CEO Office of the Tax Ombud Advocate Eric

CEO: Office of the Tax Ombud Advocate Eric Mkhawane BALANCING SCALES BETWEEN TAXPAYERS AND SARS.

OFFICE OF THE TAX OMBUD – Background – Role of an Ombud – SARS Service Monitoring Office – Tax Ombud – Appointment and Independence – Mandate of the Tax Ombud – Limitations on Authority – Review of Complaint – Reports by the Tax Ombud – Resolutions and recommendations – Confidentiality – Top five issues raised by Taxpayers – Serious Issues – Systemic Issues – Procedural Issues – Service Issues – Letters of appreciation – How to contact the OTO

BACKGROUND v Third Interim report of Katz Commission Proposal to introduce the Tax Ombud to (a) protect taxpayer rights (b) mediate between taxpayers and revenue authorities

ROLE OF AN OMBUD v Ombud is an independent and impartial officer who deals with complaints about an organization/agency, whether private or public. v Typically these complaints involve issues that the organization or agency has been unable or unwilling, to resolve to the complainant’s satisfaction.

ROLE OF AN OMBUD (cont. ) v Notably – Ombud – represents many of the concerns left untouched. o He is impartial o His services are free and available to all o He operates informally.

SARS SERVICE MONITORING OFFICE v SARS Service Monitoring Office was established in 2002 to resolve disputes of service, procedural or administrative nature. v No independence.

TAX OMBUD v Established in terms of the Tax Administration Act (Act 28 of 2011) v One of the key objectives of the Act is to achieve a balance between SARS powers and duties, on the one hand, and taxpayer rights and obligations on the other.

TAX OMBUD (cont. ) v Creating an independent and effective recourse for taxpayers in respect of service, procedural and administrative matters. v Needed to draw from international best practices v The Tax Administrative Act draws largely from the Canadian, US and UK models.

APPOINTMENT AND INDEPENDENCE v s 14 – The Tax Ombud is appointed by the Minister to ensure independence from SARS. Similar to Canada, the terms and conditions of employment are determined by the Minister. (Renewable term of 3 (three) years). (Terms and Conditions of employment and determined by Minister. ) v Can only be removed by the Minister - s 14(2). v The Tax Ombud is accountable to the Minister s 14(5)(a).

APPOINTMENT AND INDEPENDENCE (cont) v The Tax Ombud reports directly to the Minister s 19(1)(a). v To submits an annual report to the Minister within 5 months of end of SARS’ financial year – s 19(1)(b). (Similar to Canada)

APPOINTMENT AND INDEPENDENCE (cont. ) v Similar to the Canadian model. v s 15 - The staff of the Office of the Tax Ombud (OTO) must be employed in terms of the SARS Act (and be seconded to the Office of the Tax Ombud at the request of the Tax Ombud in consultation with the Commissioner).

APPOINTMENT AND INDEPENDENCE (cont. ) v In Canada, the staff is also employed pursuant to Canada Revenue Agency Act, and shall be within the Agency v S 15(4) – Expenditure connected with the functions of the Tax Ombud is paid out of the funds of SARS.

MANDATE OF TAX OMBUD s 16. taxpayer regarding a service matter or a procedural or administrative matter arising from the application of the provisions of a tax Act by SARS. (Currently includes Customs & Excise – since 2012. All legislation administered by the Commissioner).

MANDATE OF TAX OMBUD (cont. ) In discharging his or her mandate, the Tax Ombud must— (a) review a complaint and, if necessary, resolve it through mediation or conciliation; (b) act independently in resolving a complaint; (c) follow informal, fair and cost-effective procedures in resolving a complaint;

MANDATE OF TAX OMBUD (cont. ) (d) provide information to a taxpayer about the mandate of the Tax Ombud and the procedures to pursue a complaint; (e) facilitate access by taxpayers to complaint resolution mechanisms within SARS to address complaints; and (f) identify and review systemic and emerging issues related to service matters or the application of the provisions of this Act or procedural or administrative provisions of a tax Act that impact negatively on taxpayers.

LIMITATIONS ON AUTHORITY s 17. The Tax Ombud may not review (a) legislation or tax policy; (b) SARS policy or practice generally prevailing, other than to the extent that it relates to a service matter or a procedural or administrative matter arising from the application of the provisions of a tax Act by SARS; (c) a matter subject to objection and appeal under a tax Act, except for an administrative matter relating to such objection and appeal; or

LIMITATIONS ON AUTHORITY (cont. ) (d) a decision of, proceeding in or matter before the tax court. S 259(2) The first Tax Ombud may not review a matter that arose more than one year before the day on which the Tax Ombud is appointed, unless the Minister requests him to do so. (Currently the Ombud has approval from the Minister to review these cases).

REVIEW OF COMPLAINT 18. (2) The Tax Ombud may— (a) determine how a review is to be conducted; and (b) determine whether a review should be terminated before completion.

REVIEW OF COMPLAINT (cont. ) (4) The Tax Ombud may only review a request if the requester has exhausted the available complaints resolution mechanisms in SARS, unless there are compelling circumstances for not doing so. (5) To determine whethere are compelling circumstances, the Tax Ombud must consider factor such as whether:

REVIEW OF COMPLAINT (cont. ) (a) the request raises systemic issues; (b) exhausting the complaints resolution mechanisms will cause undue hardship to the requester; or (c) exhausting the complaints resolution mechanisms is unlikely to produce a result within a period of time that the Tax Ombud considers reasonable.

REPORTS BY THE TAX OMBUD s 19. Finance Minister (1)within the of. Annual report to 5 months of end of SARS financial year 19(1)(a). (2) Quarterly report to the commissioner Reports contain 1. 1. 1 A summary of at least 10 of the most serious issues encountered by taxpayers 1. 2 Identified systemic and emerging issues

REPORTS BY THE TAX OMBUD (cont. ) 2. Inventory of issues: v for which actions has been taken and result of action v action remains to be taken, period it remained on the inventory v no action taken, period in the inventory and reason for inaction. 3. Recommendation for such administrative action as may be appropriate to resolve problems experienced by taxpayers. Minister tables this report to the National Assembly.

RESOLUTION AND RECOMMENDATIONS s 20. (2) The. Tax. Ombud’srecommendationsarenot binding on taxpayers or SARS.

CONFIDENTIALITY s 21 (1) The provisions Chapter apply ofwith the 6 changes required by the context for the purpose of this Part. Deals with general prohibition of disclosure – Secrecy Provisions. (2) SARS must allow the Tax Ombud access to information in the possession of SARS that relates to the Tax Ombud’s powers and duties under this Act.

CONFIDENTIALITY (cont. ) (3) The Tax Ombud any person acting on the Tax Ombud’s behalf may not disclose information of any kind that is obtained by or on behalf of the Tax Ombud, or prepared from information obtained by or on behalf of the Tax Ombud, to SARS, except to the extent required for the purpose of the performance of functions and duties under this Part.

TOP FIVE ISSUES RAISED BY TAXPAYERS ASSESSMENTS REFUNDS DISPUTE RESOLUTION GENERAL SERVICE CORRESPONDENCE 23% 22% 19% 14% 9% OTHERS 13%

SERIOUS ISSUES v Authentication of Banking Details: v A taxpayer notified SARS with his changes of banking details. SARS failed to authenticate the taxpayer details and did not implement the new banking details before a refund was due to the Taxpayer. v The refund was paid into the old bank account which was allocated to a different client by the bank. v The taxpayer lodged a complaint with the Office of the Tax Ombud and after our intervention, SARS authenticated the banking details and rectified the payment to the taxpayer.

SERIOUS ISSUES (cont. ) v Failure to Attend to Objection v A taxpayer submitted an objection to an assessment raised by SARS at the SARS Branch office within the prescribed time. v SARS branch Office failed to forward the objection to the relevant department within time to address the dispute. v The taxpayer was required to apply for a Tax Clearance Certificate but could not do so while the dispute was pending v The taxpayer lodged a complaint with the OTO and after our intervention the objection was forwarded to the relevant department and resolution was expedited.

SYSTEMIC ISSUES v Capturing Error by SARS v A taxpayer went to SARS branch office for assistance in filing its Income Tax Returns. v The amount of income was incorrectly captured on the return by the SARS official. v The taxpayer lodged several objections, all of which were rejected by SARS due to the fact that they were lodged after the assessment had prescribed. v The taxpayer lodged a complaint with the OTO and after our intervention the assessment was corrected in terms of the provisions of the Tax Legislation.

SYSTEMIC ISSUES (CONT. ) v Erroneous Classification for taxpayer as Provisional Taxpayer v Taxpayer was erroneously classified as a provisional taxpayer when he was not. This resulted in penalties and interest being levied for his failure to file provisional tax returns while he was in fact complying with legislation by filing his annual returns. v Being unsuccessful in resolving this issue with SARS, the Taxpayer lodged a complaint with the OTO and after our intervention the taxpayer’s status was rectified and all penalties and interest were waived.

PROCEDURAL ISSUES v Failure to Adhere to Suspension of Payment v A taxpayer had lodged an objection to an assessment raised by SARS and simultaneously requested payment of the amount subject to the assessment to be suspended pending finalisation of the dispute. v SARS agreed to suspend the payment of debt, however shortly after a refund became due to the taxpayer, it was held back and used to set off. v This was in contravention with the procedure relating to suspension of debt.

PROCEDURAL ISSUES (cont. ) v Taxpayer lodged a complaint with the OTO and after our intervention the refund was released and paid to the Taxpayer. v Failure to Resolve an Appeal within the Prescribed Timeframes v A taxpayer lodged an appeal after its objection was disallowed. SARS failed to finalise the appeal within the prescribed timeframes and the SARS Service Monitoring Office(SSMO) closed the complaint without providing reasons for its closure. v The taxpayer lodged a complaint with the OTO and after its intervention the appeal was expedited and finalised.

SERVICE ISSUES v. Failure by SARS to accept electronic Copies of supporting documentation Exceeding a Certain Size v A taxpayer who is registered as e-filer, was requested by SARS to provide supporting documentation related to certain claims submitted on his return. v The e-filing system is not able to load documents bigger than 2 MB in size.

SERVICE ISSUES (cont. ) v. The taxpayer, who is a disabled senior citizen had to visit SARS branch twice to have the relevant documentation scanned. v. Complained was lodged with OTO, after our engagement with SARS, it took an undertaking to explore the feasibility of increasing the file size that can be uploaded.

LETTERS OF APPRECIATION • “Thank you for your prompt assistance in this matter. 10/10 for the Tax Ombud! Keep it up, well done!” • tax practitioner, having dealt with many such cases, and that this has been exceptionally well handled and I thank you most sincerely. ”

LETTERS OF APPRECIATION (cont. ) • “Kindly accept my gratitude for your fantastic assistance. What we (and . . . ) could not achieve with more than 10 representations/letter/objection etc. over more than 2, 5 years, you were able to sort out in 2 months, including the festive season in between. I really appreciate your help and kind assistance. ” • “My case has been finalised and I want to thank you and your office for their assistance. It was quite a surprise to find there are capable people and institutions willing to assist the voiceless, without financial gain. ”

HOW MANY CASES HAVE BEEN REVIEWED BY THE OTO? Total Approaches received Queries Rejected not falling within our mandate Concerns (Older than 1 year) Approval was granted by the Minister on 23 rd May 2014 to attend to these cases. Valid complaints – falling within our mandate Period 01/10/2013 to 31/03/2014 670 514 64 Period 01/04/2014 to 31/03/2015 6003 4726 861 Period 01/04/2015 to 31/05/2015 1140 836 108 31 7 0 61 409 196

WHAT PERCENTAGE COMES FROM TAX PRACTITIONERS VS TAX PAYERS? Period 01/10/2013 to 31/03/2014 Period 01/04/2014 to 31/03/2015 Period 01/04/2015 to 31/05/2015 Taxpayers 62% 78% 73% Tax Practitioners 24% 15% 17% Other (Attorneys; Trustees etc. ) 14% 7% 10% Percentage

HOW MANY CASES HAVE GONE IN FAVOUR OF SARS VS TAXPAYERS? OUTCOME In favour Taxpayers In favour of SARS of Period 01/10/2013 to 31/03/2014 Period 01/04/2014 to 31/03/2015 Period 01/04/2015 to 31/05/2015 80% 84% 79% 20% 16% 21%

Vision The vision of the Tax Ombud is to strengthen taxpayers’ confidence in tax administration. Mission The Tax Ombud is committed to being an efficient, independent, impartial and fair redress channel for taxpayers. Accountability Taxpayers are entitled to a rational and fair reason for decisions and actions taken. Independence In dealing with taxpayer complaints, the Tax Ombud operates independently of SARS. Efficiency The Tax Ombud ensures that all taxpayer complaints are resolved promptly and efficiently. Fairness The Tax Ombud acts in fairness at all times. Confidentiality The Tax Ombud holds all communications with taxpayers in strict confidence unless authorised by the taxpayer.

HOW TO CONTACT THE OTO v Phone: 0800 662 837 or (+27) 12 431 -9105 v Fax: (+ 27) 12 - 452 -5013 or 0102083054 v Email: complaints@taxombud. gov. za v Download the complaints form from our website: www. taxombud. gov. za, or request a manual form. v Physical address: IParioli building, Block A 3, Ground Floor; 1166 Park Street (Between Jan Shoba/old Duncan & Grosvenor Streets), Hatfield, Pretoria, 0157 v Postal address: P O Box 12314, Hatfield, 0028

THANK YOU