011 463 5566 tonyd@harding.co.za

Tax Ombud’s report 2020

Tucked away in point 38.2 of the sixty-one-page Report and occupying only a half-page is, in my experience of the tax dispute-resolution process, a valuable finding and recommendation by the Tax Ombud, on non-meritorious additional assessments: Leaving aside appeals withdrawn by taxpayers and looking only at cases where the merits of the assessment are actually reconsidered, the proportion of matters in which SARS concedes in full increases to 92,14%. This is rather concerning as it means that in 92% of the matters that reach appeal, there was no merit in the assessments. [71% of objections were allowed in whole or in part.]

The Ombud in his findings thus questions, first, why these assessments were raised in the first place, and, secondly, why they could not be allowed at the objection stage. Such an approach would save time and effort and delays, since thousands of non-meritorious cases clog the system.

Taxpayers time and costs not recoverable

Although not an issue specifically commented upon by the Ombud, taxpayers are effectively penalized by having to incur costs when a matter is successfully resolved at the objection, appeal or ADR stages. (If a matter proceeds further to the tax board, tax court, High Court or SCA, legal costs can be awarded to a successful taxpayer.) Aside from internal bookkeeping and accounting personnel’s time and costs, the taxpayer has to bear the charges of expensive external tax lawyers’ (myself included), with no recompense available. Although I am not yet advocating the award of compensation to a successful taxpayer, my suggestions to both SARS and taxpayers are as follows:

  • SARS should be more circumspect in raising additional assessments, by placing more focus on the legal merits at the earlier stage of the taxpayer’s response to the SARS auditor’s letter of audit findings.
  • Taxpayers (especially in a corporate context) should involve more senior internal persons rather than junior accounting staff to interface with the SARS auditor.
  • In my view such conduct by both parties would obviate the need to escalate the dispute to the appeal stage, where, as observed by the Ombud, 92% of matters are conceded by SARS.