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Proposed tax administration law amendments welcome, but concern remains

By in Business, Economy, Finance on August 29, 2016

By: Sibusiso Thungo, Tax Manager, South African Institute of Professional Accountants.

In early August this year, comments were submitted for the draft 2016 Tax Administration Laws Amendment Bill that brings welcome change and thought-provoking additions.

However, Section 16 of the bill has caused a major concern. To clarify, this section speaks of the mandate of the Office of the Tax Ombud to review and investigate any systemic issues related to a service matter; including the application of the provisions of the Tax Administration Act; or procedural or administrative provisions of a Tax Act, as defined in the above Act, only at the request of the minister. It is one of the areas being discussed with the ministry to ensure that the Office of the Ombud has true power to bring on substantial change and oversight.

We want to see that the Office of the Ombud is being given the ability to investigate complaints about infringements of taxpayers’ rights by South African Revenue Services (SARS).

This includes recent allegations that SARS delays paying refunds, especially around their financial year end. These have never been investigated, so if the Office of the Ombud can achieve this kind of power, then it would be of inordinate value to taxpayers. It means that SARS will be called to question when their actions are not in line with taxpayers’ constitutional rights, or fair and reasonable administrative actions.

It must be noted that the above is not something new for the Office of the Ombud, other jurisdictions like Canada, India and Australia have been given a similar mandate.

Rise of the Tax Ombud
The Office of the Tax Ombud was originally created in 2013 to engage with the rising concerns of taxpayers when dealing with SARS, as well as to take a vital seat at the taxation table.

There was a need to have an intermediary to deal with the complaints laid before SARS. Under the leadership of Judge Bernard Ngoepe, this Office of the Ombud has seen considerable success and played a pivotal role in resolving a significant number of cases.

To date, 88% of the cases referred to the Office of the Ombud have been resolved with SARS taking its recommendations into consideration. It has, perhaps surprisingly, found joy on behalf of taxpayers and practitioners in spite of having limited authority and weight. These successes have played no small part in the proposed changes ahead.

More time for mandate
Also included within the draft bill are crucial proposed changes to the Office of the Ombud that could potentially give both taxpayers and Ombud greater control and independence when it comes to dealing with SARS and provide taxpayers with a reliable, neutral space in which to address challenging situations or issues.

With the current legislation, the Office of the Ombud has only three years to achieve its mandate. The new draft legislation proposes to extend this duration to five years, a very welcome and applauded step, as it can be difficult to instigate real change in only three years. This is particularly true of an office that is so new.

By extending the length of time for the Office of the Ombud to run, the draft legislation will allow the office potentially save even more taxpayers’ frustration and concern. Should the legislation be signed off, the office will run for five years effective from 2017, but how it will be managed and when its start date finalised has yet to be determined.

Other welcome changes
In addition to the time extension, the Office of the Ombud has been given more power. Previously, when the office wanted to appoint staff, they could only do so in accordance with the SARS Act and after consultation with the SARS commissioner. With the current draft legislation, the office now has the autonomy to independently appoint staff and this will support them in attracting talent. It shows that they are increasingly independent of SARS.

Finally, the proposed amendments also place control of the budget into the hands of the Ombud. While the organisation will still be funded by SARS under the proposed legislation, there are at least some steps being taken to shift the boundaries of control.

Currently, the recommendations the Office of the Ombud makes are not binding to SARS and taxpayers. They may choose to follow them or not, however if not accepted by a taxpayer or SARS, reasons for such decision must be provided to the Office of the Tax Ombud. SARS has accepted all of these recommendations so far and it is clear that they take the Office of the Ombud seriously. Hopefully this will only bode well for the growth of the office going forward.