THE office of the tax ombud is but a month old, but moves towards South Africa’s first tax class-action lawsuit and test cases to end uncertainty are evident amid calls for a wider taxpayer movement to provide a unified voice against abuse.
While new tax ombud Bernard Ngoepe has resolved one case in his first month in office, the industry last week aired a growing list of grievances in areas that do not fall under the jurisdiction of the ombud, including the wrongful freezing of bank accounts. The ombud can only resolve service, procedural and administrative disputes arising from the application of the Tax Act.
"Talk of a class action is rumbling. There is a concern by taxpayers they could be victimised if they do it alone, so they are considering this," South African Institute of Tax Practitioners (Sait) CEO Stiaan Klue said on Sunday.
Mr Klue confirmed he had been approached to head and reinvigorate the nonprofit Taxpayers Movement of South Africa — which was set up in 2010 but has not managed to get going. While he said he would not take on such a role full-time for a few years — as he will complete his second and final term at Sait first — he said there was a strong need for such an institution and he would consider being a part-time adviser.
The South African Revenue Service (SARS) was now a world-class revenue authority, and this had to be recognised, he said. He believed disputes could be settled far more quickly if the engagement was done in a professional manner with SARS via a well-structured body.
The frustration for SARS and the Treasury is that many taxpayers, including multinational companies, are said to be not paying their fair share, which is why they are focusing strongly on reining them in. However, this does not mean taxpayers’ rights should be trampled upon in the process.
South African Institute of Chartered Accountants (Saica) project director for tax Piet Nel said on Friday that "frustration levels" seemed to be rising among taxpayers, and that there may well be some support from individual practitioners to take on SARS in court action.
The idea behind collective action would be to save costs, but also to avoid being "singled out" or "victimised" by SARS, a number of sources said.
Leading Edward Nathan Sonnenbergs tax lawyer Beric Croome said he was not aware of a tax class-action suit at the moment, but that he had heard about the possibility — which was first mentioned by audience members at a tax conference he had attended.
"To me, litigation should be the last resort, but for the first time I think it (a class action) is being considered," he said. According to Dr Croome, a non-governmental organisation or similar body that can speak for taxpayers at the grassroots level to assist the poor or indigent is lacking in South Africa.
He said that as some problems would not fall within the ambit of the ombud, it may be appropriate for a legal resources centre or other nongovernmental organisation to assist. "There is concern some smaller businesses might not be able to afford attorneys and advocates to go to court," he said.
Following the recent high-profile exchange-control test case by billionaire Mark Shuttleworth, another significant development would be tax test cases to clarify rules and clear up uncertainty.
Mr Nel confirmed that Saica had been approached by a member, who is a tax manager in a big company, to ask it "to take SARS on" on an administration justice issue. But he said Saica had declined to institute action, as "it is better for members to do that". But both Mr Nel and Mr Klue said their institutions would consider providing technical evidence as "friends of the court".
Some of the frustrations mentioned by taxpayers and professionals include losing out on tender business because tax clearance certificates were not issued in time, bank accounts being closed as they tried to get reasons for assessments, 21-month delays in getting voluntary disclosure application responses, unreasonable provisional tax penalties, and requests for amnesty being granted then being denied years later.
International tax attorney Daniel Erasmus, who is based in the US, said on Friday that there was a need for taxpayers to be represented on a far broader base to "address certain abuses by SARS", since to challenge them in court "can cost a fortune".
"There is a suspicion SARS are aware of this and pretty much defend any action, as they have very deep pockets. The problem is not one organisation is prepared to take on the responsibility for fear of reprisals in one form or another." He said the test case route may be a more popular method for taxpayers.