The Tax Ombud (OTO) plays a critical role in ensuring that the South African Revenue Service (SARS) handles its tax administration duties fairly and transparently. Its mandate as we all know is helping taxpayers by addressing their complaints about SARS’ service and procedures. What is less known is the OTO’s mandate to investigate broader ‘systemic’ issues within the tax system. The OTO’s focus within its mandate is to maintain high standards of professionalism and impartiality to improve the tax administration system.

What are systemic issues?

Systemic issues are significant problems identified by the Office of the Tax Ombud (OTO) that can affect many taxpayers within South Africa's tax system. These might be due to how the South African Revenue Service (SARS) manages its systems, makes policies, or enforces laws. The OTO spots these issues by reviewing taxpayer complaints, working with tax professionals, and monitoring media. If the problem is already part of the OTO's assigned tasks, they can investigate it without additional permissions. However, if the issue is outside of these usual complaints, the OTO must first get approval from the Minister of Finance, as required by law.

Top of Form

Ongoing Systemic Issues Investigated by the OTO

Systemic issues currently being addressed by the Tax Ombud in South Africa, as detailed in your provided text:

1.      Delays in Payment of Refunds

This issue involves delays in clearing stops on refunds, specifically within designated timeframes. VAT and Diesel refunds, though declared on the same return, are managed in different systems at SARS, requiring manual interventions that delay processing. Additionally, incorrect debt recovery actions are sometimes taken despite suspension requests by taxpayers. The OTO recommended that SARS should implement a standalone return for diesel refunds and systemic improvements. SARS is working on implementing these recommendations to streamline the refund process, although the issue remains under review due to ongoing challenges.

2.      Non-adherence to Dispute Resolution Timeframes

Complaints indicate SARS often fails to adhere to legally prescribed timeframes for handling objections and appeals, complicating the dispute resolution process. SARS is developing a project plan to manage appeals inventory more effectively and improve dispute resolution practices. However, the resolution timeframe remains to be in the long term.

3.      Confirmation of Sent Correspondence

There are gaps in SARS’s ability to confirm whether correspondence was sent to taxpayers, including both manual and electronic notifications. Recent legal rulings stress the importance of proving that notices were properly delivered to taxpayers’ last known addresses or electronically uploaded to their profiles. To resolve this problem SARS need to enhance the integration of electronic and manual correspondence systems to ensure proof of delivery is reliably recorded.

4.      Issues with the Tax Compliance System (TCS)

The design of the TCS has caused problems such as recognising fraudulent debts, errors in reflecting tax compliance when payment arrangements are in place, and issues with minor outstanding liabilities. The OTO recommended that SARS adjust the TCS to accurately reflect compliance statuses when payment arrangements are in place or when there is an approved suspension of debt.

5.      Delayed Responses to Deferred Payment Arrangements

SARS has been slow in responding to requests for deferred payment arrangements within the prescribed 21-day period, which impacts both taxpayer compliance and revenue collection.

6.      Delayed Responses to Compromise Requests

Similar to deferred payment issues, there are delays in SARS’s response to compromise requests, which should be addressed within 90 days.

7.      Delayed Responses to Suspension of Payment Requests

SARS often does not respond within the required 30 business days to requests for suspension of payment, affecting taxpayer compliance and financial planning.

8.      Coding Issues for Deceased Estates

There are delays in updating taxpayer profiles to reflect deceased estate status and in updating contact details for executors, which should be completed within 21 working days.

9.      Repeat Verification Cases

Verification cases are sometimes inappropriately created following reduced assessments or repeated verifications with the same risk profile and documentation, which can be redundant and inefficient.

These issues reflect systemic challenges within SARS that the Tax Ombud is monitoring to ensure effective resolutions and improved operations. Collaboration between the Ombud and SARS has helped reduce the number of systemic issues, but several critical ones remain open for further action and review.

Identification of systemic issues

The Office of the Tax Ombud (OTO) has a way of spotting widespread problems that might affect many taxpayers. It starts by closely reviewing individual complaints and the patterns these reveal about the South African Revenue Service (SARS) operations. In addition, the OTO doesn’t work in isolation; it regularly meets with key stakeholders to get a wider perspective and refine its approach. This includes quarterly meetings with Recognised Controlling Bodies (RCB), such as the Chartered Institute of Business Accountants (CIBA), where they discuss and strategise on identified issues. This collaborative effort ensures that the OTO effectively addresses systemic problems, enhancing the fairness and efficiency of tax administration. Read the insights from the previous RCB meeting with the OTO.

What accountants should do

Accountants should take proactive steps to understand and engage with the mandates of the Office of the Tax Ombud (OTO), which plays a crucial role in resolving issues related to the services, procedures, and administration of tax laws by SARS. Here’s what accountants should do:

Accountants and tax practitioners play an important role in the relationship between taxpayers and regulators. To effectively fulfill this role you should take the following actions:

1. Stay Informed: Understand the mandates and roles of the OTO in addressing individual complaints and systemic issues that impact a broad range of taxpayers.

2. Inform your clients about their rights as taxpayers and the work of the OTO. We included a handy email you can use to send to your clients.

3. Become part of the process by engaging with CIBA: Participate by submitting your issues related to tax administration to CIBA’s technical support unit:

• Email communications directly to CIBA’s technical team at technical@myciba.org

• Raise a technical ticket on the CIBA Academy, with adequate details on your problem. Read more about the technical support offered in the CIBA blog.

Keep your clients informed about the good work you are doing

Use CIBA’s template letter to send to clients and making them aware of the processes offered by the OTO.