STEP PRESENTATION November 2017 Advocate Eric Mkhawane Chief E xecutive Officer Office of the Tax Ombud

WHY THE TAX OMBUD Third Interim report of Katz Commission: proposal to introduce the Tax Ombud to protect taxpayer rights mediate between taxpayers and revenue authority impartial and independent

WHY THE TAX OMBUD(cont.) SARS has very wide powers. When a taxpayer has a complaint against SARS – it is necessary to have an independent verification of what happened. Tax Ombud – to ensure that there are checks and balances

ESTABLISHMENT In terms of the Tax Administration Act, 28 of 2011 To ensure independence: Minister appoints the Tax Ombud for a term of 5 years (previously 3 years) The Tax Ombud reports to the Minister (not to SARS)

APPOINTMENT OF STAFF The Tax Ombud appoints staff – i.t.o SARS Act (previously in consultation with Commissioner). This compromised independence. Proposal to remove the requirement to consult the Commissioner was accepted and legislation amended.

FUNDING Previously paid out of the funds of SARS s15(4). It compromised independence. Proposal to have the Minister determine the budget was accepted.

MANDATE OF TAX OMBUD Must do so independently s16. Review and address any complaint by a taxpayer regarding a service, procedural or administrative matter arising from the application of the provisions of a tax Act. Tax Act – All Acts administered by the Commissioner. Includes Customs & Excise. Must do so independently May use conciliation/mediation S16(2)(f) Identify and review systemic or emerging issues related to service matters or the application of provisions of this Act or procedural or administrative provisions of Tax Act that impact negatively on taxpayers

MANDATE OF TAX OMBUD (CONT.) Previously inability to initiate such investigations. Proposed – Ability to initiate such reviews. (Now s16(b) – Can initiate a review with the approval of the Minister. Recommendations by the Tax Ombud Not binding on SARS or taxpayers. Proposal – To be required of SARS to provide reasons where it is not implementing the recommendations within 30 days. Accepted – New s20(1)

LIMITATIONS ON AUTHORITY Legislation or tax policy SARS Policy or practice generally prevailing, other than issues that fall within mandate. Matter subject to objection and appeal, except for an administrative matter relating to such objection and appeal. A decision of, proceeding in or matter before the tax court.

PROCESS 16(4) Exhaust SARS internal process (unless if have compelling circumstances Then complain to the Tax Ombud

THE REVIEW PROCESS (STEP 1) Mandate Section 16(1) 1.1 Is the complaint against SARS? NO 1.2 Does the complaint relate to the application of a tax act? Matter not in Mandate: REJECT YES NO 1.3 Does the complaint relate to a service, administrative or procedural issue? YES NO The Complaint is in Mandate: Proceed to STEP 2 YES

THE REVIEW PROCESS (STEP 2) Exhausted / Compelling Section 18(4) & (5) 2.1 Did the Taxpayer lodge a complaint with the CMO and has the TAT lapsed? NO YES 2.2 Are there compelling circumstances to not refer the Taxpayer to SARS to exhaust? Matter in Mandate but may not review: REJECT YES NO Matter in Mandate and TP Exhausted / Compelling: Proceed to STEP 3 s18(5)(a) the complaint has been identified as a systemic issue; s18(5)(b) referring the taxpayer back to CMO will cause undue hardship; or s18(5)(c) referring the taxpayer back to CMO will not resolve the issue within a reasonable time.

THE REVIEW PROCESS (STEP 3) STEP 3 Limitations Section 17 3.1 Is the taxpayer asking us to review legislation or tax policy? NO YES 3.2 Is the taxpayer asking us to review SARS’ Practice generally prevailing? NO YES 3.3 Is the taxpayer asking us to review a matter subject to objection or appeal? NO YES Matter in mandate, exhausted / compelling, but limitations apply REJECT 3.4 Is the taxpayer asking us to review a matter before tax Court? NO YES In Mandate, exhausted / compelling & no limitations apply: ACCEPT and Proceed to STEP 4

THE REVIEW PROCESS (STEP 4) Section 18(1)-(3) Determine the facts of the complaint by considering the taxpayers’ and SARS’ actions. Does the taxpayer have a valid complaint against SARS? YES NO Determine the best way to facilitate resolution and refer matter to SARS with Recommendation In Mandate, Exhausted / Compelling & No Limitations Apply, but there is a reason to TERMINATE

COMPLAINTS RECEIVED

TOP CATEGORIES OF MATTERS RECEIVED 2015/16 Assessments 40% Dispute resolution 17% Refunds 15% Accounts Maintenance 10% Others 18%

TOP CATEGORIES OF MATTERS RECEIVED 2016/17 Dispute resolution 40% Refunds 25% Debt 8% Assessments 7% Others 20%

IN FAVOUR OF TAXPAYERS 2013/14 80% 2014/15 84% 2015/16 87% 2016/17 86%

MOST ISSUES Delays in payment of refunds 1.1 Unwarranted placing of stoppers/delay in removing stoppers 1.2 Using the filing of new returns as an excuse to block verified refunds 1.3 Refunds of one period being withheld while an audit/verifications on another period is in progress 1.4 SARS raising assessments and pass journals to clear unallocated credits

MOST ISSUES (CONT.) 2) Incorrect allocation of payments 3) Delays in issuing tax clearance certificates 4) Non adherence by SARS to dispute resolution regulations (timelines, incorrectly invalidating objections) 5) SARS failure to respond to requests by taxpayers (request for reasons, suspension of payment, offers of compromise, waiver of penalties and interest 6) IRP 5 errors – SARS normally send employees with errors back to the employer – and the latter refers taxpayers to SARS.

MOST ISSUES (CONT.) 7) Holding members of CC or directors of companies personally liable for a debt of the CC/Co respectfully 8) Revision of assessments without reasons 9) Profile hijacking 10) Final demand letters. non compliance

THE FUTURE Institutional independence – looking at different models without creating a financial burden Footprint expansion Regularly monitoring our effectiveness (whether result in changes in timeframes) Service Charter Taxpayers Bill of Rights Regulations

THANK YOU