The Office of the Tax Ombud has been a feature of the South African tax landscape for seven years. In that time it has ruled in favour of taxpayers in 80% of the complaints against the South African Revenue Service (Sars).
However, it is still not structurally independent from the revenue service – and such independence is necessary for the credibility of the tax ombud’s office.
“It would be good for tax morale and a culture of tax compliance,” says Tax Ombud Judge Bernard Ngoepe.
Read: The cost of political deafness for taxpayers
The Office of the Tax Ombud (OTO) believes every country needs a tax administration that sticks to the rules and treats taxpayers with dignity and fairness.
Abuse of revenues
“We acknowledge that taxpayers are enraged by the corruption pandemic that has overwhelmed the country, especially as it relates to Covid-19 tenders,” says OTO CEO Thabo Legwaila.
“This abuse of the taxes collected harms the tax administration system and the OTO condemns this corruption and any abuse and looting of the hard-earned taxes that have been collected.”
It is bad when someone does not pay taxes, but even “worse and disheartening” when someone then goes and steals the taxes that have been collected from compliant and patriotic taxpayers, says Legwaila in the latest OTO newsletter.
According to Legwaila taxpayers should be treated fairly and justly in order to ease the burden of compliance. Tax collection is under pressure, but it should continue to be carried out in a manner that is administratively fair, with correct and legislated procedures followed.
Channel for fairness
Elle-Sarah Rossato, PwC’s tax controversy and dispute resolution leader and chair of the tax administration work group of the South African Institute of Tax Professionals, believes that the OTO’s presence has created an additional channel for administrative fairness.
“It has conducted independent reviews of complaints levelled against Sars [within its mandate] and they have provided redress to many small, medium and large taxpayers.”
The office has managed to get Sars to enhance its internal complaints mechanisms and has created an awareness and accountability within Sars to abide by its own legislation, she adds.
The results of the PwC Taxing Times survey released in August show that almost all (98%) of respondents are of the view that the behaviour of Sars officials in terms of its Service Charter should be linked to their key performance indicators (KPIs).
Rossato says beyond the perception of the tax administration and the tax system, confidence in the government is extremely important.
“It gains support for compliance, and for minimising avoidance of rules and regulations, especially with regard to taxation.”
In this year’s survey PwC asked respondents how much confidence they have in government.
The results were split, with half saying they have confidence and the other half saying they have no confidence. Only 1% said they have a lot of confidence in the government.
Almost three quarters of the respondents (73%) stated that they are dissatisfied with public infrastructure and services. “Although these factors are beyond the tax administration’s reach, these drivers will need to be addressed to avoid deterioration in tax compliance,” warns Rossato.
Ngoepe says the OTO has provided access to tax justice to thousands of taxpayers who could not afford to take Sars to court as litigation is expensive.
“We have been providing independent, impartial and free recourse to taxpayers.”
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Legwaila acknowledges the fact that Sars has considerable power and sufficient resources to battle it out with taxpayers in courts, while taxpayers are rarely in a position to stay in the ring.
Ngoepe says 90% of its recommendations to Sars have been implemented in the past three years.
However, Kubashni Moodley, tax partner at mid-tier accounting firm PKF, says the fact that the recommendations of the ombud are non-binding is problematic. It results in a serious weakening of the entire complaints process.
In an article in the OTO newsletter Moodley expresses the view that if the recommendations were binding, they would be taken more seriously by Sars personnel and dealt with properly.
At present, when a complaint is sent to Sars, the person dealing with the matter may drag their feet in resolving the case.
“This results in the taxpayer and the Office of the Tax Ombud having to follow up with Sars on numerous occasions,” she remarks.
In the PwC survey respondents were asked what Sars should do to improve its service to taxpayers. More than half (55%) favoured actions to improve the technical skills of its staff.
Even more pointedly, 51% said Sars needs to improve the ways in which taxpayers can communicate directly with the revenue service, rather than through eFiling or the call centre.