The impact of tax refund delays on farmers

Nothing in the relevant acts compels the revenue authorities to effect refund or rebate payments within a given time period.

Peter O’Halloran - Tax advice

A KwaZulu-Natal Midlands farmer contacted me recently, complaining that he was experiencing endless problems in getting SARS to reimburse him R2,6 million in tax rebates.

He assured me he had all the necessary documents and records in place (a professional tax consultancy handles his tax returns), and said SARS had repeatedly found fault with the smallest issues – which then resulted in the whole tax evaluation process starting again.

Meanwhile, the farming business had included the tax reimbursement in its operational budget, while SARS still required him to submit tax returns for the next reporting season.

From personal experience, I can attest he is not the only farmer experiencing these problems with SARS.

It seems that in cases where farmers are behind in their paperwork, they are liable for interest and penalties and, in the case of diesel refunds, clawbacks. However, where the delays are down to SARS, the picture is far rosier – no penalties and generous terms for interest rates and repayment time periods.

In seeking to try and compel SARS to prioritise reimbursement to your farming business, it is also important to remember the institution is admin-driven. It produces nothing. Its sole business is revenue collection, and its delays are less costly to itself than for people whose occupations are self-funded and product-driven.

It produces nothing.

Its sole business is revenue collection, and its delays are less costly to itself than for people whose occupations are self-funded and product-driven.

I don’t think I’m alone in finding this one-sided and unfair, and it’s something I’ll discuss at a later stage.

For now, what solutions are available to farmers desperately awaiting their rebate and/or VAT reimbursement, among others?

Nothing in the VAT, income tax, or (in the case of diesel rebates) customs and excise acts, compels the revenue authorities to effect refund or rebate payments within a given time period.

You may expect the Tax Administration Act to remedy this defect, but it does not. There is no statute that directly prescribes the time period in which the revenue authority should refund a taxpayer any capital amount due.

The SARS Charter states that refunds will be processed within 21 days in respect of VAT and 30 days from date of assessment in the case of income tax. Clearly this is not happening.

So, if there are no statutory provisions for timeous refunds, can a farmer resort to common law for a remedy?

I will discuss this at length next time.