Tax Ombud report a victory for taxpayers
The eagerly awaited report by the Office of the Tax Ombud on the delay in the payment of refunds by the South African Revenue Service (SARS) is a victory for individuals and companies taxpayers.
The Ombud initiated its investigation after receiving 500 complaints relating to the delay in payments within a period of six months. It found the number of complaints sufficient to initiate the investigation into the systemic nature of the complaints.
SAIPA praises the legislature for recently amending the Tax Administration Act (TAA) to allow the Ombud’s office to investigate complaints which indicate that there is a systemic problem.
The Ombud’s report found the current system allows for SARS to unduly delay the payment of verified refunds to taxpayers in certain circumstances. Taxpayers argued that, in this respect, the tax collection system was being implemented unfairly by SARS.
This resulted in financial hardships to them and, in some instances, the near collapse of their businesses; in others, loss of jobs ensued.
Complaints by taxpayers are not new
SAIPA welcomes the report, although the issues raised in the report are not new. It has, however finally been addressed by the Ombud. Industry bodies such as SAIPA, the South African Institute of Chartered Accountants (SAICA) and the South African Institute of Tax Professionals (SAIT) have raised these issues with SARS in the past. Their concerns were never sufficiently addressed as they should have been.
The Ombud’s report should serve as a lesson to SARS to take matters – which are raised with them – seriously and not to wait until it becomes necessary to resort to the Ombud to investigate its conduct. This is an extremely important report, and the findings and recommendations cannot be ignored.
The complaints have been raised by taxpayers who have endured hardship and who took refuge with the Ombud to resolve the matter. The fact that some taxpayers did not want to be identified for fear of intimidation does not take away from the fact that their complaints were justified.
The report clearly illustrates that SARS has to improve its systems and that some of its internal processes will have to be revisited. SARS is being guided by the TAA and it is clearly in a position to apply the act correctly. The Ombud found that SARS “acted outside of the legal framework” in some instances, which caused financial hardship to taxpayers. The financial hardship was found to be “drastic’’ in some instances due to SARS failure to pay the refunds on time.
Matters of concern
One of the practices which was highlighted in the report referred to the raising of assessments to reduce the overpayment of tax (credits) to zero for the 2016 and 2017 financial years.
The Ombud said the information provided by SARS did not give a complete picture of the full financial impact this practice has had on refunds. The practice of raising assessments solely to absorb credits simply because a taxpayer has not explained an overpayment is of grave concern.
Another complaint which has been raised on numerous occasions related to the verification of bank details. Although the verification has been concluded, SARS still waited 21 days before paying legitimate refunds. As much as we support any SARS fight against fraud, however using unfair practices cannot be allowed to continue.
SAIPA finds it concerning that in some instances SARS did not respond or provide comments to the office of the Tax Ombud, and in other instances they had concern with proving responses on the findings related to the complaints wherein no illustrated cases were found.
It would have been prudent for the tax authority to respond or to find solutions to the issues raised by the Ombud. In my view SARS has been more defensive in its responses, than trying to resolve the issues. The report is clearly not about pointing fingers, but to improve current systems and to resolve issues which have been raised in many instances by different stakeholders and taxpayers.
True independence of Tax Ombud
This investigation has offered taxpayers a much better understanding of the role of the Tax Ombud. This has without a doubt confirmed the independence of Tax Ombud Bernard Ngoepe and his office.
The outcome will surely boost taxpayers’ confidence in the office. It will also boost their trust that they are being protected.
It is a victory for taxpayer and for companies who have been placed in financial distress, despite being complaint. The report ensures the fair treatment of taxpayers.
Author: Sibusiso Thungo, Tax Specialist at the South African Institute of Professional Accountants
12 September 2017