The Office of the Tax Ombud (OTO) has been part of the South African tax landscape for nine years and has grown in size and stature to counter the growing powers of the tax authority.
Despite several legislative changes the office is still not structurally independent from the South African Revenue Service (Sars), which it is mandated to oversee. This is something that deeply bothers Tax Ombud Judge Bernard Ngoepe.
“I am not happy with the mandate as it is. We are not allowed to investigate a systemic problem without the minister’s permission. I do not think that is correct.”
The Tax Ombud reviews and addresses any taxpayer complaint regarding a service, procedural or administrative matter arising from Sars’s application of tax legislation.
“I think it must be left to the good judgement of the Tax Ombud to decide to initiate a particular investigation. But no, we first have to get the minister’s permission so that we can investigate. That is wrong.”
Ngoepe’s term ends on 30 September, but his office has asked the minister of finance to extend it by two years.
In an interview with Moneyweb reflecting on the role of the Tax Ombud, Ngoepe says there seems to be little appetite for greater independence of his office.
“I suspect, at least on the part of some people, that there is this perception that the Tax Ombud will unduly protect taxpayers or obstruct Sars from collecting as much money as it could. That is a fallacy.”
He adds: “Our task is not to shield people from paying tax. It is imperative for them to pay their tax, but they must be treated fairly.”
The number of complaints received by the OTO increased from just over 400 in 2013/14 to close to 3 000 in 2020/21.
Ngoepe says it is an “awkward and nonsensical form of governance” for his office to query the activities of Sars when Sars is the hand that feeds the office.
The ideal situation will be to work towards a structurally and financially independent office.
When asked why, after almost a decade, he still believes this will happen, Ngoepe says it is based on “unfounded optimism”. One has to keep hope, he says.
“Taxpayers will have more confidence in the OTO because they will know it is not dependent on Sars for its survival. That remains my vision for the future.”
Corruption kills morality
Ngoepe says there is a moral obligation on all South Africans to pay their fair share of tax.
Taxpayers do however need to see that their money is being used prudently and properly.
Moral obligations can be as strong as legal obligations, but once people don’t feel morally obliged to pay they tend to resort to “devious ways” to avoid and evade paying tax.
Years of corruption, waste and theft have affected taxpayer morality. That is the problem with corruption: it kills the moral [inclination] of people and the spirit of compliance, says Ngoepe.
“Our spirit of compliance is not yet in intensive care, but it certainly is not good. People need to see consequences for the misuse of their money. That is what will resuscitate our moral[s] and spirit of compliance.
“Fear of the law is not sufficient to get maximum tax collections.”
Ngoepe believes we are very close to the precipice. Action is needed to demonstrate our anger against corruption.
There are signs of people being held accountable by way of arrests and property being confiscated in order to recover money. It may seem like a drop in the ocean, but it does send out a positive message, says Ngoepe.
He is also not happy with the way our legal system deals with white-collar crime, saying the courts are too lenient in their punishment. “We need to strengthen our sanctions against economic crimes.”
Balance of power
The Tax Administration Act has given Sars quite drastic powers. It is necessary for a tax collector to have drastic powers since they often have to deal with “crooked people”, says Ngoepe.
“At the same time parliament has deemed it appropriate, and correctly so, that there must be a counterbalance in the form of the Tax Ombud to ensure that these drastic powers are being exercised properly.”
The OTO has had notable achievements over the years in offering relief when taxpayers have become stuck in a dispute with Sars. A major issue has been the payment of legitimate refunds. This has been identified as a ‘systemic issue’ and continues to plague taxpayers.
The ombud is not allowed to intervene in policymaking or when a matter is already being ventilated in the form of an objection or appeal, unless it is an administrative matter relating to the objection and appeal. Nor may it assist taxpayers with decisions of the tax court or proceedings or matters before the court.
Very few taxpayers have the resources or the resilience to take Sars to court as it is a costly and time consuming affair. Their last resort in seeking relief is the Tax Ombud.
Quick, convenient, cheap
“I must say that I have learned to appreciate the importance of the Office of the Tax Ombud,” says Ngoepe.
“It is quite a convenient, quick and cheap way of resolving disputes.
“Disputes need to be resolved without having to take each other to the labour court and the likes. I hold the role of an ombud in high regard.”
He refers to the economic woes of the country and believes there is likely to be an increase in tension between tax collections and people’s willingness to part with their money.
“It will be increasingly difficult for Sars to collect taxes because people are in a very tight situation. That tension may translate into conflicts and disputes between Sars and taxpayers.”
The role of the Tax Ombud will become increasingly important, says Ngoepe.