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Tax Ombud to probe Sars (again)

Finance Minister Nhlanhla Nene approves two separate reviews.

The Tax Ombud has received approval to launch two separate investigations into the South African Revenue Service (Sars).

The reviews are related to problems with Pay-As-You Earn (PAYE) statement of accounts and alleged non-adherence to dispute resolution timeframes by Sars.

The Ombud previously conducted a similar probe and found that Sars unduly delayed the payment of tax refunds in certain instances.

In terms of the Tax Administration Act (TAA), the Ombud may investigate any systemic and emerging issue with the approval of the Minister of Finance.

In a statement issued on Wednesday, Ngoepe said the request to Minister Nhlanhla Nene was prompted by complaints he received from taxpayers and industry bodies.

“Both Sars and external stakeholders including industry bodies have already been notified. The Office of the Tax Ombud will be engaging Sars, concerned taxpayers and/or their representatives including their relevant industry bodies.

“It is hoped that, as a contribution toward facilitating revenue collection and building confidence in the tax system, necessary recommendations will be made at the end, if need be,” the Ombud said.

The announcement comes just days before the Nugent Commission of Inquiry into tax administration and governance is expected to deliver its interim report to president Cyril Ramaphosa on September 30. The final report is expected by November 30.

The Nugent commission previously heard how Sars became fragmented after the implementation of a new operating model under the now suspended Commissioner Tom Moyane and is expected to make recommendations to put Sars on firmer footing. Moyane was suspended amid allegations of misconduct.

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“…SARS not adhering to Dispute time-frames”

I came across the odd case where an Objection-Dispute was lodge WITHIN the 30 business day rule (..from the date of assessment), and where a findings letter later arrives from SARS stating “Invalid” objection…we need to re-submit within 20 business days.

Dispute correspondence are being thrown back and forth unnecessarily, too many times.

Don’t expect too much from this. There is honour amongst thieves.

The same people dealing with verification audits are dealing with Disputes – this is the Compliance division in SARS. The verification audits have been increasing year on year as SARS tried to plug holes in their risk engine. Stopping more and more cases because of the massive amount of fraud being committed against SARS via its eFiling channel. The executive of Compliance has been moving more and more people from Disputes to verification audits to address the growing inventory. In addition to this team members in Compliance (especially PIT) have been working overtime continuously for 3 years. No investment in additional human resources have been made. There is virtually no training due to the size of the inventory and when people resign the positions are often not filled.

This year none of this is working anymore, too many audits, not enough people and the decision to shorten filing season has led to the position where Compliance is sitting with tens of thousands of audits outside the service charter period of 21 days. SARS is now touching the audit for the first time when a case is already past 30 days. The auditor must now decide to allow or disallow without being able to request relevant supporting documents. The dispute division don’t have any staff left, those remaining finding making disputes invalid the only recourse to try and manage that inventory.

The first thing that must change is that one Executive (in this case the person’s name is Freed Khan) cannot be in charge of verification audits and disputes. It is evident that this Executive will prioritise one item and neglect another item. Why SARS has not changed this and investigated this Compliance division yet is unclear.

Nothing has changed in SARS since the previous Tax Ombud report. This report was not even shared in SARS. Having another investigation just appears to be delaying tactic. The Ombud is staffed by previous SARS staff, they know exactly what is wrong inside SARS. Nobody wants to do anything about it. The Tax Ombud is not rally independent. Mark Kingon is a placeholder Commissioner with zero power to make changes. This situation will continue with the continuous destruction of functioning areas inside SARS.

One must ask the question – where does this buck stop?

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