On 27 March this year the Tax
Ombud, namely, Judge B. M. Ngoepe, confirmed that he had requested and secured
the approval of the Minister of Finance to review the alleged delays in the
payment of refunds by the South African Revenue Service (“SARS”) to taxpayers.
The Office of the Tax Ombud
was created by Part F of chapter 2 of the Tax Administration Act (“TAA”) which
took effect on 1 October 2012. The Tax Ombud was created to deal with taxpayers’
complaints of an administrative nature and is an office independent of SARS
which reports directly to the Minister of Finance.
The TAA was recently amended conferring
greater autonomy on the Office of the Tax Ombud and specifically to enhance the
mandate of the Tax Ombud and the power to request that the Minister of Finance
approves a request made by the Tax Ombud to investigate any systemic and
emerging issue relating to a service matter or the application of the
provisions of the TAA or procedural or administrative provisions of the a tax
Act.
The approval granted to investigate the alleged delays in the payment of
refunds to taxpayers is the first review to be conducted under section 16(1)(b)
of the TAA which came into operation on 18 January 2017.
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| Image from www.taxombud.gov.za |
The Tax Ombud’s review will
encompass all categories of tax refunds.
The Tax Ombud approached the
Minister for approval to investigate the apparent delay in the payment of
refunds to taxpayers because of the volume of complaints received by the office
of the Tax Ombud from taxpayers regarding the delay in refunds.
The Office of the Tax Ombud
has accordingly advised both SARS and external stakeholders, comprising
professional bodies representing tax practitioners and others of the investigation
into the delays in refunds. SARS indicated that it will cooperate with the
office of the Tax Ombud during the course of the investigation.
The Office of
the Tax Ombud has confirmed that it will engage both SARS and concerned
taxpayers regarding the delays in payment of refunds to taxpayers.
The Office of the Tax Ombud
will investigate the question of refunds due to taxpayers and make
recommendations to the extent necessary.
In my capacity as chairman of
the TAA sub-committee of the South African Instituted of Chartered Accountants (“SAICA”),
we have received various representations from members of SAICA regarding the delay
in refunds being paid to taxpayers.
Many delays are experienced
by taxpayers claiming VAT refunds and whilst it is accepted that SARS must
ensure that refunds are in order and prevent payment of fraudulent claims,
taxpayers have experienced unnecessary delays in the payment of refunds.
In many
cases taxpayers have submitted VAT returns reflecting a refund payable and then
suddenly SARS takes a decision reversing all input credits claimed by the
taxpayer eliminating the refund without due process being followed which
requires that SARS informs the taxpayer of reasons for adjustments made in assessments
issued to the taxpayer.
There have been a number of complaints that VAT vendors
have submitted VAT refund claims only to discover that the refund has been
eliminated on the basis that SARS requests the documents which it has not
apparently received. Unfortunately, taxpayers often submit documents to SARS
which are not property receipted and despite having submitted documents on more
than one occasion encounter problems in dealing with SARS such that the refunds
are eliminated without proper notice being given relating thereto.
In the case of income tax
SARS will often summarily disallow all expenses claimed by a taxpayer despite
the fact that the taxpayer’s expenses had been allowed in the past and will not
properly consider the documents submitted by a taxpayer on multiple occasions.
In some cases the documents submitted by taxpayers are voluminous and
difficulties are encountered by taxpayers in filing the documents through the
e-filling system because of constraints on the SARS system.
Taxpayers have also
encountered difficulties in securing refunds from SARS after the successful
conclusion of alternative dispute resolution procedures or after successfully prosecuting
a tax appeal in the tax court. Once the tax court has delivered a judgment and
SARS has decided not to appeal it and the taxpayer has paid the tax in dispute,
the taxpayer is entitled to a tax refund together with interest thereon. In
some cases taxpayers may secure the payment of their tax previously paid under
protest but encounter further difficulties in securing the payment of the interest
to which they are entitled under the provisions of the TAA.
Taxpayers who have
encountered unreasonable delays in the payment of any tax refund from SARS
should inform the Office of the Tax Ombud so that their case can be considered
as part of the general review being conducted by the Office of the Tax Ombud
into the alleged delay of refunds payable by SARS to taxpayers.
Professional
bodies have also made submissions to the Office of the Tax Ombud to assist it in
its investigation into the delays faced by taxpayers in securing refunds from
SARS.
It is hoped that the investigation into the delays in refunds will result
in substantive proposals being made by the Office of the Tax Ombud to ensure
that the undue delay in payment of refunds does not occur in future which adversely
affects taxpayers’ business operations in South Africa.
Dr Beric Croome is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, June 2017.
