South African tax legislation allows taxpayers the right to dispute an assessment or any decision that is subject to objection and appeal. However, several issues stand in the way of quick resolution.
In 2020 the South African Revenue Service (Sars) raised 4.34 million personal income tax returns, resulting in more than 520 000 (12%) objections.
This is higher than the international norm and Sars has committed itself to bringing the rate of dispute to within “appropriate norms”.
Sars says many of the disputes arise because of the lack of documentation provided during the verification or objection process. This delays the resolution of disputes and is primarily responsible for delays and the ageing of appeals in particular.
Elle-Sarah Rossato, head of tax controversy and dispute resolution at PwC, adds that the loss of expertise at Sars resulted in certain processes functioning less than optimally. The eFiling system also does not assist in resolving many issues to satisfaction.
The lack of skills and improvements to the eFiling system have received attention since Sars Commissioner Edward Kieswetter and his new team started with the rebuilding of the tax agency.
Rossato, who also heads the Tax Administration Act working group of the South African Institute of Taxation, says there are ways to avoid a dispute process with Sars.
“In many instances Sars auditors will request additional information from the taxpayer, who will either not respond or respond with incomplete information.”
She says by the time the matter reaches a legal official in the dispute phase, the taxpayer will offer the information required to support their dispute. “If it was supplied from the start, there would never have been a dispute.”
If taxpayers do not understand what is required of them they should ask. Having said that, Rossato adds that in many instances Sars does not communicate effectively, or its systems do not reflect the information that has been sent to them through the eFiling system.
Many disputes could be put to bed if communication was faster and better.
There have been instances where taxpayers waited months for an answer about what was required of them. Although there are thousands of unresolved disputes in the system, not all of them are active cases on their way to the tax court. Cases that could have been resolved faster “upstream” are causing “downstream” blockages, she says.
Sars urges taxpayers to provide accurate documentation as early as possible in order to hasten the resolution of a dispute.
Understand the processes
In many instances the lack of understanding leads to taxpayers or even their tax practitioners following the wrong process. According to the Sars guide on the dispute resolution process, if an assessment contains errors, whether caused by Sars or the taxpayer, there is no need to object against the assessment. The taxpayer must submit a request for correction.
Rossato says there are different procedural remedies available, but they are not always easy to understand without some experience of the dispute resolution process.
Sars notes in its guide that taxpayers are required to pay the tax in dispute before the dispute is finalised or resolved. The obligation to pay is not ‘automatically’ suspended by an objection or an appeal.
The obligation to pay can only be suspended by Sars on request by the taxpayer.
Payment may be suspended depending on the compliance history of the taxpayer, the amount of tax involved, the risk of dissipation of assets during the payment suspension, or whether there is fraud involved in the origin of the dispute.
Suzanne Smit, fiduciary and tax consultant at Fidelis Vox, says should taxpayers feel there is no end to resolving their dispute Sars they can apply for a default judgment (final relief) under Rule 56 of the Tax Administration Act.
The rules set out the dispute resolution timelines and if there is non-compliance by either the taxpayer or Sars, the aggrieved party may give notice to the non-complaint party to comply within 15 days, failing which they can apply to the tax court for a final order in their favour.