Balancing Sars’ powers and duties with taxpayers’ rights and obligations

Professor Thabo Legwaila was appointed CEO of the Office of the Tax Ombud (OTO) on April 1, following the departure of Advocate Eric Mkhawane, who returned to the Bar last year.

Legwaila has had an esteemed career in the tax field, in academia, and in professional practice, and has been widely published in journals, magazines and newsletters. In 2013 he co-authored the tax textbook Tax Law: An Introduction (republished in 2020).

He was appointed Professor of Tax Law at the University of Johannesburg in 2014, and as a member of the Davis Tax Committee (DTC) in 2015.

The Office of the Tax Ombud (OTO), which is independent of the South African Revenue Service (Sars), makes a positive contribution to improving the South African tax administration system and plays a vital role in ensuring that all taxpayers are treated fairly. The OTO also investigates systemic issues for improved tax administration.

The next step when Sars remedies exhausted

A taxpayer may only approach the OTO after they have exhausted all of Sars’s internal remedies available under the Tax Administration Act (TAA). Taxpayer complaints must relate to a service, administrative or procedural issue with Sars.

The OTO will hold Sars accountable where taxpayers have a legitimate complaint against Sars.

For the 2019 tax year, Sars implemented 99.27% of the OTO’s recommendations, and the top 10 tax refunds paid to taxpayers through the intervention of the OTO collectively exceeded R35 million.

Dynamic, responsive

Legwaila is of the view that the OTO needs to be a dynamic organisation that changes with the times, and with the nature of the issues raised. The OTO cannot deal with the same issues year in and year out, he says. It hopes that the more common complaints levied against Sars become a thing of the past, particularly as tax is becoming more complicated, which may lead to more issues to be dealt with.

The OTO aims to balance Sars’s powers and duties with taxpayers’ rights and obligations.

It maintains a database of systemic and emerging issues related to say, service matters (systemic issues register), and is working towards making more effective use of this. New challenges, such as PAYE issues, require attention. Default judgments and taking money from taxpayers’ bank accounts for alleged debts owing, without following due process, are a concern.

Covid-19 has brought about additional challenges. For example, the delay in finalising issues has caused a large backlog. However, the OTO hasn’t seen as many complaints as normal during the lockdown period.

Matters of substance

There are however still complaints involving refunds not received, and the lack of communication from Sars; for example, Sars not responding to objections and queries. The OTO would like to deal with more serious issues, rather than frivolous matters like that of Sars not following due process.

The OTO has a good relationship with the recognised controlling bodies of tax practitioners such as the Chartered Institute of Management Accountants, Chartered Secretaries Southern Africa, the Financial Planning Institute, the Institute of Accounting and Commerce, the SA Institute of Chartered Accountants, the SA Institute of Professional Accountants and the South African Institute of Tax Professionals.

The OTO also has a very cordial relationship with Sars, with a lot of interaction at the different levels – operational, legal and top management.

In the next few weeks, the OTO will be able to release a systemic issues report. It will be very detailed in terms of issues identified.

Taxpayers’ bill of rights

When asked whether the tax ombud will advocate for a taxpayers’ bill of rights, Legwaila replied that he is personally of the view that it is a much needed document. It has been shown elsewhere that it increases taxpayer morality, and also makes the tax authority aware of taxpayer morality.

A normal taxpayer cannot be expected to go through all the sections of the Tax Administration Act to understand their entitlements, and how to resolve a dispute with Sars.

Taxpayers need a baseline office that can assist them.

A taxpayers’ bill of rights should go much further than the Sars Taxpayers Service Charter, which essentially outlines taxpayers’ rights and responsibilities and the service standards they can expect and must demand from the revenue collector. The service charter is not enough.

In the US, for example, the bill of rights includes the right to retain representation.

It states: “Taxpayers have the right to retain an authorised representative of their choice to represent them in their dealings with the Internal Revenue Service (IRS). Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.” The IRS has a link to the Taxpayer Bill of Rights on the home page of its website.

Working to restore trust and confidence

Following the revelations that emerged during the Nugent Commission of Inquiry into Tax Administration and Governance at Sars, there is still a lot that must be done to instil confidence and trust in Sars. More can be done to improve and commit to turnaround times.

Legwaila thinks it will be a good idea if technical training is provided to staff to increase efficiency and improve on customer service delivery, including how to interact with taxpayers and how to look at matters objectively, as well as being taught the values of being customer-centric. There is a difference between being a collection tool and providing a service, he says.

The OTO’s Strategic Plan 2020-2025 and Annual Performance Plan 2020/21 have been tabled in parliament. The OTO is striving for structural independence from Sars, and this is supported by taxpayers, tax practitioners, civil society, tax industry bodies, academia, as well as representatives of private and public sector entities.

The OTO publishes a quarterly newsletter called Fairplay, which is obtainable from its website.

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