ID theft among issues in tax ombud's report
27 October 2014
Posted by: Author: Angelque Arde
Author: Angelque Arde (Iol)
Cases of e-filing fraud, identity theft and the wrongful classification of taxpayers as provisional taxpayers are among the "serious issues” that the Tax Ombud dealt with in his first term in office.
This is according to the ombud’s first annual report, which covers the office’s first six months.
The Office of the Tax Ombud was launched in October last year to provide a free and impartial service for taxpayers who have been unable to resolve problems through the appeal processes offered by South African Revenue Service (SARS).
The ombud is Judge Bernard Makgabo Ngoepe. He reports to the Minister of Finance and is independent of SARS.
Over six months, 670 taxpayers made contact with the ombud’s office, but only 61 of them were valid complainants.
Judge Ngoepe says the low number of valid complaints is less indicative of good service levels at SARS and more indicative of low levels of awareness of his office.
"It may well be that SARS is doing a good job, but ours is a new office – members of the public don’t know much about us or our mandate, and therefore don’t know what we can or can’t do for them. You approach an institution that you believe can help you. But if you look at the gross number of approaches (670) – that’s more than 100 a month, which is not bad for a new office.”
The numbers show that people need to be told more about his office, and in particular about its mandate, Ngoepe says (see "What the ombud can and can’t do”, right).
Of the 670 approaches received, 77 percent (514) were enquiries; 10 percent (64) fell outside his office’s mandate and were rejected as invalid, and four percent (31) were noted as "concerns”.
The report describes "concerns” as complaints that arose more than a year before the appointment of the ombud, which the ombud was not allowed to review. But Advocate Hanyana Eric Mkhawane, the chief executive of the ombud’s office, says these complaints were valid and raise "important systemic issues. We got approval from the minister to look at those cases, so some have been addressed and raised with SARS.”
Of the 61 valid complaints received, only 63 percent (40) were resolved.
On the high percentage of unresolved complaints, Ngoepe says matters don’t lie entirely in the ombud’s hands. "We will refer them to SARS and they may call for a legal opinion. In some instances you find that the taxpayer doesn’t provide all the necessary information at once. It’s a combination of factors. But it doesn’t take us that long to finalise a matter.”
The ombud’s office aims to resolve complaints within 15 business working days of submitting them to SARS.
The annual report segments complaints into three categories – serious issues, systemic issues and emerging issues – and provides cases in each category. Some matters fall into more than one category. For example, e-filing fraud is both a serious and a systemic issue.
The report notes a "lack of sufficient security within SARS systems to prevent e-filing fraud”. In one case, a company’s bank details were changed – by way of fraudulent e-filing – resulting in a refund being paid into a third-party account. Despite several attempts by the company to deal through SARS, including providing SARS with the necessary proof and documentation as requested, "no feedback was received on the progress of the investigation”. The ombud recommended to SARS that it finalise the matter, and it was resolved within three days .
In another case involving a company and e-filing fraud, the result of its complaint to the ombud wasn’t as favourable. The company submitted its income tax return via e-filing, without completing its banking details. About three months later, a fraudulent return was submitted with banking details and the name of an unknown public officer. The company’s banking details were updated according to the information on the fraudulent return and the refund was released into that account.
The ombud’s report states that the company reported the matter to SARS and it was escalated to the SARS Service Monitoring Office. Despite numerous follow-ups to SARS, no feedback was forthcoming. The ombud’s office asked SARS for an update on the investigation and to explain why it had not paid the company the refund, but the matter has yet to be resolved.
Individuals also fell victim to e-filing fraud. The report says SARS’s system is "failing to prevent fraudulent e-filing profiles from being opened under taxpayers’ names, resulting in fraudulent income tax returns being submitted and fraudulent refunds released”. In the case of a taxpayer who was not an e-filer, two fraudulent profiles were opened under the taxpayer’s ID number with different particulars. The ombud’s office is evaluating the complaint and has not yet forwarded it to SARS, the report says.
Identity theft is another serious issue and "SARS is finding it difficult to prevent identity theft on their system”, the report says. In one case of identity theft, a fraudster submitted a fraudulent return in the taxpayer’s name. This resulted in a duplicate assessment for that year. In order to secure the refund, fraudulent documentation for a new bank account was submitted at a SARS office.
Despite numerous follow ups, no feedback was forthcoming from SARS. Following the ombud’s recommendation to SARS that it finalise its investigation, the refund was released. The matter took 35 days to be resolved.
The report says that SARS’s process of bank detail validation has significantly improved to ensure that only the taxpayer and their authorised representative can request changes to banking details.
Ngoepe says that e-filing fraud and identity theft are very serious, but is emphatic that they are not common problems. "I wouldn’t want taxpayers to panic, but even one such case is serious,” he says.
"[Our office] is required to identify trends and categorise issues. The idea is that SARS should be able to get the message and put its house in order.”
What the ombud can and can't do
The Tax Ombud’s mandate is to address complaints about service, procedural or administrative matters that you have been unable to resolve with SARS. You must have exhausted SARS’s internal complaint systems before approaching the ombud.
There are limitations to the ombud’s authority. For example, he may not review:
* Legislation or tax policy;
* SARS policy or practice generally prevailing, other than to the extent that it relates to a service, procedural or administrative matter;
* A matter subject to objection and appeal under a tax Act, except for an administrative matter relating to such objection and appeal; or
* A decision of, a proceeding in or a matter before a tax court.
Recommendations made by the ombud are not binding on taxpayers or SARS. If you, as a complainant, are not satisfied with the outcome of your complaint, you are free to pursue other channels of redress.
The tax ombud offers the following advice to taxpayers:
* Understand the mandate of the ombud. In assessing your complaint, the ombud’s office may help by indirectly addressing other issues. "For example, SARS may have given you wrong advice, which you acted on. It’s a service issue, even if the main dispute falls outside our mandate. Addressing service issues may fast-track the resolution of another issue,” the ombud says.
* Be responsive to SARS, the ombud says. Don’t ignore SARS
* Check your assessment and make sure you understand it. Ultimately, you are responsible for it.
* If you owe SARS money and you can pay it, don’t put it off, or you will owe much more in the long run. If you don’t have the money, make an arrangement with SARS, but don’t ignore the problem.
Contact the ombud
The Tax Ombud is Judge Bernard Makgabo Ngoepe
Phone: 080 066 2837 or 012 431 9105/6
Fax: 012 452 5013
Post: P O Box 12314, Hatfield, 0028
This article first appeared on iol.co.za.