Amendments to the Tax Administration Act have given the Office of the Tax Ombudsman greater independence and, importantly, the ability to initiate an investigation into systemic issues affecting taxpayers.
The power to initiate an investigation was a significant, and unexpected, change to the amendments, which came into effect on January 19.
Although the tax ombud will still need to receive approval from the finance minister for such investigations, it is now free to investigate systemic and emerging issues related to a service matter, application of the provisions of the act, as well as procedural or administrative provisions of the act without a formal complaint being lodged.
This brings the tax ombud in line with similar entities in other jurisdictions such as Australia, the US and Canada.
In an interview with City Press, CEO of the Office of the Tax Ombudsman Advocate Eric Mkhawane said that the office was in the process of identifying areas of concern that it would like to investigate. One of the areas will most likely be around the delays by the SA Revenue Service (Sars) to pay refunds.
“Although Sars tells us that 90% of refunds are paid in time, that still means 10% are not and the value of those refunds can be substantial – accounting for hundreds of millions of rands or even more,” said Mkhawane, who explained that due to fraudulent behaviour, Sars had implemented a system of verification of banking details to process refunds.
However, even if the taxpayer physically goes to a Sars office to comply, their refunds are still not paid timeously in some instances.
Further amendments to the act have strengthened the independence of the tax ombud from Sars. Mkhawane said this was a step in the right direction to ensure that the ombud could fulfil his mandate without a perception that the office is an extension of Sars.
The tax ombud can now employ his own staff directly without consultation with the commissioner of Sars, and all funding for the office will now be allocated by the finance minister rather than Sars.
Sars is also now required to inform the tax ombud within 30 days as to why it is not implementing its recommendations. This means that Sars cannot ignore the ombud’s recommendations – as it could in the past.
According to the tax ombud’s most recent annual report, over the April 2014 to March 2016 financial years, a total of 460 complaints had not been resolved by Sars, of which 86% were already outside the turnaround time.
Mkhawane said that, with the amendments to the act, if Sars had not responded to the recommendation and did not accept the recommendation, it would not be complying with the act.
Although these amendments are a step in the right direction, the tax ombud would like to see further autonomy and independence that would be created by a Tax Ombud Act, which would be in line with the Public Protector Act. This would give the office full legal status, including the ability to take legal action.
Keith Engel, head of the SA Institute of Tax Professionals, said the issue of VAT refunds was particularly challenging for small businesses,
which “find that their refunds are subject to heavy and sometimes never-ending documentation requests”.
“Interest on refunds is payable, but Sars often only provides interest upon the taxpayer’s request,” said Engel, who added that businesses with small profit margins were particularly affected.Read Fin24's top stories trending on Twitter: Fin24’s top stories