Parliament’s two finance committees have added their weight to making the Office of the Tax Ombud (OTO) structurally and financially independent of the SA Revenue Service (Sars).
The National Assembly’s standing committee on finance and the National Council of Provinces’ select committee on finance have resolved to approach finance minister Enoch Godongwana on the issue, which the tax ombud, retired judge Bernard Ngoepe, has sought for several years.
Ngoepe argues that it is improper for the body which deals with taxpayers’ complaints with Sars is dependent on and operates as a unit of the tax authority. The commissioner of Sars has accounting officer responsibilities for all budget and related governance functions of the OTO.
The two committees resolved at a joint meeting on Tuesday night to consider other means, including the possibility of initiating their own bill, if Treasury fails to make progress on legislating for the independence of the tax ombud.
Joining the virtual meeting from the US, Sars commissioner Edward Kieswetter stressed that there was nothing in its relationship with the OTO that compromised its independence.
National Treasury’s newly appointed acting director-general Ismail Momoniat said Treasury intended to establish the autonomy of the OTO, but would do so together with dealing with the recommendations of the Nugent commission of inquiry into Sars and of the Zondo commission of inquiry into state capture. The legislation is intended to be in place within the next year, Momoniat said, but select committee chairperson Yunus Carrim said that was too long. The issue has been dragging on since 2017, Carrim added.
Ngoepe, who will step down as tax ombud at the end of September, briefed the committees on various taxpayer complaints, including the withholding of VAT and diesel refunds, the length of time it takes to finalise appeals against Sars decisions, non-adherence to the prescribed dispute resolution procedure, and the failure to respond to correspondence.
Over the past four years an average of 76% of taxpayer complaints attended to by the OTO related to tax refunds, dispute resolution and verification, audits and assessments. While the number of complaints hasn’t increased, the proportion of complaints from taxpayer representatives, including professional tax bodies, has been on the rise.
“Sars conducts audits on VAT and would wrongfully withhold refunds on periods that do not fall under the audit,” Ngoepe told MPs. “When taxpayers complained about its actions, Sars would extend the scope of the audit to include the VAT periods that were not covered in the initial audit. This would be an attempt by SARS to remedy its non-compliance with the law,” he added.
“In one of the cases received by the OTO, Sars took almost two years to finalise the audit while withholding refunds in excess of R70m. Sars only revised assessments to the value of R1.6m and paid more than R6m in interest on the delayed refunds.”
Ngoepe said Sars inefficiencies in attending to tax dispute resolution affected all taxpayers, but especially companies and their cashflows.
Another problem is that objections take too long to resolve.
“The legally prescribed time for finalising objections is 60 business days after an objection is lodged, but for corporate income tax Sars takes more than 120 business days on average ... Between February and March 2022 there was an increase from less than 40 days to more than 100 business days in the time it takes Sars to finalise VAT objections. This is cause for concern.”
Regarding appeals, Ngoepe said a typical case shouldn’t take more than 120 business days to be resolved, but the average time taken was more than a year. VAT appeals take on average 476 business days to finalise and corporate income tax appeals 500 days.
Kieswetter said Sars had no interest in holding back a refund without cause. “There can be no evidence that Sars is holding back refunds because it is trying to influence the revenue collection outcomes,” he said, adding that 82% of refunds were paid within 72 hours for individual taxpayers, amounting to R3bn in the last tax year.
The number of disputes has declined from about 200,000 objections and 11,300 appeals in 2018/2019 to 136,000 and 8,251, respectively, last year, Kieswetter said. This represented 1.45% of all appeals submitted compared with the The Organisation for Economic Co-operation and Development norm of 10%.
He said 90% of the disputes had been finalised within an average of 43 working days compared with the allowable time for the resolution of a simple dispute of 60 days and of a further 45 days if it was a complex matter.
In 2022 one in 10 VAT submissions was submitted for verification, which was completed on average within 27 days and which yielded more than R40bn.
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