LIST: How SARS can avert delays in refunds
Johannesburg – Tax Ombud Judge Bernard Ngoepe has made several recommendations to the SA Revenue Service to speed up the payment of refunds to taxpayers.
This follows an investigation into the systems at the tax authority, following a number of complaints received since the establishment of the Office of the Tax Ombud in 2013.
Ngoepe found that a number of the complaints into delayed payments were justified, and that delays had a significant impact on the financial position of some taxpayers. He found that delayed refund payments were due to systematic issues at SARS.
SARS, however, said Ngoepe’s findings were made in relation to less than 1% of all the refunds that it processes."They (delayed payments) are the exception rather than the rule,” stated SARS. It said it had already implemented "certain corrective measures", and would work to close the gaps identified in the Tax Ombud’s report.
The Tax Ombud responded to SARS’ reasons for delayed payments with the following recommendations:
1. Failure to link submitted documentation requested by SARS to the main file – this is related to a complaint that documentation submitted by taxpayers at a SARS office is not linked to the query. This complaint was lodged by the South African Institute of Chartered Accountants (Saica).
The ombud recommended that when requested documents are uploaded at a SARS office, they should be linked to the request.
2. The unwarranted placing of “Special Stoppers”– this relates to special stoppers placed on taxpayers’ accounts to stop refunds from being paid out. In these cases taxpayers have to verify bank details in person at a SARS branch to avoid fraud. However this causes a long delay despite banking details being verified or a taxpayer having complied with SARS’ requirements.
The ombud noted that while the complaints were justified, fraud remained a problem. The ombud recommended that banking details given by the taxpayer be duly recorded and verified timeously to avoid the delays.
3. Using the filing of new returns as an excuse to block refunds - this complaint relates to a stopper being placed 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,” the report read. This may effect VAT where periods are close to each other.
The ombud recommended that SARS ensure the remedy it has put in place for VAT refunds, works well to address the challenge in income tax refunds. In this regard, complaints seem to be persisting, the ombud noted.
4. Delay in the lifting of stoppers and lack of time frame for doing so – the lifting of special stoppers takes “unduly” long.
The ombud recommended that the stoppers be removed as soon as possible once the cause thereof had been resolved. There should be a timeframe for doing so which is shorter than 21 days. “Taxpayers cannot be expected to be patient to no end,” he said.
5. Refunds for one period being withheld while an audit or verification is in progress on another period – this relates to SARS refusing to release refunds that have been verified for a specific tax period, until all audits or verification that may be pending on other tax periods have been finalised, the report indicated.
The ombud noted that this was against section 190 of the Tax Administration Act (TAA). These provisions state that SARS must pay a refund if a person is entitled to a refund, including interest thereon. Further, SARS does not have to authorise a refund until the audit or verification is finalised. However the right to withhold refunds under the provision is not extended to other refunds or other categories of tax or other tax periods.
6. SARS using historic returns to delay the payment of refunds – this is related to returns that have never been shown as outstanding on Tax Clearance Certificates or Statements of Account, suddenly reflect as outstanding and then used as reason for not paying refunds.
The tax ombud found that the use of historic returns to delay the payment of verified refunds was wrong and should cease.
7. In the case where overpayments are made, SARS raises assessments to absorb credits on taxpayers’ accounts. By doing this SARS creates fictitious tax liabilities, instead of making a refund.
The ombud found that failure of SARS to take the decision to pay a refund should be subject to objection or appeal. But when SARS raises an assessment, it takes the dispute resolution procedure away from paying a refund. This practice should cease altogether.
8. Requesting further information during an audit - SARS auditors keep audits pending while repeatedly requesting information from taxpayers. This delays the refund and if more requests for information are sent out within 21 days of each other, interest will not start accruing on the refund.
The ombud recommended that where an auditor failed to ask for all documents at once, and the refund was consequently delayed, SARS should pay interest on the delayed refund.
9. Assessments successfully disputed, but refund is still not paid out - In this case taxpayers experience a delay in the revision of the assessments and the payment of the refund. The problem here is that there is no turn-around time.
The ombud welcomed SARS’ acknowledgment that there were instances where reduced assessments were not made swiftly to reflect the outcome of the dispute.
10. Obstacles regarding diesel refunds delays – In this case VAT and Diesel refunds are declared on the same return, which gives a net amount payable by or refundable to the taxpayer. But SARS reflects these on two different systems and manual set offs need to be done to obtain the net result reflected on the return. Where there is a delay in this, set off refunds are delayed.
The ombud has noted SARS's concern that there are significant risks identified in this industry, which requires more audits to mitigate these risks.
11. The raising of assessments prematurely – Taxpayers get 21 days to submit supporting documents, but assessments are raised prior to the lapse of this deadline.
The ombud noted that assessments are raised when taxpayers only submit some of the documents requested and then SARS raises the assessment. In its provisional report the ombud recommended that taxpayers need to be “educated and encouraged” to submit all the required documents or information at once. If only some of the documents are submitted, then the taxpayer should inform SARS that outstanding documents will be submitted.
12. Refunds for periods that have been verified by SARS are automatically set-off against debts on other periods notwithstanding a request for suspension or where there is the suspension of payment – Section 164(6) of the TAA states that SARS may not introduce collection steps from the date of submission of a request for suspension of payment, until 10 days after a decision to not grant the request has been shared with the taxpayer. However SARS’ system automatically sets already confirmed refunds against debts, even if taxpayers have requested the suspension of payment.
The tax ombud’s report showed that SARS acknowledged the complaint and the recommendation that SARS’s systems must be updated to ensure that they comply with the provisions of the TAA. “Whenever legislation changes, any automated actions performed must be changed to comply with legislation,” the ombud recommended.
SARS has put in place an automated process for a “request for the suspension of payment”. “This should ensure that a refund is not set-off against a suspended tax debt which is disputed,” SARS commented.
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