Tax ombud calls for greater powers

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While the office of the tax ombud handled 961 complaints that fell within its mandate during the 2015/16 financial year, 432 have still not been finalised by the SA Revenue Service (Sars).

According to the latest annual report from the ombud, “a weakness in the current legislation is that the tax ombud does not have a mechanism to compel Sars to respond to its recommendations”.

Over the two financial years from April 2014 to March this year, a total of 460 complaints had not been resolved by Sars, of which 86% where already outside the turnaround time.

“Such delays make it difficult to provide timely feedback to taxpayers. This has been taken up with Sars, which is working with the ombud to finalise a memorandum of understanding that would also govern response and turnaround times,” says the report.

Earlier this year, proposed amendments were made to the Tax Administration Laws Amendment Bill 2016, which would strengthen the role of the tax ombud, requiring Sars to provide a reason for not implementing a decision, but which fell short of making the recommendations binding.

Another concern for the current tax ombud, Judge Bernard Ngoepe, is that he cannot initiate an investigation into any “systematic or emerging issues”.

In other jurisdictions, such as Canada and the US, ombuds have the power to initiate investigations into any apparent systematic issue.

In South Africa, however, the tax ombud can only investigate issues relating specifically to formal complaints received and is not able to investigate any other problem he may identify that may impact negatively on taxpayers.

These concerns have been raised with Finance Minister Pravin Gordhan, who, in the latest annual report, stated that “going forward, the ministry will review proposals to further strengthen the office”.

“It is my firm expectation that all entities reporting to the ministry of finance will always enhance integrity and financial prudence and make every effort to expose and fight corruption and mismanagement of public funds.”

Despite its limitations, the ombud has increased the awareness of its office, and the number of complaints received in the last financial year increased from 1 270 to 2 133 (68%), of which 961 where complaints that fell under the mandate of the ombud.

In the previous financial year, only 409 of the complaints that were received fell within the auspices of the tax ombud.

One of the greatest challenges facing the office is not only in highlighting its existence to aggrieved taxpayers, but also in helping taxpayers to understand the role and mandate of the tax ombud.

Complaints can only be investigated if the taxpayer has first followed the Sars internal complaints mechanism, and only if the complaint relates to a service, procedural or administrative matter.

For example, the office of the tax ombud does not extend to complaints relating to the determination of a tax liability.

So, if you feel that Sars has charged too much tax, that would not fall under the tax ombud’s mandate, but if Sars has failed to acknowledge your dispute letter or has not provided reasons for not including certain expenses as deductions against income, that would be a procedural and service issue, which would fall under the ombud.

THE MOST SERIOUS TRANSGRESSIONS

In its annual report, the office of the tax ombud listed some of the more serious issues raised by taxpayers.

It is worth noting that, fortunately, many of these remain in the minority.

Refunds: The ombud received complaints about delays in payments of refunds with no communication with the taxpayers.

Sars notes that 90% of refunds are paid within 60 days of submission and that many of the delays are a result of stringent refund rules to mitigate fraud by individuals hijacking taxpayer’s accounts.

The ombud has requested that Sars communicate effectively with taxpayers who have not received their refunds and adhere to the service level agreement.

Hijacking of eFiling profiles: Fraudsters change the taxpayer’s banking details to their own and file fraudulent returns, creating refunds that Sars later recalls, creating a tax debt for the legitimate taxpayer.

To combat this fraud, Sars now requires that any changes to identity numbers or bank details can only be done at a branch, and not online.

However, the tax ombud notes that, in the case of identity theft, even where Sars is aware of the alleged fraud and is investigating, it is still holding the taxpayer liable for the tax debt.

Banking details: In some cases, there has been a failure by Sars to update banking details submitted by taxpayers, resulting in refunds paid into the incorrect bank account.

Incorrect tax payment allocation: Sometimes there is incorrect allocation of payments received by Sars, when payments are allocated to the wrong tax number, resulting in a debt on the Sars system. Sars has then instituted collection steps to collect debt that is not actually due. Sars says this can be due to incorrect payment reference numbers being used by taxpayers.

Illegal collections: The ombud says there are cases where Sars is taking collection steps when legally barred from doing so.

For example, when taxpayers have submitted requests for suspension of payment, Sars takes recovery steps before a decision has been made, which is against the law.

Sars has told the ombud it would be rolling out suspension requests on eFiling to improve the communication within Sars.

Tax clearance certificates: There have been complaints of delays in issuing tax clearance certificates, which can be serious for businesses that require them to continue operation of their business.

Sars is implementing a new tax compliance status system to ease delays.

Non-issuance of IRP5: There are complaints by taxpayers who have not received IRP5 certificates from their employers. Currently, there is no mechanism for Sars to enforce this, leaving it to the employee to resolve.

The ombud recommends that Sars enforce the legislation to ensure that employers reconcile their PAYE and hold them accountable if they do not do so.

Reasons for assessments: Complaints have been made where Sars has not responded to requests for reasons for assessments.

This means the taxpayer is not in a position to decide whether or not they agree with the assessment or formulate grounds for objection.

Complaint management: The ombud notes that, in some cases, Sars staff have not informed taxpayers of the correct complaint management process.

This results in taxpayers following incorrect procedures and thereby not gaining access to the internal Sars complaints management office.

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