On 23 June 2020, Judge Bernard Ngoepe released the Tax Ombud’s long-awaited second report on the investigation on systemic issues at SARS, writes Jean du Toit, Senior Tax Attorney at Tax Consulting SA. The report, which is probably the Ombud’s best to date, will be immensely insightful to the SARS Commissioner, but equally concerning.
Informed by an impressive massive amount of data, the report reveals just how much resources SARS pours into the administration of tax disputes, without getting much bang for its buck.
The general picture painted is one of unnecessarily protracted SARS disputes that, at least from a SARS perspective, is all for naught, as SARS in any event ends up conceding in most cases.
The below statistics illustrates just how ineffective matters have become;
– 54% of objections lodged by taxpayers are declared invalid. The report found that 31% of these were invalidated incorrectly, whereas the remainder was caused by taxpayers or their tax practitioners, being in the wrong. Practically, this means more than half of all disputes must be resubmitted and reconsidered afresh, which is a simple duplication of work for SARS and taxpayer alike.
– The report finds that the SARS system does not correctly calculate dates for dispute resolution. The effect is that, in some cases, the system considers an objection or an appeal as being submitted late, even though it was not. 18% of all objections submitted must be considered for condonation, in which case the taxpayer is forced to apply for condonation unnecessarily and SARS must spend time in attending to this request.
– In terms of condonation, this process is seemingly somewhat pointless as ultimately almost 90% of all requests are allowed by SARS. When it comes to these requests for late filing of appeals it takes SARS on average 113 days to allow it, after which the appeal must still be considered. The result is a massively protracted dispute.
– In each of the different steps of the dispute resolution process, there were high numbers of incidents where SARS did not comply with the prescribed time periods. For example, SARS must notify taxpayers within 30 business days if their objection does not comply with the requirements, but in 31.9% of cases, SARS failed to do so. In 32.8% of objections where SARS requested substantiating documents, it failed to make these requests timeously and in 8.2% of cases SARS does not respond within the prescribed timeframes to a request for reasons for an assessment submitted by the taxpayer.
– The most profound statistic is that SARS allows or partially allows 71% of objections, and this figure increases to 92% where the taxpayer progresses the dispute to the appeal stage. This begs the question – how much taxes are actually collected once the dust has settled?
One can look at this from two angles – either most additional assessments are raised without merit, or, of equal concern, SARS incorrectly concedes in some of these cases. In any event, SARS is deeply invested in a process that bears little fruit at the moment.
Commissioner Kieswetter has noted that the SARS he returned to is not the same as the one he left behind some years ago and this report will be a stark reminder of that.
It is well documented that SARS has lost many good people over recent years and it simply cannot afford such a wastage in resources.
One can imagine that where these resources are deployed to perform proper audits; SARS’ collections should vastly improve, especially where they are properly trained back into the arts and hunting instincts of bringing down tax evaders.