A proposal to establish a tax ombud funded and staffed by the South African Revenue Service (SARS) was criticised this week, when Parliament’s Standing Committee on Finance held public hearings on the Tax Administration Bill.
The bill proposes that a tax ombud is appointed by the Minister of Finance and reports to him, but that the ombud’s office is funded by SARS and that SARS staff are seconded to the ombud’s office.
Tax practitioners told parliamentarians this week that the tax ombud’s office had to be seen to be independent and therefore had to have its own budget and staff.
The bill proposes that the tax ombud’s rulings will not be binding on SARS or you. However, practitioners told the committee the rulings had to be binding on SARS, otherwise the ombud’s office would simply duplicate the role of the SARS Service Monitoring Office (SSMO).
The SSMO was set up in 2003 to deal with service or procedural issues that taxpayers have with SARS. The tax ombud will, like the SSMO, be confined to hearing complaints about service and procedures, while complaints about tax policy or how SARS determines your tax liability will still have to go to the tax court.
Professor Osman Mollagee, a tax director at PricewaterhouseCoopers (PWC), says that, although a tax ombud appointed by the finance minister and accountable to him is a slight improvement on the SSMO, the ombud’s office would not be truly independent if its costs were paid by SARS and its staff were employed by SARS.
PWC suggests that the tax ombud is funded by the National Treasury and has its own staff, Mollagee says.
Stiaan Klue, the chief executive of the South African Institute of Tax Practitioners, suggested that the tax ombud report directly to Parliament.
Etienne Retief, the chairperson of the national tax committee of the South African Institute of Professional Accountants (Saipa), told parliamentarians that if the tax ombud’s decisions were not binding, the office would be without teeth, but if it did have binding authority subject to review by a court, it would not be necessary to have a separate SSMO.
In its written submission to the finance committee, the South African Institute of Chartered Accountants (Saica) also suggests the SSMO be removed, allowing taxpayers to go directly to the tax ombud.
The proposed tax ombud will hear your complaint only after you have exhausted SARS’s complaints resolution mechanism. The bill also proposes that you will not be able to take a matter that is the subject of an objection or an appeal to the ombud.
But Saica says taxpayers frequently have problems because SARS officials ignore them when they try to use the complaints resolution mechanisms or because SARS takes months to exercise its discretion.
Saica says SARS does not always respond to objections or appeals within the prescribed time periods and then there is little a taxpayer can do other than launch a court application.
The bill proposes that the tax ombud resolves complaints through mediation and conciliation, but Saica, PWC and Saipa suggest that the tax ombud should be able to compel SARS to comply with procedures laid down in the tax Acts or prevent SARS from taking certain actions.
In its written submission, Saipa suggests the tax ombud be given the mandate to force SARS to attend to correspondence, convene the relevant committee to consider applications, give coherent reasons to taxpayers for decisions and be bound by the time lines in the various tax laws.
Saica says the tax ombud should also have the power to direct SARS to suspend its collection procedures where there has been abuse of its power or where it has issued an incorrect assessment. It suggests the tax ombud be able to award you compensation for aggravation and costs incurred in dealing with SARS.
The Association of Chartered Certified Accountants suggests the tax ombud’s role be expanded to include a review of faulty procedures, unfair treatment, bias or prejudice, misleading or inadequate advice, refusal to answer reasonable questions, mistakes in handling claims, frivolous investigations and the burden on taxpayers as a result of SARS’s administrative actions.
The bill aims to consolidate numerous administrative measures in a number of tax Acts. It gives additional rights to taxpayers, as well as greater powers to SARS to ensure that it can collect what you owe.
Tax practitioners also commented on these powers, largely welcoming them, but suggesting counter-balancing measures.