinee Chetty

Myself (left), Judge Edwin Cameron and other guests of Juta Law

Judith Katzew (Wits School of Law), myself, my wife Judy Croome

The face of a happy Juta's author

Another side plate gift - a book mark

Useful and appropriate side plate gifts
from Juta's - self adhesive book plates

One of Juta's earlier logos (celebrating 100 years)

Table centre piece

More decor

Amendments to the Transitional Rules dealing with Penalties in the Tax Administration Act

Introduction

The Tax Administration Laws Amendment Bill, No. 40 of 2013 was introduced in Parliament on 24 October 2013.  The President of the Republic of South Africa must still  assent to the Bill and it must then be published in the Government Gazette before it becomes an Act.

The Tax Administration Laws Amendment Bill (“TALAB”) contains various amendments of an administrative nature to various tax Acts administered by the Commissioner: South African Revenue Service.  In this article it is not possible to deal with all of the amendments contained in the bill and only those amendments dealing with the transitional rules in the Tax Administration Act, No. 28 of 2011 regulating the imposition of penalties are dealt with.

Juta's 2010 edition of "Tax Administration" by Beric Croome and Lynette Olivier.
Currently being updated by Beric Croome for publication later in 2014.

Transitional Provisions

Significant amendments are being made to the transitional provisions contained in section 270 of the TAA to deal largely with the imposition of the understatement penalty as opposed to the additional tax which may have been leviable under another tax Act.  

It is indicated in the explanatory memorandum on the TALAB that during the drafting of the Tax Administration Bill that SARS consulted with international experts from the International Monetary Fund and that the constitutionality of the bill was reviewed by both expert constitutional counsel and the state law advisors who certified the bill as constitutional.  

The memorandum states that during the Parliamentary process, whereby the TAA was enacted, the general transitional approach in drafting the Tax Administration Bill was that the new Act will apply to an act, admission or proceeding taken, occurring on or instituted before the commencement date.  It was intended that this applied also to the imposition of the understatement penalty such that that penalty would apply from the outset. 

It is apparent from the commentary on the TALAB that to have continued these actions or proceedings under the previous legislation would have required different processes and systems within SARS into the indefinite future which would have increased the cost of the tax administration.  

The view is expressed that the general transitional approach contained in section 270(6) of the TAA was enacted to permit the imposition of additional tax, as opposed to the understatement penalty, if the verification, audit and investigation had been completed before the TAA commenced but the amended assessment had not yet been issued.  

The section previously required that the additional tax must have been “capable of” being imposed, meaning that all other requirements for the intended imposition of the additional tax must have been met before the TAA commenced but was not yet imposed.  

The commentary on the TALAB indicates that uncertainty has arisen in practice whether section 270(6) of the TAA means that additional tax must be imposed in respect of all returns containing understatements submitted before the commencement date of the TAA. 

As a result of the abovementioned uncertainty amendments are being made to section 270(6) to clarify that if an understatement penalty cannot be imposed, additional tax may be imposed.  

In principle the previous regime whereby additional tax was imposed contained a discretion whereby the Commissioner could levy a penalty ranging from 0 to 200%. In those cases, where it could be shown that there was no intention to evade tax and there were extenuating circumstances, SARS generally levied a nominal penalty ranging from 5 to 10%.  Where, however, the taxpayer had intended to evade tax the penalty levied would amount to anything from 100 to 200%.

As a result of the uncertainties relating to the imposition of the understatement penalty various new subsections are introduced to section 270(6) of the TAA.  The new section 270(6A) of the TAA seeks to clarify that the purpose of 270(6) was that additional tax may be imposed if capable of being imposed which would only be the case where the verification or audit necessary to determine the additional tax, penalty interest had been completed before the commencement date of the TAA, namely, 1 October 2012.

The new section 270(6B) of the TAA seeks to address those cases where a taxpayer was not in a position to comply with the tax opinion requirement contained in section 223 of the TAA by virtue of the fact that the tax return, for example, a 2010 tax return was filed prior to the enactment of the TAA.  

Under section 223 no penalty may be imposed where the taxpayer obtains an opinion in the prescribed manner before the filing of the tax return in question.  This requirement is done away with in respect of tax returns filed before 1 October 2012.  Thus, where the taxpayer obtains an opinion after the return was filed that will assist in mitigating the penalty.

Section 270(6C) of the TAA will provide that where taxpayers made a voluntary disclosure before 1 October 2012 they may qualify for relief from an understatement penalty if the audit of their tax affairs was concluded after 1 October 2012.

In addition, a new section 270(6D)(a) is being introduced to allow a senior SARS official who considers an objection by the taxpayer against an understatement penalty imposed as a result of an understatement made in a return submitted before 1 October 2012 to reduce that penalty if he is satisfied that there were extenuating circumstances.  To some extent this reintroduces the discretion which was available to SARS in section 76 of the Act. 

Finally, section 270(6D)(b) of the TAA deals with additional tax imposed under the Value-Added Tax Act which could only be imposed if there was an intent to evade tax.  Under the new understatement penalty regime a penalty may be levied if reasonable care was not taken, no reasonable tax position existed or gross negligence existed.  

Thus, the TAA removes the intent requirement as the basis for levying additional tax under the VAT Act.  The explanatory memorandum recognises that it may be difficult for vendors to argue that they had known about the application of the understatement penalty regime to VAT returns submitted before 1 October 2012.  

The amendment provides that a senior SARS official who considers an objection lodged by a taxpayer against an understatement penalty as a result of an understatement made in a VAT return filed before 1 October 2012 must be reduce the penalty in full where there was no intent to evade tax. 

Conclusion

The amendments to the transitional rules regulating the imposition of penalties may alleviate a number of the concerns raised regarding the imposition of understatement penalties in respect of tax returns filed by taxpayers before 1 October 2012.

This article first appeared in ENSafrica's monthly tax newsletter taxENSight (December 2013)

New Release: The Weight of a Feather and Other Stories by Judy Croome

I've been asked when my wife's next book will be available. It is now available in both print and eBook. The links to purchase it are below the book details.

 “The promise implicit in an anthology is that it aspires to present something different, unexpected”  Joyce Carol Oates (Introduction to The Oxford Book of American Short Stories) 

From the classical form of 'The Weight of a Feather', first published by The Huffington Post (2013), to the suggestive allegory of 'The Leopard and The Lizard', this collection of short stories by South African author Judy Croome is an ideal mix of the familiar and the startling.  

These vibrant slices of life testify to the mysterious and luminous resources of the human spirit. Whether feeling the harrowing emotion in 'The Last Sacrifice' or the jauntiness of 'Jannie Vermaak’s New Bicycle', the reader will delight in a plethora of stories that cross boundaries to both challenge and entertain with their variety.

The book trailer:

South African Readers

Buy from Loot

Buy from Exclusives

International Readers
available from Amazon, Kobo, Barnes and Noble and Apple iStores

Product Details

• Paperback: 200 pages
• Publisher: Aztar Press; 1 edition (November 3, 2013)
• Language: English
• ISBN-10: 0987044737
• ISBN-13: 978-0987044730
• Product Dimensions: 0.5 x 5.9 x 8.9 inches
• Shipping Weight: 12.8 ounces 

RIP, Nelson Mandela

"Man's goodness is a flame that can be hidden, 
but never extinguished." 

Nelson Mandela - 1994 (Long Walk to Freedom)

Image from Nelson Mandela Foundation

Rolihlahla Nelson Mandela  
July 18, 1918 - December 5, 2013

Rest in Peace, Mr Mandela and Hamba kahle.

May we as a nation strive to live up to your ideals of integrity, courage and tolerance.

Tax Law: An Introduction

A new law book from Juta's Law is now available. I had the privilege of working on TAX LAW: AN INTRODUCTION as editor, together with an excellent team of co-authors, as well as the outstanding team from Juta's, Marlinee Chetty, Robyn Evans and Mmakwena Chipu. 

Here are the book's details:

Purchase your copy from Juta & Co 

About this Publication:

Tax Law: An Introduction is a practical guide for students studying tax as part of their law, accountancy or business studies.

The book briefly describes the historical development of taxation in general, emphasising the development of the modern income tax system. Tax Law: An Introduction explains the South African tax system and important policy considerations, clearly setting out the key objectives and essential principles of taxation. It covers the areas of tax collection, taxation in the context of the South African Constitution and the interpretation of the Income Tax Act and the Taxation Laws Amendment Act of 2012. The book also sets out the principles and explains the practices of the South African Revenue Services (SARS). It provides practical guidance on the Income Tax Act and applicable case law, and hones in on problem areas where students seek a greater understanding.

Contents Include:

• The origin and historical development of taxation
• Structure of income tax
• Jurisdiction to tax
• Gross income
• Exempt income
• Deductions
• Capital allowances
• Avoidance or evasion
• Employees’ tax and provisional tax
• Capital gains tax and PAYE
• Taxable persons
• Taxation of companies
• Administration
• Returns
• Assessments
• Dispute resolution and collection
• Learner CD
• CD-ROM with lecturer support material (contact your Juta Law Academic Consultant)

Of Interest and Benefit to:

• Undergraduates
• Postgraduates

Authors:

• Dr Beric Croome - Editor
• Prof Annet Oguttu
• Dr Elzette Muller
• Dr Thabo Legwaila
• Prof Maeve Kolitz
• Prof R C Williams
• Advocate Cornelius Louw

Tax Ombud to keep SARS customers Happy

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