Tax report proposes bill of rights

• Obligations should ensure SARS takes responsibility for its dealings

The Davis tax committee and the office of the tax ombud have again stressed the need for the introduction of a taxpayer bill of rights and a service charter to guarantee taxpayers’ rights.

The Davis committee’s final report on tax administration emphasised the need for a bill of rights that is “enforceable and with legal effect”, to guarantee the rights of taxpayers and ensure the South African Revenue Service (SARS) takes responsibility for its dealings with taxpayers.

It recommended that the tax ombud be given the powers to enforce the bill of rights. The committee looked at various models and suggested the gradual implementation of the Mexican model, in which an independent public body, the Procuradur a de la Defensa del Contribuyente (Prodecon), assumes the role of protecting and promoting the defence of all taxpayers in Mexico.

The committee said it might not be possible to adopt the full Mexican model due to the resources required to enhance the office of the tax ombud to the level of the Prodecon.

It recommended that the ombud’s functions and powers be extended to enable it to act as a mediator in a tax alternative dispute-resolution mechanism to solve differences between audited taxpayers and tax authorities. It should also have the powers to adjudicate the disputes brought before the ombud, subject to review and appeal by the courts.

The Davis committee recommended the implementation of the right to finality; to privacy and confidentiality; to complete, accurate, clear and timely information; to pay no more than the correct amount of tax; not to pay tax amounts in dispute before they have had an impartial review; to legal representation; to quality of service; and to a fair and just tax system.

Elle-Sarah Rossato, vicechairwoman of the tax administration work group of the South African Institute of Tax Professionals (Sait), said such a bill of rights would have a different standing than the promised Client (Service) Charter initially introduced by SARS.

Making taxpayer rights effective would require amending the Tax Administration Act and the ombud’s mandate to enable the ombud to represent taxpayers in tax disputes with SARS and to be involved in the consideration of suspension of payment, Rossato said.

Beric Croome, tax executive at ENSafrica, said many rights included in the bill of rights flowed from the Constitution itself, as well as the Tax Administration Act. “I agree that the rights must be legally enforceable. Rights are useless unless they can be properly protected and enforced,” he said.

Eric Mkhawane, CEO of the office of the tax ombud, said the office had been quite vocal about its disappointment that a bill of rights and a service charter had not yet been published. “We have provided SARS with a draft document setting out the rights and obligations of taxpayers, which is not that much different from the Davis committee’s recommendations a long time ago.”

Tax Ombud Bernard Ngoepe also remarked in the 2016-17 annual report that his office had repeatedly called on SARS to finalise the Service Charter and a bill of rights. “This has to date not happened with either. These two documents will be of great benefit to taxpayers, and thus strengthen public confidence in the tax system,” Ngoepe said.

SARS Commissioner Tom Moyane undertook in September 2016 to have the Service Charter implemented by the end of the financial year, on March 31 2017, Ngoepe said.

“Regrettably, this has still not happened. We do hope that, after such a long period of stagnation, the finalisation and implementation of the two instruments will now be a top priority; this is long overdue.”

Mkhawane said the Mexican model was quite extreme as it allowed the Prodecon to represent taxpayers in court.

“If this model is introduced it will mean that the office of the tax ombud must be extremely well capacitated,” he noted.

Patricia Williams, tax partner at Bowmans and chairwoman of Sait’s tax administration work group, said the tax ombud had not received an increased budget or an increase in staff despite a reported 62% increase in complaints and a 224% increase in queries in 2016-17.

“One wonders if the inadequate budget could simply be an oversight or if this is indeed by design. While the ombud has performed extremely well given the limited funding, this situation cannot continue,” Williams said.

Mkhawane said his office experienced a “greater appetite” from Parliament for more independence and a wider mandate for the office of the tax ombud.

“It is clear from the feedback received following the appearance of the tax ombud at parliamentary briefings that the time is right for the introduction of a service charter and a taxpayer bill of rights.”

Williams expressed reservations about the right to confidentiality. “These taxpayer secrecy rules keep on being used as a basis to prevent transparency and accountability….

“My view is that the taxpayer secrecy rules should not apply in relation to politicians, and that SARS should be entitled to publicly confirm what tax approach has been applied in relation to issues of public concern,” Williams said. Instead, SARS was able to “hide behind” taxpayer confidentiality and seemingly fail to take legal action that it should be obliged to take, Williams said.

She referred to the remark by the Davis committee that SARS applies the “pay now, argue later” principle “savagely”.

“In the circumstances, it is astounding that the committee’s recommendation is that taxpayers should pay 40% of the disputed tax as a ‘down payment’ before having the matter heard by an independent tribunal.”

Williams said if SARS could “automatically get” 40% of whatever it assesses, regardless of the merit of the assessment, and this must be paid before access to a court or other tribunal, it would be an extreme violation of taxpayers’ rights.

Croome said the right was absent to recover wasted costs or damages from SARS where it had acted badly. “SARS should be liable for costs where it has caused undue duress and costs to a taxpayer, where SARS and its officials have acted badly and violated the law.”

The US had “low-income taxpayer clinics” to assist indigent taxpayers who earn up to a specified income level in dealing with the Internal Revenue Service. The Davis committee proposes that taxpayers have a right to legal representation, but Croome said many taxpayers could not afford this in tax cases. Sometimes the legal fees would exceed the tax debt due.

“This is unfair and can lead to the denial of justice,” he said.