Home Accounting and Auditing Tax Ombud finds ‘confusing’ communication in SARS investigation into PAYE, dispute resolution

Tax Ombud finds ‘confusing’ communication in SARS investigation into PAYE, dispute resolution

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SAIBA recently interviewed Judge Bernard Ngoepe for his insights, listen to the full interview here.

A report by the Tax Ombud into PAYE and dispute resolution issues found SA Revenue Services (Sars) to have issued confusing communications to taxpayers, but this was not systemic.

The investigation by the Ombud follows a letter dated 5 July 2018 requesting the Minister of Finance’s authority to investigate two issues in terms of Section 16(1)(b) of the Tax Administration Act (TAA):

1. Complaints by taxpayers about the fluidity of the Pay As You Earn (PAYE) statements of account; and
2. Failure by Sars ) to adhere to the Dispute Resolution Rules, Procedures and Timeframes prescribed in the Regulations and the TAA.

The purpose was to establish whether the complaints constituted systemic issues or revealed emerging systemic issues.

Judge Ngoepe said he obtained permission from the Finance Minister on 10 September 2018 as required, to investigate if the two matters listed above constituted systemic issues or revealed emerging systemic issues.

“The intensive investigation, which included inputs from complainants and Sars, gave our institution insight into some important matters in the tax sphere. It revealed that some of the aspects of the two complaints constituted systemic issues while others did not. It was also clear that there had been some breakdowns in communication between Sars and taxpayers, resulting in confusion. We recommended that Sars refrained from sending letters containing information that was not relevant to the particular taxpayers as this caused more confusion,” said Ngoepe.

He added that on the PAYE complaints it was discovered that a combination of factors, including Sars errors, inadequate communication, absorption of credits, questionable letters, and lack of knowledge of the Payment Allocation Rules, contributed to the complaints being made. It is important to note that both Sars and taxpayers were at fault.

The Tax Ombund, Judge Ngoepe, said he obtained permission from the Finance Minister on 10 September 2018 as required, to investigate if the two matters listed above constituted systemic issues or revealed emerging systemic issues.

“The intensive investigation, which included inputs from complainants and Sars, gave our institution insight into some important matters in the tax sphere. It revealed that some of the aspects of the two complaints constituted systemic issues while others did not. It was also clear that there had been some breakdowns in communication between Sars and taxpayers, resulting in confusion. We recommended that Sars refrained from sending letters containing information that was not relevant to the particular taxpayers as this caused more confusion,” said Ngoepe.

He added that on the PAYE complaints it was discovered that a combination of factors, including Sars errors, inadequate communication, absorption of credits, questionable letters, and lack of knowledge of the Payment Allocation Rules, contributed to the complaints being made. It is important to note that both SARS and taxpayers were at fault.

“On the Dispute Resolution Rules, we found that both taxpayers and the revenue collector failed to adhere to the prescribed timeframes. It is important to note that Sars was found to be at greater fault due to the power it wielded against taxpayers and the prejudice the latter might suffer; we therefore recommended that Sars adhered to the prescribed timeframes and addressed the fundamental causes of the delays it caused,” said Judge Ngoepe.

“I am grateful for the contribution made by our stakeholders, the cooperation and support we received from Sars, and most importantly my OTO colleagues who conducted the investigation. I am confident that working together with our stakeholders, including Sars, we would continue to reduce systemic issues and improve our country’s tax administration system,” he concluded.