Tax Ombud: Another toothless entity?

By Ingé Lamprecht

Questions abound on its independence, limited powers.

JOHANNESBURG – The tax industry has been lobbying for an ombud system as a cost-effective remedy for taxpayers for some time.

The Tax Ombud, it was envisaged, could offer a remedy for taxpayers to use in instances of failures in service delivery and enforcement of rights with regards to tax administration, without the need to escalate to court at great cost and time delay.

The Tax Administration Act (TAA) that came into effect on October 1 last year, provides for the appointment of an ombud within one year. While the industry seems cautiously optimistic about the appointment, serious questions are already being asked about whether the ombud would be independent, given his or her appointment by the Minister of Finance, and whether taxpayers would not still be forced to approach the courts as the ombud can’t compel the South African Revenue Service (Sars) to adhere to its ruling.

How it will work

Pieter Faber, senior manager national tax technical at PricewaterhouseCoopers, says the tax ombud is positioned as a last resort internal compliant procedure before the taxpayer should have to approach a court.

Ettiene Retief, chairperson of the National Tax and Stakeholders Committees at the South African Institute of Professional Accountants (Saipa), says it is important to remember that the ombud will not address any issue of legislative interpretation, nor the correctness of a tax assessment or decision – they will only address administrative and service issues.

“The tax ombud is limited to addressing very narrowly-defined administrative complaints but has no powers to compel Sars to do anything. The tax ombud can only attempt to resolve issues by merely advising or communicating with Sars on what it should do to remedy the position and then informs the taxpayer about what it informed Sars to preferably do,” Faber says.

He says this goes against the tax industry’s initial proposal as it provides no effective relief to taxpayers who will still have to approach a court to compel Sars to administratively comply with the law. Even if the tax ombud’s recommendation does result in effective relief, it is a last resort mechanism in terms of the TAA and thus is not an expedient method for providing relief, he says.

Retief says to a great extent the ombud provides what was initially proposed. “However, the ombud has limited powers and the decision or ruling by the ombud is not binding on Sars or the taxpayer,” he adds.

While the court should be the ultimate authority, taxpayers should have the right to rely on the ombud’s ruling, until a court rules differently, he says.

“The important question to ask is: What is the recourse for a Sars official [who] fails to, willfully or not, comply with the ruling of the ombud? The taxpayer will still be forced to seek the assistance of the court. In fact, before you can refer a matter to the court on the grounds of ‘fair and administrative justice,’ the taxpayer must first exhaust all internal remedies, which now would include the ombud, and will result in a delay and added costs. However, if Sars management actively monitor the ombud rulings and Sars officials’ compliance to the rulings, then the lack of binding powers would be mere academic debate,” Retief says.


Faber says he has reservations about the independence of the tax ombud.

“The tax ombud is appointed by the minister for a renewable term which means that the tax ombud has a vested interest in ensuring that the minister of finance is satisfied with his or her work. In other words this is the same minister who overseas Sars and against whom it would reflect badly if Sars were to be regularly acting unlawfully. This possible undermining of independence has been held by our courts as one of the main reasons why judges are not subject to renewable terms. The minister also determines the salary and benefits of the tax ombud which further undermines such independence,” Faber says.

Moreover, the staff of the tax ombud is seconded Sars employees which means they fall under the direction and control of the commissioner and his staff before and after their secondment to the tax ombud, he says.

Retief says while he has some reservations regarding the independence of the ombud, he also appreciates that a Sars official has a better understanding of the revenue service’s internal policies, procedures and systems.

Tax ombud vs other ombud

Faber says the various industry ombudsman generally do have determinative powers and may make monetary awards or decisions which are given effect to the same as a court order, “hence the initial request that the tax ombud should operate on a similar basis within the proposed limited administrative mandate.”

“However, it is acknowledged that these ombuds operate in the civil sphere, thus between non-governmental persons, whereas the tax ombud would operate between an organ of state and the public, similar to the Public Protector on which it is seemingly modeled,” he says.

“The latter also does not have determinative powers but is more independent, can investigate any matter, reports directly to parliament and all reports on complaints are generally accessible by the public.”

“In its current form the tax ombud adds nothing that is not already available to taxpayers by approaching the Public Protector, with fast and effective relief only available through the courts and reserved for those who can afford it,” Faber says.

Time will tell

“While the TAA fails to give the ombud ‘teeth’, we believe that if Sars management monitor and enforce the rulings of the ombud, then there is no need for legislative ‘teeth’. Time will tell,” Retief says.

Stiaan Klue, chief executive officer of the South African Institute of Tax Practitioners (Sait) says while the industry would have preferred to ombud to have declaratory powers, it would not need these powers if it functions effectively.

Klue says the ombud should be given a chance to set up office and talk to the industry and Sars in order to establish a relationship and sort out issues.

He says the fact that the ombud would need to report the most important service delivery failures directly to Parliament every year will be an incentive for Sars to sort out issues before it gets there.

Adrian Lackay, spokesperson for Sars, says the ombud will function independently from Sars and will report to the Minister of Finance. He referred questions to the minister’s office.


Several efforts to obtain comment from Treasury were unsuccessful.