Taxpayers are getting legal threats when they still have objections pending. The Tax Ombud says as this is a systemic issue, taxpayers can go straight to the ombud
Several taxpayers have received threats from the South African Revenue Service (SARS) that they are facing legal action because their tax payments are in arrears.
However, it appears many of these taxpayers have filed objections to the assessments issued by SARS. The objections were also accompanied by applications for the suspension of payment until the disputes were settled.
SARS acting spokesman Sicelo Mkosi says once a suspension has been applied for, its processes do not allow for collection steps to proceed until 10 days after SARS has notified the taxpayer of the result of the suspension request.
“If taxpayers are receiving final demands in this period, that is incorrect. Such examples should be escalated to SARS via the SARS complaints process so that SARS can rectify the situation,” he said.
Tax practitioners have raised concern that SARS does not comply with the 60-day timeframe allowed for responses to objections.
When the lack of response is queried by e-mail to the SARS contact e-mail addresses, the response is that the turnaround time for a query is 21 working days.
“The taxpayer now faces the prospect of having to wait effectively another month before some response will be produced,” a tax practitioner says.
He says the debt recovery process seem to be detached from the electronic filing process, where the objection and suspension of payment applications are lodged.
“Demands for payment are sent to taxpayers although the process is still subject to the requirements of the dispute and suspension of payments process.”
Mkosi says practitioners can raise their concerns with industry bodies such as the South African Institute of Chartered Accountants (Saica), the South African Institute of Professional Accountants (Saipa) and the South African Institute of Tax Professionals (Sait).
Mkosi says it is important to note that once a person has applied for suspension on SARS’s electronic e-filing system, the key SARS systems are updated.
However, Ruaan van Eeden, a member of the Sait tax administration work group, says suspension of payment requests do not appear to reflect on the SARS system.
“Also, SARS’s system does not appear to reflect a suspension of a tax debt even after a suspension has been granted. As a result, tax debts are collected with no regard to the suspension, resulting in the undue recovery of tax debts.”
The situation is exacerbated by the fact that underpayment penalties are levied when a successful suspension of payment request for a specific period is not noted on the system.
Taxpayers may also have tax clearance certificate applications rejected, on the basis of outstanding taxes, even though the relevant tax debt is suspended, Van Eeden says.
Ettiene Retief, chairperson of Saipa’s national tax and SARS committee, says it is important that tax practitioners and taxpayers alert their industry bodies to these problems.
Retief warns that the mere filing of an application for suspension of payment does not mean it is successful. There are certain requirements to meet, such as the level of hardship suffered by the taxpayer if the payment is not suspended.
However, he shares the frustration of taxpayers who are left in the dark because SARS fails to adhere to stipulated timelines, and because of the difficulty in getting a speedy resolution to their queries.
Eric Mkhawane, CEO of the Tax Ombud, says delays in the finalisation of objections and appeals, and SARS taking collection steps when it is legally barred from doing so, have been identified as systemic issues.
This means taxpayers do not have to exhaust the SARS internal complaints resolution mechanisms before lodging complaints with the ombud.
“We would like to urge all affected taxpayers to lodge formal complaints with our office so that we can engage SARS to resolve their issues,” says Mkhawane.
Cheryl Howard, founder of Talaria Wealth, says on LinkedIn that SARS should “give taxpayers a break and stop the aggressive attitude”.
She says provisional taxpayers had until the end of January to file their annual returns. Assessments that were issued had a payment date of March 31 2018.
However, taxpayers have already received an SMS threatening legal action if the outstanding taxes are not paid immediately — even though payment is not overdue.
The Tax Administration Act provides that SARS must consider a valid objection to an assessment within 60 days to advise the taxpayer of the outcome of the objection.
Patricia Williams, tax partner at Bowmans, says taxpayers can potentially apply to a tax court if SARS fails to adhere to the rules.
She referred to a recent case in the tax court, where the court granted a taxpayer default judgment because of SARS’s failure to play by the rules. SARS did not timeously deliver its statement of grounds of assessment.
“The days of administrative bodies being able to do as they please are over, and South Africans are protected by the Constitution, the Promotion of Administrative Justice Act, and various other legal provisions,” says Williams.
Elle-Sarah Rossato, associate director at PwC, says SARS is under immense pressure to collect revenue during the first three months of the year.
“It could lead to the sometimes overzealous behaviour in attempting to collect taxes that are either not due for payment or are already approved as suspended pending the outcome of a dispute.”
She says it remains imperative for taxpayers not to ignore communication from SARS’s collection department and to address issues as soon as possible.