The current Tax Ombudsman, Judge Bernard Ngope, and his team have produced a hard-hitting report following an investigation into delays with refunds due to taxpayers (taxombud.co.za).
The investigation was prompted by the high number of complaints received by the Office of the Tax Ombudsman (OTO) since its inception in 2013.
Between October 2016 and March 2017, the number of the complaints increased drastically, with 500 being logged with the OTO. Half of these were validated. According to the report, more than R25 billion had been withheld by SARS.
Taxpayers claimed that SARS had employed certain ‘mechanisms’ to delay or avoid paying refunds. In the course of its investigation, the OTO identified a number of these, including:
- Failing to link documentation (usually scanned files sent electronically) requested by SARS to the main file, after submission by taxpayers.
- Unwarranted placing of special stoppers (to withhold payment), such as the need to first verify the taxpayer’s bank details at a SARS branch.
- Using the filing of new returns as an excuse to block refunds. The mere submission of the next return resulted in the refund being stopped.
- Refunds for one period being withheld while an audit or verification for another period was in progress. This was in contravention of Section 190 of the Tax Administration Act.
- Raising assessments to clear unallocated credits. In other words, if a refund was due to a taxpayer, SARS would issue an assessment to absorb it and so avoid making payment. The report referred to ‘fictitious tax liabilities’.
- Requesting further information during an audit. This tactic was used by SARS to avoid the payment of interest on refunds.
- Refunds still not paid out even though assessments had been successfully disputed.
- Obstacles regarding diesel refund delays. The diesel refund system and the VAT system ran concurrently and this meant that law-abiding farmers and other diesel rebate recipients incurred penalties and interest.
- Refunds for periods that had been verified being set off against debts for other periods, notwithstanding a request for suspension.
- Some of these ‘mechanisms’ will be discussed in subsequent columns. For now, suffice to say, it seems that SARS is not above bending the rules in its own favour.