The Office of the Tax Ombud (OTO) released its 2019/20 annual report on Wednesday, with Tax Ombud Judge Bernard Ngoepe revealing that its interventions have resulted in over R116 million in tax refunds being paid to taxpayers.
“The biggest single refund was over R52 million, so you can just imagine how the loss of such an amount could have affected a business,” said Ngoepe.
He feels that “complete independence’ from the South African Revenue Service (Sars) would “facilitate taxpayers’ continued confidence in the office”.
In the year under review over 250 activities – covering education, outreach, stakeholder engagements, advertising and public relations – were conducted to create greater awareness of the OTO. Taxpayers still contact the office prematurely, before exhausting all the required procedures at Sars. However, due to the outreach programme, the number of rejections is dropping.
Minister of Finance Tito Mboweni said: “In these trying times, an institution like the OTO becomes very important in supporting and promoting a culture of tax compliance, as well as in protecting the rights of taxpayers.”
Issues are considered systemic when they are recurring, or have the potential to negatively affect a number of taxpayers.
During the 2019/2020 year, 13 systemic issues the OTO brought to the attention of Sars were successfully resolved. Of these, 50% were service-related; 34.14% concerned dispute resolution (objections and appeals) and 21.29% were related to refunds.
Anyone can report a systemic issue to the OTO. A reduction in the number of system issues will have the effect of reducing the number of complaints.
Report to the minister
The Tax Ombud is required to submit an annual report to the Minister of Finance on at least 10 of the most serious issues encountered by taxpayers, as well as identified systemic and emerging issues.
There were many issues concerning refunds, resulting in Sars making certain changes, including increasing the size parameters for uploading documents on the eFiling site and removing the unwarranted placing of ‘special stoppers’. In addition, Sars’s correspondence has to be specific (not generic), and it must provide consistent timelines.
The following matters have not been resolved and are ongoing:
- Raising assessments without issuing a letter of findings;
- Failure to respond to the request for a deferred payment arrangement within the prescribed turnaround time of 21 days;
- Failure to respond to the request for a compromise within the prescribed turnaround time of 30 days; and
- Failure to respond to requests for a suspension of payment within the prescribed turnaround time of 21 days.
OTO CEO Professor Thabo Legwaila is hoping for the office to move to a paperless environment, and to enable taxpayers to lodge grievances online. Digitisation will streamline many processes, and will make data management more effective.
Digitisation will be costly, and the OTO operates on a tight budget.
Fairness for all
The OTO’s second issue of ‘Fairness for all’, a monthly newsletter featuring significant case studies, outlines a tax refund matter that “saw questionable actions by the revenue collector, several contraventions of tax legislation, and a possible abuse of power”.
This matter was brought to the OTO’s attention in December 2017. At that stage there was a value-added tax (Vat) refund due of R5 million dating back to 2016. By September 2018 Sars had not carried out any investigations nor audits, and the refunds due were sitting at more than R24 million.
After the Tax Ombud got involved, Sars ultimately had to repay over R73 million, as well as R6 million interest.
If the ombud had not intervened, it is unlikely that this matter would have been resolved without expensive litigation.
The OTO commented: “Most entities who are subjected to the same treatment by Sars would surely not be able to survive. The outcome of this matter is an expensive one for the taxpayers who foot the bill for the interest paid. It cannot be in the best interests of the economy and its citizens for this kind of practice to be [tolerated].”
Read: Sars versus taxpayers
Legwaila and Gert van Heerden, senior manager: legal services, discussed the vital role played by the OTO. They hold the view that an effective Tax Ombud should make Sars more vigilant. Perhaps when Sars officials read the latest comments in the OTO newsletter on the discussion of the delayed Vat refund matter, shown below, they will in future check their intended actions against the Tax Administration Act:
- “That unless Sars could provide a legal basis on which the refunds were withheld, this could be seen as an abuse of power.”
- Sars issued assessments prematurely, before the time period given to the taxpayer to submit documents.
- “It became apparent that Sars was continuously disregarding the provisions of the Tax Administration Act by withholding refunds for periods where there were no verifications or audits pending.”
- “What is of great concern is the fact that, on face value at least, it seems as though Sars was content to hold back refunds it was not legally entitled to withhold – until the OTO raised the issue.”