Reviewing the role of the tax ombud

Bernard Ngoepe, tax ombudsman

“2017 has been a defining year for the OTO in overcoming patent obstacles limiting the OTO’s ability to serve as an independent resource for taxpayers,” says Madelein Grobler, South African Institute of Chartered Accountants (Saica) project manager: tax legislation. “The most significant legislative extension included an extended mandate for the OTO to initiate a review of current systemic tax administrative matters such as the OTO Report of alleged delayed payment of refunds or emerging tax administrative issues. The ability of the OTO to appoint its own staff and the allocation of its own financial resources furthermore increased the OTO’s operational independence.”

“The 2017 Annual Report states that 621 complaints were finalised, while 897 complaints have been carried forward. It is worth noting that 86% of the complaints that were finalised were in favour of taxpayers. The carried forward cases on the other hand emphasise the importance to increase the OTO’s human resource capacity.

The report does not shy away from the increased percentage of complaints being rejected. A total of 1,722 cases were rejected in 2016/17 representing almost 50% of the total cases (i.e. 3 454) received, compared to 2015/16 where nearly 44% of complaints (938 of 2,133 were received). Complaints are rejected if they fall outside the mandate of the OTO or when a complaint is lodged prematurely (i.e. the taxpayer did not exhaust Sars’ internal complaints mechanisms).

Mandate

Given that the OTO is mostly contacted by individual taxpayers, representing 77% (i.e. 12,077) of the total 15,658 contacts, we unpack the mandate of the OTO. In summary, the OTO’s mandate is to review and address any service, procedural or administrative complaints initiated by taxpayers relating to powers exercised by Sars in terms of a tax act. Invariably, the more prevalent the issues are and the more significant the adverse impact on a number of taxpayers, the more likely that a review will be conducted on the basis of the matter being systemic.

The matters that fall within the mandate of the OTO may be unpacked by way of an example, which could then furthermore form the basis of a review in terms of the OTO’s extended mandate:

• Service matters: A taxpayer may encounter that lodging a complaint with the Sars complaints management office process is not effectively resolved and may result in a considerable waste of resources, both in terms of time and costs. If several taxpayers with the same experience channel their complaints to the OTO, these issues could be escalated by the tax practitioner to the OTO and a review process may be initiated by the OTO with the approval of the minister of finance.
• The application of provisions of the Tax Administration Act No 28 of 2011 (the TAA): The OTO may, on its own initiative, note possible shortcomings of specific provisions of the TAA. For example, a number of taxpayers are experiencing frustrations with verification audits and decisions of invalid objections by Sars, without seemingly having any clearly defined procedural recourse. The minister, if he becomes aware thereof, may now instruct the OTO to review these processes and to make a recommendation, which recommendation may be relied on for effecting the necessary legislative amendment. The OTO may also approach the minister to authorise such a review should it become aware of such matter.
• Procedural and administrative provisions of a tax act. The original mandate of the OTO was seemingly closely resembling an extended complaints process. However, it should now be clear that with the current extended mandate, the position of the OTO has been strengthened significantly in that the role of the OTO is now instrumental in ensuring observance of procedural fairness on a more fundamental level. The mandate therefore provides a bridging link between an internal complaint and the judicial review processes. It therefore becomes increasingly useful in reducing or eliminating the need for costly High Court processes. This also serves the constitutional values of a more efficient and fair administration accessible to all taxpayers in line with the provisions of the Promotion of Administrative Justice Act No 3 of 2000 (the PAJA).

The purpose of the OTO is to increase the efficiency of SARS and the tax administration system in collecting taxes, while facilitating a good relationship between Sars and taxpayers. In discharging such mandate, the OTO is in effect a mediator between Sars and taxpayers in resolving administrative tax complaints and also ensures that taxpayers have full access to Sars’ complaints resolution mechanisms. The 2016 legislative amendments, effective from 19 January 2017 are considered to increase transparency, efficiency, fairness and accountability, as will also further be supported by the draft Code of Good Administrative Conduct that will be issued in terms of section 10(5A) of the PAJA.

Recognising the immense challenges that Sars face in executing its mandate is part and parcel of the common aspiration by all stakeholders to make Sars world class and an institution we can collectively be proud of. The OTO should continue, in collaboration with the public and other organs of government, to endeavour in contributing to this aspiration that so critically underpins our social compact between the state and society,” concludes Grobler.