In these times of rapidly diminishing action against wrongdoers, it is refreshing to read the Tax Ombud’s findings after an investigation into “…alleged delayed payment of refunds as a systemic and emerging issue.”
Taxpayers have over the years been complaining that SARS unduly delays the payment of verified refunds. The complaints reached their peak in the period December 2016 to March 2017. Taxpayers identified certain mechanisms allegedly employed by SARS, unfairly, in the implementation of the tax collections system, to cause the delay. This resulted in financial hardships to them and, in some instances, the near collapse of their businesses and in others, job losses.
The wish expressed by taxpayers is that these mechanisms be eliminated from the system or, alternatively, be employed in a manner that would cause the least possible delay in the payment of the refunds.
The Tax Ombud’s management summary then lists 12 obstacles allegedly in place at SARS to delay the payment of refunds. These include:
- The unwarranted placing of “Special Stoppers” on taxpayers’ accounts in order to stop refunds from being paid out. In most of these cases taxpayers are required to verify bank details in person at a SARS branch. Whilst the OTO understands this is done to prevent payment of refunds that are not due, or fraud, there is, however, too long a delay in paying these refunds despite a taxpayer’s banking details having been verified, or a taxpayer having complied with SARS’s requirements.
- The placing of a stopper every time a new return for the next period is filed. The system blocks already verified refunds the moment a subsequent return is submitted by the taxpayer. Therefore, even where specific returns are not identified for audit/verification, the mere submission of the next return results in the payment of the refund being stopped. This may have a knock-on effect especially in the case of VAT where the periods for declaration are close to each other.
- SARS refuses to release refunds that have been verified for a specific tax period until such time as all audits/verifications that may be pending on other tax periods have been finalised.
- SARS raises assessments to absorb credits on taxpayers’ accounts where for example overpayments are made. In doing so, SARS creates fictitious tax liabilities, instead of taking a decision on a refund. Failure to take such a decision is subject to objection and appeal, but SARS avoids this, it seems, by raising an assessment, a step which takes the dispute resolution procedure in another direction, away from paying the refund. The Ombud feels “strongly that the practice should cease altogether.”
- SARS auditors keep audits pending while repeatedly requesting information from taxpayers. Apart from delaying the refund, the incidental consequence is that if successive requests for further information are sent out each within 21 days of the other, interest will not start accruing on the refund.
In conclusion, the Ombud remarks:
“It was commendable to pay out as many taxpayers as possible as SARS says it did, however, the residual (non-paid) taxpayers may be of very high value, as indicated in the Report, whose payments, once made, would reduce the amount of tax collected over that particular period.”
“It is clear that the system allows for SARS to unduly delay the payment of verified refunds to taxpayers in certain circumstances. This has become a systemic issue. The system does not sufficiently protect taxpayers. The removal of the obstacles discussed in the Report, as well as any others, would go a long way towards addressing the problem.”
The report was sent to Finance Minister Malusi Gigaba and SARS Commissioner Tom Moyane who is yet to comment on it.
Let’s hope that the reaction to these findings proof to be refreshingly different from what appears to have become the norm – having blame storming meetings, firing a few scapegoats and continuing business as usual.
Click here to download the full report.