Tax Ombud: How it Works and How it is Performing
By Gerhard Nienaber, Director, KISCH Tax Advisory
The Office of the Tax Ombud (OTO) was established in October 2013 to enhance the South African tax administration system. The Office is an independent and impartial channel for taxpayers unable to resolve a service, procedural or administrative complaint through the normal complaints management channels of the South African Revenue Service (SARS). The OTO aligns with the Public Protector. The Public Prosecutor exists to ensure administrative justice by being a check on the exercise of government and its agencies’ authority and, in turn, the OTO exists to ensure administrative justice by being a check on the exercise of the authority of SARS. The OTO is appointed by and reports directly to the Minister of Finance (currently Enoch Godongwana) and may only be removed by the Minister. The term of Tax Ombud is five years but can be renewed.
Process to follow with the OTO
- The route to be taken when lodging complaints to OTO
Via SARS first
Most of the time, in the event of a dispute, the taxpayer/tax practitioner must follow the proper channels with SARS first. If the given time frame with SARS lapses and the taxpayer/tax practitioner’s complaint is not resolved, they can then lodge a complaint with the OTO. The OTO needs the original complaint number from SARS to proceed with assessing the complaint.
Directly
The OTO does make exceptions and allows certain cases to be submitted to them directly, but only under compelling circumstances. These circumstances include the taxpayer/tax practitioner’s request raising systemic issues, exhausting the complaints resolution mechanism causing undue hardship to the taxpayer/tax practitioner, and exhausting the complaints resolution mechanism being unlikely to produce a result within a period that the OTO considers reasonable.
- Application process:
The taxpayer/tax practitioner must complete a complaint form in full and send it to the OTO by email, fax, post, or hand delivery (offices in Pretoria). If the taxpayer is represented by a tax practitioner, then the complaint form must be accompanied by a fully completed Power of Attorney.
- Assessment of complaint
Once the application has been submitted, the OTO will then assess the complaint. First, they will check if the complaint falls within their mandate. If it does not, they will reject it and advise the taxpayer/tax practitioner on what process they need to follow. If, however, the complaint does fall within the OTO’s mandate, they will investigate the nature of the complaint, determine if it is a service issue, a procedural and/or administrative matter, and then make recommendations to SARS. It used to take an average of 15 days to get a complaint resolved following the OTO submitting its recommendations to SARS, but it can now take anywhere from 15 days to over 90 days to get a complaint resolved. This is something that urgently needs to be addressed as it defeats the purpose of the OTO being a check on the exercise of the authority of SARS if SARS can create such a delay in responding to the OTO. This delay also goes against the Memorandum of Understanding (MoU) between the OTO and SARS.
Statistics on the Tax Ombud
Based on the Tax Ombud Annual Report 2022/23, in the reporting period, the Office had contact with 17 249 taxpayers through its contact centre, of which 13 284 contacts were queries and 3 965 were complaints. Most of the queries received (53%) were requests for advice, while 19% concerned the status of existing complaints and 28% were requests from taxpayers for forms and information on how to lodge complaints with the Office. In the reporting period, 3 965 complaints were captured compared to 2 967 in 2020/21. The Office captured and acknowledged 85% of the complaints within two business days. The Office validated 3 950 complaints to determine if a complaint falls within the mandate of the Tax Ombud. This compares to 2 852 validated complaints in 2020/21, representing a 38% increase in validated complaints. Of the 3 950 complaints validated in 2021/22, 2 457 (62.20%) were categorised as service matters, 781 (19.77%) as procedural matters, 640 (16.20 %) as administrative matters and 72 (1.82%) as “Other” matters. “Other” refers to complaints that were lodged with the OTO but were not about complaints involving SARS and did not fall within the mandate of the Office. Individual taxpayers were responsible for 44.1% of validated complaints and taxpayer representatives for 55.8%.
When a complaint is submitted to the OTO, it is evaluated and reviewed. The total number of accepted complaints increased from 1 512 in 2020/21 to 2 058 (including 383 which were later terminated). The number of rejected complaints increased from 1 340 in 2020/21 to 1 892 in the reporting period. The increase in rejected complaints remains a concern as the majority (96.51%) of them were prematurely lodged with the Tax Ombud and had not first been submitted to the SARS Complaints Management Office. The reason could be taxpayers not understanding the SARS complaints management process, necessitating more taxpayer education about this process.
In the reporting year there had been an increase in the number of accepted complaints being investigated under criminal investigation at SARS, whereas in the previous financial year, complaints that fell under criminal investigations did not reach the top 10 complaints referred to the revenue collector for resolution (the top ten complaints being criminal investigations, dispute resolution, account maintenance, assessment management, refunds, debt management, general service, fraud investigations, portfolio management, and verification). Furthermore, the Office noticed that the complaints related to refunds are no longer in the top three; this could mean taxpayers are now receiving their refunds quicker and there is no need to complain.
In 2021/22, the Office finalised 1 561 accepted complaints compared to 1 340 in 2020/21, which yielded a 16% increase in the resolution rate. The value of the top 10 tax refunds collectively paid to taxpayers through the intervention of the OTO exceeded R215 million, compared to R156 million in 2020/21. This was an increase of over 38%.
57% of all respondents reported that they were satisfied with the service offered by the OTO, while 77% of the respondents understood the contents of the letter the Office sent to them with the outcome of their case, and 77% found it easy to lodge a complaint.
Also in 2021/22, systemic investigations based the OTO’s Systemic Investigations team’s research placed one new systemic issue on the register for systemic and emerging issues that could affect many taxpayers. This related to delays on the part of SARS in coding the taxpayer’s profile as a deceased estate and updating the executors’ contact details. In 2021/22, including this deceased estate matter, there were nine systemic issues in the systemic issue register that were sent to SARS as recommendations for tax administration improvements. The submission of these issues to SARS has proven to be crucial in identifying and recommending changes resulting in improved service from the revenue service.
Recent positive outcomes
In January of this year, the OTO published a case where it won a taxpayer the interest due to them (over R135?000.00) on their VAT refund due to SARS’ late payment of said refund. The OTO explained that if a VAT refund is not paid out within 21 business days, SARS is obliged to pay interest at a prescribed rate on the amount refundable.?According to the OTO, there are, however, certain circumstances that will delay the accrual of interest. Where for instance a taxpayer submitted a defective or incomplete return, where SARS requested information from the taxpayers about the return in question, or where a taxpayer did not provide SARS with confirmed banking details. The 21 business days will only start counting on the date on which the taxpayer provides SARS with the correct return, information, or banking details.
News outlets also announced in August of this year that the OTO will evaluate whether SARS did enough to help taxpayers whose eFiling profiles have been hijacked (scammers changing taxpayers’ banking details, filing false returns, collecting the refunds and then SARS later reversing said refunds leaving the legitimate taxpayer with an unwarranted tax debt). The OTO had already been outspoken about the fact that?SARS was holding the legitimate taxpayers liable?for the tax debt, even if they (SARS) were aware of the fraud. The OTO has received approval from the Minister of Finance, Enoch Godongwana, to conduct a review of possible systemic and emerging issues related to SARS’s alleged service failures to help these victims in time, following complaints and queries from taxpayers and industry bodies. The OTO will investigate how specific SARS systems operate, how it formulates and implements policies, practices/procedures, and how it applies legislative provisions. The outcome of this review will be a report containing recommendation which will be submitted to Godongwana.
Challenges faced by OTO
The OTO has stated repeatedly the detrimental effect of not having a national footprint. The single Pretoria office is not sufficiently accessible by taxpayers throughout the country and the OTO requires a presence in the various provinces to have more of an impact. If you look at the 2022/23 reporting period, Gauteng accounted for most complaints (63.8%), followed by the Western Cape (18.1%) and KwaZulu-Natal (8.6%). There were no complaints from the North West Province (and minimal complaints from the Eastern Cape, the Free State, the Northern Cape, Mpumalanga, and Limpopo).
Many taxpayers/tax practitioners (especially those outside of Gauteng) do not know the OTO exists or do not make use of it because they are unaware of the OTO, or they do not know what complaints procedures to follow. Education around the OTO is still lacking in this regard.
If you have any queries on the above or require any tax advice, please contact:
Gerhard Nienaber
Director
KISCH Tax Advisory
+ 27 82?771 9549
Gerhardn@kisch-ip.com
