The Ombudsman & SARS/taxpayer relations
27 January 2014
Posted by: Author: Graham Walker
Author: Graham Walker (Altron)
Perhaps the only people that don’t necessarily relish the recent appointment of the ombudsman are the South African Revenue Services’ (SARS) employees who, seemingly with impunity, don’t follow due process. A number of distinguished tax experts, including Dr Beric Croome who spoke at a recent SAIT breakfast introducing the Ombudsman, have commented, on the lack of redress for taxpayers in the Tax Administration Act No.28 of 2011 (TAA). SARS currently has draconian provisions contained in the TAA, which cover a broad range of taxpayer transgressions. I am, however, heartened by the words of Judge Bernard Ngoepe, who when addressing the same breakfast meeting said, "Perhaps SARS will mend its ways if it knows someone is watching over its shoulder.” While a decision made by the ombudsman is not binding to SARS, the Judge was at pains to point out that SARS should heed the call from his office.The Ombudsman has already recorded one case, which was resolved even before the office was fully staffed - and this is indeed heartening because the office will certainly be inundated with requests for interventions from frustrated taxpayers seeking administrative redress.
A number of complaints are, in all likelihood, to be system- related, meaning that there will be a recurrent pattern in the nature of the complaints. This will require a dedicated information technology ("IT”) systems team at SARS to remedy the situation. In my view, the SARS’ modernisation programme is a primary source of frustration and was implemented with undue haste and without sufficient consultation with taxpayers on the practical implications of the changes. To give the programme its fair due, it does introduce positives such as e-filing but there are also many negatives as set out below. Tax practitioners’ clients are unwilling and - in many cases - unable to pay for the increased compliance charges and the administrative interventions needed to correct SARS’ actions. The apparent, current, default answer from the SARS’ operational interface is: "We have no control over head office decisions.”This invites several questions: Who is making these decisions? SARS’ operational staff members seem not to challenge these central system changes. Many of the operational changes have cost taxpayers millions of Rands in additional staffing costs and major changes to IT systems. What is the tax yield to SARS, net of these taxpayer costs, which are an allowable deduction from taxable income? Finally, who will review this "new” data and revert to taxpayers, with specific questions on relevant points of law?
It is easy to automate a process, but far more difficult to use the information to increase compliance or - more importantly - the tax take. The second source of frustration is the approach often taken by many SARS staff members, which assumes a taxpayer is guilty until proven innocent. Procedures are frequently disregarded and in some cases the law is disregarded. The former is the domain of the ombudsman, whereas the latter – the subject of a separate article - falls to be dealt with by the courts. Prior to the appointment of the ombudsman, the only taxpayer recourse for redress was via the SARS’ service monitoring office and the alternative dispute resolution procedure "ADR”. I, for one, was a staunch supporter of the ADR until faced with a situation during an ADR proceeding which prompted the late Advocate David Meyorwitz to lament: "SARS you are before me again and woefully out of time, what am I to do?” Today one arrives at an ADR to find the presiding officer frustrated by SARS’ lack of preparation, and they frequently proceed to argue on a basis not supported in tax law, or –as has happened to me - to dissect an IFRS statement which has no bearing on taxable income.
So much for the once successful ADR process. And one can only imagine the frustrations that a learned judge may experience dealing with this situation in a court of law. One must also question SARS’ capacity to provide resources to the office of the ombudsman since it is already woefully short of competent audit staff to meet its own mandates. Perhaps a solution lies in garnering suitably qualified staff for the adjudication function, on a contract basis, using cloud computing, which would save on office costs. A database of cases could be created and cases could be assigned online. The lack of fixed overhead costs would be in the ombudsman’s favour, as payment would only be made for cases actually reviewed and presented. Clearly a fixed core staff would be needed at a central location to monitor work in progress. Regional nodes could be set up to cater for interaction with taxpayers at ground level and this could be facilitated by regional contract staff as and when required.
This would obviate the need for fixed regional offices. SAIT is at present in fact performing this function for and behalf of its members and it already has a database of regional problems to kick-start the ombudsman’s initiative. These concerns and suggestions considered, I am of the firm view that the tax community needs to approach the appointment of the ombudsman positively, and work together with SARS to ensure that the ombudsman’s office is not only successful, but that trust between taxpayers, their hard-pressed advisors and SARS is re-established. Tax in its many guises is complex in nature and many small businesses receive sound advice from their advisers but are frustrated by the lack of decision-making or a high-handed attitude from certain SARS officials. It is the remit of organisations such as SAIT, SAICA and SAIPA, not SARS, to deal with delinquent practitioners.
The cost of doing business in South Africa is high when compliance costs are taken into account. Not receiving a tax clearance certificate on time, or having a garnishee order on one’s bank account, can result in business failure. The national development plan calls on business to create jobs; in turn, we call on government to make this as simple as possible and to remove the current impediments entrepreneurs face in their bid to start businesses, succeed and grow.
This article first appeared on the Jan/Feb edition of Tax Talk.