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Frustration mounts over tax refund delays

Sars tightens controls to prevent possible tax fraud.

JOHANNESBURG – Frustration around tax refunds is growing, with many tax practitioners citing concerns about on-going delays.

This is sometimes despite finalisation of the verification or audit processes at the South African Revenue Service (Sars) and after taxpayers have re-verified pre-existing details in person, seemingly to combat fraud.

Yet, even in instances where taxpayers have repeatedly supplied the required documents requested to complete a verification process, refunds can remain stuck in the system.

Of particular concern seems to be a “Special Stopper” notification, which tax practitioners only become aware of after inquiring about the hold-up.

Rupert Oberholster, tax practitioner at Pro-Accounting, says since the eFiling system was introduced several years ago, filing tax returns has been a breeze. Where individuals weren’t marked for verification or audit, refunds were typically paid within 24 to 48 hours. A verification or audit process could potentially take three to four weeks, but once it was completed, refunds were also generally paid within two days.

But in the current tax season, this hasn’t been the case, he says.

Following the completion of a client audit, the refund wasn’t paid and when he followed up with Sars after about a week, he was informed that a “Special Stopper” was in place. The client in question then had to visit a Sars branch in person with his Fica documentation and proof of bank details.

Oberholster says a number of clients have visited a Sars branch to verify their details but their refunds still haven’t been paid. They continue to monitor the situation on a weekly basis but the problem persists.

Of particular concern is that officials can’t explain why tax refunds aren’t being paid.

Hendrik van Deventer, chief operating officer at ST&T Executors & Trustees (Stellentrust), says they are “most definitely” experiencing more challenges with tax refunds.

He too notes that refunds were typically paid between 24 and 48 hours in the past, but that it is “definitely not the case this season”.

In the past tax practitioners were able to update client bank details themselves, but the current process requires taxpayers to visit a Sars branch in person, which removes the practitioner from the loop, he says.

But even then, refunds may not necessarily be paid, he adds.

Piet Nel, head of the School of Applied Tax at the South African Institute of Tax Professionals (Sait), says during previous tax seasons, Sars did audit certain refunds, which it is permitted to do by law, but this year it has been incredibly common.

Some tax practitioners have indicated that a Special Stopper notification was triggered in almost all instances where refunds were due.

Nel says refunds often take much longer to be paid than during previous tax seasons.

While tax legislation does not stipulate a maximum time frame in which refunds have to be paid, the absence of an updated Sars Service Charter has added to industry woes. Sars Commissioner Tom Moyane previously indicated that the Draft Charter would be released shortly.

Ettiene Retief, chairperson of the National Tax Committee of the South African Institute of Professional Accountants (Saipa), says from a practice point of view there generally is a problem with refunds.

This is also the case for VAT, he adds.

He stresses however, that context is important. Where individuals have a pretty straightforward tax return, with one employee tax certificate and a retirement annuity, there is a lot less risk, numbers may not be significant and the refunds probably won’t be a problem.

Taxpayers with more complex affairs may find that refunds are held back because supporting paperwork could be required where the risk of non-compliance is higher.

In addition, Sars also had to put a stop to fraud and therefore require verification in some instances.

“There [are] definitely more cases where we hear people complaining about their refunds not being paid out, but part of that could be because of the new banking validations or could be for some other outstanding risk issues that it could be stopped and not just Sars sitting back and saying our policy is not to pay out.

“In fact Sars generally prides itself on the policy of paying out refunds quite fast. They want taxpayers to feel comfortable that they are not going to hold back your refund for no reason, so we do have communication with Sars where we are trying to address whether there are other systemic problems that might be causing this,” Retief notes.

Delays in the payment of VAT refunds can have significant implications for a company’s cash flow.

Sars spokesperson Sandile Memela says it consistently has to balance its service and enforcement role when processing tax returns. 

“We have tightened our controls on the tax return process to prevent possible tax fraud and reduce the risk of incorrect refund pay-outs. Challenges include, among others, a taxpayer’s personal details being compromised by fraudulent or possible fraudulent activity.”

Memela says Sars had to introduce additional controls to protect the taxpayer and the fiscus. These include the normal process of verifying information submitted on a tax return (information such as whether expenses submitted by a taxpayer qualify for a deduction, and the supporting documentation to verify such expenses). 

The additional measure is the verification of personal details that requires the affected taxpayer to physically present themselves at the branch to authenticate their details. 

“Of course, not all taxpayers are affected. Of the 3.5 million returns received, 5% of these were identified for verification of personal details. We now have approximately 50 000 returns that require verification of personal details. These remaining taxpayers have been notified to visit their nearest branch to verify their personal details.”

He says Sars does use third party data to verify details and detect anomalies. These anomalies are then addressed when the taxpayer presents themselves for the verification in person.

Taxpayers are urged to take ownership of their tax affairs even if they are making use of a registered tax practitioner or intermediary.

Around 15% of the 2 133 complaints reviewed by the Tax Ombud in the 2015/16 financial year related to refunds.

If a proposal in the Draft Tax Administration Laws Amendment Bill is promulgated, the Ombud would in future be able to investigate and review any systemic issues related to a service matter at the request of the minister.

Asked whether he intended to ask Finance Minister Pravin Gordhan to investigate the delay in tax refunds as a systemic issue, Tax Ombud judge Bernard Ngoepe said his office has an “open mind” about the issue.

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Getting VAT refunds has become a nightmare with waiting sometimes over 90 days with query after query even though all documentation has been submitted and claims are totally accurate.
One has to resort to ‘cheating’ by increasing and/or decreasing input and output to always pay in. In the end it always balances out correctly.
In one of our companies we are owed over R250k for over 2 months now but had to pay in R280k in past return?

As a provisional tax payer I was subjected to and audit, I waited at the Randburg office for 45 minutes merely to submit my documentation which Sars personnel photocopied and sent off to wherever. I then received another sms and notification on e filing to submit further documentation, again another half hour waiting on their ticket system to call me to a counter.
There certainly seems to be a deterioration in SARS administrative capabilities and the personnel are exceedingly arrogant and disdainful
Sars is losing the plot

And you still think the anc govermunt is solvent, after this article? Then you must be an anc supporter.

It seems to me that this is simply further evidence that the State is running out of money. It is not new to this Tax Season and was clearly evident last year as well. Using the “excuse” of protecting the Tax Payer is disingenuous as there are too many examples of folk who have been in the system for decades with no changes to addresses or bank details … but severely delayed refunds.

The negative and disruptive shift in attitude towards taxpayers in SARS offices, combined with the “Special Stopper” will simply add another nail in the coffin of tax compliance from the public. Several high profile folk have already warned about the severe consequences of a tax revolt from the public.

SARS … beware … the small percentage of the populace funding the State’s activities [too many nefarious ones at that] may soon dry up unless attitudes towards them changes!

I’m gonna ask them to come verify themselves before I pay my taxes this year.

SARS had a Special Stopper on one of my clients, I made an appointment to go and verify the details, had to wait twoo weeks, and when I rocked up, they said they have paid the money out yesterday. No mentioning of the Special Stopper they told me about when we queried the holdup on the payment, seems the one hand does not know what the other does.
SARS seemingly is under the impression that taxpayers and practitioners simply love to visit their offices….it is nothing but a grude visit in my mind!!

It starts with refund delays and ends up like what you have in Nigeria or Ghana or most other African countries, where tax refunds don’t exist – if you are not part of the inner circle of the president, that is.

If you fail to settle your outstanding tax commitment timeously then SARS start leveling all sorts of draconian fees/levies/penalties. If e filing sites are as secure as SARS can possibly make them then there should be no reason for them to conduct verification tests. After all its their data that they are using so either their site is insecure, and if so that should be worrisome to every tax payer. If these verifications are being done to slow down the process of repayments, then SARS should make recompense to the taxpayer by paying the taxpayer suitable inconvenience fees at repo rate plus 6%

I have been told by a friend who works at SARS that there are employees in SARS who make bogus tax refunds to family and friends when in fact they are not eligible for any tax refunds. SARS should be spending time and investigating its own staff for these practices. They should make use of a polygraph service like how the FBI and CIA does to investigate all its staff and clean out the organization of the criminal elements.

My wife was subject to his ludicrous “special stopper”. She has had the same bank details since the early 1960s and has one tax certificate and one pension fund contribution. She spoke to more than one call centre agent and more than one SARS agent at Randburg and got a different response each time . more than one agent had the guts to say they don’t know what it’s about nor how long it would take to resolve. One agent said appear in person and bring 6 months bank statements. Another said one month is enough. The agent she appeared before after a very long wait in the queue looked at the statements and handed them bank with blinking or making notes. All the fuss over a measly R 7000. Previous year’s pay outs were done within 7 days.
This is undoubtedly a ruse by SARS not to pay out as they are short of cash.
My own audit was completed a while back but SARS refuses to release the money owing. Its a trivial amount. No SARS agent has been able to explain why there is a hold up. One agent didn’t even know what the special stopper was.
My respect for SARS has collapsed and especially on top of the reported consistent corruptive looting by Government officials of the taxes collected. Zimbabwe here we come.

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