Taxpayers are losing out in disputes with Sars by not going to the Tax Ombud sooner

The imbalance between the South African Revenue Service (Sars) and taxpayers, particularly when it comes to the dispute resolution process, remains a major concern for the Office of the Tax Ombud (OTO).

Some taxpayers believe that if they complain to the OTO about how Sars is handling the process, their objection may be disallowed, so they’d rather not complain.

Gert van Heerden, senior manager: legal services and systemic investigations, says although the OTO has not found any evidence of victimisation, the fear of it does impact taxpayer behaviour.

In a recent case, a taxpayer had two perfectly good opportunities to approach the OTO because Sars was not following the correct dispute resolution procedure.

Van Heerden says the case touched on two systemic issues identified by the OTO during its investigations into the causes of delayed refunds and dealing with dispute resolution timelines.

Periods calculated incorrectly

The investigations in 2017 and 2020 showed there were undue delays with issuing revised assessments after an objection was allowed or partially allowed, and Sars was not calculating the periods for dispute resolution correctly and then incorrectly channelling objections for condonations.

In this case, the taxpayer’s problems started in November last year, when his claim for travel expenses was disallowed.

He objected to the assessment, but despite errors in the process related to the identified systemic issues, he missed two opportunities to approach the ombud’s office. By the time he did, Sars has amended its procedural errors and was still within its timeline in which to issue the revised assessment.

Van Heerden says there are three different types of timelines:

• Timelines set out in legislation – that is, the dispute resolution process;
• Timelines not set out in legislation, but the Sars Service Charter gives undertakings; and
• Matters where there are no timelines set out in legislation or through undertakings in the charter.

Sars’s first mistake

In the case of a successful appeal against a decision by Sars to the Tax Board or the Tax Court, Sars must issue a revised assessment within 45 business days. However, there is no timeline when an objection was allowed or partially allowed.

The OTO raised this with Sars when it investigated the delayed refund complaints, and Sars undertook to adhere to the 45 days, similar to the timeline when a taxpayer’s appeal is successful.

Sars made several errors in the process, and the taxpayer could have had a speedier outcome if he had approached the ombud’s office earlier.

The first mistake was when Sars invalidated the objection on the merits in December. Sars said the taxpayer was trying to make a duplicate deduction.

Sars is not allowed to invalidate an objection on the merits. It is allowed to invalidate an objective only if:

• The objection was not signed;
• It was not a matter to which the taxpayer can object; or
• The taxpayer did not provide the grounds for the objection.

Nonetheless, the taxpayer followed the route offered by Sars in its invalidation letter and resubmitted an objection within 20 days of receiving the letter.

Routed for condonation

Here comes the second error from Sars. When the taxpayer resubmitted his objection at the start of January, his objection was automatically routed for condonation.

The time calculated by the Sars system was incorrect. The 20-day period for resubmitting an objection is business days, and not only excludes public holidays and weekends, but also excludes the period between the middle of December and the middle of January. These days, in legal terms are dies non; they are not permitted when counting the time.

“It has been two years since our investigation and the undertaking by Sars to correct their system. They are only now close to a point of fixing it.”

It did not help the taxpayer whose matter was incorrectly routed for condonation. Sars allowed the condonation because a manual calculation showed it erred.

The taxpayer again did not complain about the erroneous ways of Sars, and his objection was partially allowed at the end of April.

But when he still had not received a revised assessment by the middle of May, that was it. He complained, but it was rejected. Sars was still within the 45 days in which it undertook to issue the assessment.

“The taxpayer should approach us the moment systemic issues arise in the process. They are entitled to approach us directly without having to go the Complaints Management Office at Sars,” says Van Heerden.

Timelines are timelines

He adds that the ombud does not get involved in the merits of a dispute. Objections and appeals must run their course. But not forever.

It takes Sars on average 500 business days to finalise a company income tax appeal.

“This excludes public holidays, weekends and days not permitted in the counting. That is ridiculous, especially when our analysis show that most appeals are conceded in full.”

Van Heerden also notes that Sars undertakes in its Service Charter to provide its decision in seven out 10 objections within 60 business days. This is a timeline set out in legislation. If Sars does not decide within that time, it is in breach of its own laws.

“Imagine a VAT vendor tells Sars it will pay seven out of 10 times on time. The outcome will be penalties and interest on late payment,” says Van Heerden.