Launch of the Tax Ombud annual report

December 1st, 2017
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Tax Ombud, Judge Bernard Ngoepe, at the launch of the Tax Ombud Annual Report 2016/17 in October.

By Kathleen Kriel

The Office of the Tax Ombud, in collaboration with the University of South Africa’s (Unisa) Department of Taxation in the College of Accountancy Sciences held the launch of the Tax Ombud’s Annual Report on 17 October.

In her welcoming address, the Deputy Executive Dean of the College of Accounting Sciences, Professor Philna Coetzee, welcomed delegates to the launch. She said that everyone present were lifelong students of taxation and referred to a quote by Albert Einstein who said: ‘The hardest thing in this world is to understand income tax’. Prof Coetzee added that the college shares the Tax Ombud’s values of accountability, independence, efficiency, fairness and confidentiality and said that these values are indispensable for the realisation of the vision of strengthening the taxpayer’s confidence in the tax administration process in the country. ‘The launch of the report is not just another event, but it signifies the close alignment of the universities and the taxation community in the country. It signifies a mutual respect for the millions of tax payers that we serve. … The Office of the Tax Ombud signifies fairness and independence, and is an indispensable safeguard for good governance,’ Prof Coetzee said.

Tax Ombud, Judge Bernard Ngoepe, started his presentation by stating that the report had already been presented to Parliament and what he might see as a high point, the public might see as a low point and vice versa. Judge Ngoepe said that no complaint or case is too small or too big and that each case is important to the Office of the Tax Ombud. He added: ‘This is the attitude we have because what criteria do you use to determine the importance of a particular case? Is it the quota of the money involved? R 20 million may be a lot of money to an individual but to a big company that may be nothing, but R 10 000 may be everything that an individual person has.’

Judge Ngoepe said that everything in the report was important and he urged practitioners to read it and make contributions that they feel are necessary.

Legislative amendments

Judge Ngoepe referred to Legislative Amendments and said that the changes to the Tax Administration Laws Amendment Act 16 of 2016 (the Act) that were promulgated and came into effect in January, included:

  • Increasing the term of office of the Tax Ombud from three to five years, so that there is continuity and retention of institutional memory.
  • Giving the Tax Ombud powers to appoint the staff of the offices without consulting the South African Revenue Service (Sars) Commissioner as previously stipulated.
  • Having its budget determined by the Finance Minister instead of the revenue collector.
  • Giving the Office of the Tax Ombud powers (with approval from the Finance Minister) to initiate investigations into any systemic and emerging issues. A stage has been reached where the Office of the Tax Ombud can approach the minister for his permission to allow the Office of the Tax Ombud to investigate cases in terms of s 16(1)(b) of the Act and to investigate what the Office of the Tax Ombud believes is systemic issues. Judge Ngoepe said it was a compromised situation. ‘We would have wanted a situation where [we] did not need to go to the minister for permission,’ he said.

Chief Executive Office of the Office of the Tax Ombud, advocate Eric Mkhawane said the Office of the Tax Ombud was a young office and there are a couple of challenges, but the challenges were a work in progress.

Increase in complaints

Judge Ngoepe said that there had been a huge increase in terms of the number of complaints and queries received since the last annual report. According to the report a total of 15 658 contacts were received, of those 12 204 complaints were queries and 3 454 were complaints as opposed to the previous year where only 5 904 complaints and queries were received. 55,4% of the queries were received telephonically and 40,5% through e-mails. 77,13% of users were individual taxpayers.

The report states further that 1 722 complaints were rejected due to complaint not falling within the mandate of the office. Accepted complaints falling within the mandate of the office totalled  an amount of 1 270 and 462 of the complaints were not validated yet. The report states that 39,5% of complaints reviewed related to dispute resolution and 24,9% to refunds.

Judge Ngoepe said in a process like this, the Office of the Tax Ombud receives complaints that are not valid, some are valid and some are in a grey area.  ‘What they tell us about the office is that it was not a mistake to establish the Office of the Tax Ombud. It was the right thing to do. … The climate was right for the establishment of the office. South Africans are very lucky to have an Office of the Tax Ombud as not every country has that kind of mechanism,’ Judge Ngoepe said.

Delays in tax refunds

Judge Ngoepe said according to the mandate given to the office in s 16(1)(b) of the Act, he wrote to the minister who gave his permission to investigate one of the major issues that the office had to deal with, namely, the unduly delayed payments of tax refunds. The report was annexed in the annual report. ‘You will see that a number of issues were raised. … We made recommendations to Sars as to how these issues should be addressed and so forth. Obviously, there were some debates between the office and Sars. … The complaints were justified and we did make some recommendations and Sars committed themselves to implementing some of the recommendations that we did make and hopefully they will soon see some fruit being born out of that,’ Judge Ngoepe said.

South African Institute of Chartered Accountants Senior Executive of Tax and Legislation, Pieter Faber gave his view of the Annual Report.

Judge Ngoepe added that some of the recommendations that were made can be categorised and perhaps Sars could improve on some of the documentation that they issue to tax payers. One point that Judge Ngoepe highlighted was that the Tax Administration Act 28 of 2011 prescribes that Sars must issue a final demand before appointing a third party owing money to or holding money on behalf of an indebted taxpayer, to pay those funds over to Sars directly to satisfy the tax debt. Sars is obliged to issue a final demand for payment to the tax debtor, which must be delivered at least ten days before the issuing of the notice to the third party and the final demand must contain all the prescribed information required.

Engagements

Judge Ngoepe spoke about engagements and collaborations, which were organised and co-hosted with different stakeholders. The purpose of the engagements was to raise awareness about the Office of the Tax Ombud and the services it offers. He added that various engagements took place with media owners and journalists and coverage included print articles, as well as radio and television features and online articles.

In conclusion, Judge Ngoepe told delegates that after reading the report, they should ask themselves whether it was right to establish the Office of the Tax Ombud. He added that it was necessary for revenue authorities to have drastic powers in order to effectively collect tax, as there are people who are not trustworthy and who do everything possible to avoid paying tax, which the law does not allow. ‘It is very fortunate in a constitutional state, such as this, that everybody’s exercise of authority must be subject to some counter-balance … and the office is there to do just that. … What is our purpose? Our main objective is to make sure that people pay tax, but I have used this expression before, we do not like Sars to adopt a skop and donner attitude. We want them to treat people fairly, because we know that when you treat people fairly you … enable them to comply with their tax duties. … Our task is to make sure that tax is collected as much as possible but as fairly as possible,’ Judge Ngoepe said.

Panel discussion

South African Revenue Service (Sars) Group Executive: Relationship Management, Mark Kingon, said that Sars welcomed the report.

After Judge Ngoepe’s presentation a panel discussion took place, facilitated by Unisa’s Advisor to the Unisa Principal and Vice-Chancellor and Director: Special Projects, Dr Somadoda Fikeni. The panel consisted of –

  • Chief Executive Office (CEO) of the Office of the Tax Ombud, advocate Eric Mkhawane;
  • Unisa College of Accounting Sciences Senior Lecturer, Werner Uys;
  • South African Institute of Chartered Accountants Senior Executive of Tax and Legislation, Pieter Faber;
  • South African Institute of Tax Professionals CEO, Keith Engel; and
  • Sars Group Executive: Relationship Management, Mark Kingon.

During the panel discussion, Mr Mkhawane said that he could see the impact that the Office of the Tax Ombud has on the tax paying public. He added that the Office of the Tax Ombud was a young office and there were a couple of challenges, which Judge Ngoepe dealt with in his presentation, but the challenges are a work in progress. ‘In moving towards more independence we are in the process of trying to find a proper model for this office going forward,’ he said.

Mr Mkhawane said that the Office of the Tax Ombud is not just there to deal with complaints. ‘We are here to make sure that you have a great experience when you deal with the revenue authority. That is what we are there for, to make sure that there are no underlying obstacles when dealing with Sars and we are there to make sure that Sars is an effective organisation,’ Mr Mkhawane said.

Mr Faber said that from the report it is clear that an impact is being made by the Office of the Tax Ombud and that is an important aspect to focus on. He added that the biggest sin would be not to learn from the complaints and mistakes reported in the annual report.

Mr Kingon said: ‘We welcome the report, we welcome the opportunity to always try and improve. … We have instituted a number of changes, one specifically where we were raising assessments incorrectly as identified by the Ombud and we are committed to continue to identify areas where we fail. Will we get to a point where we never make mistakes? … We will never get there. When we are dealing with millions of clients, mistakes will be made. Clients will do things that will cause problems. We need to find a way to deal with them expeditiously and in a fair manner.

Kathleen Kriel BTech (Journ) (TUT) is the production editor at De Rebus.

This article was first published in De Rebus in 2017 (Dec) DR 18.

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