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Tax refunds: There are still issues, Ombud says

Almost 35% of complaints reviewed in 2017/18 related to refunds.

The Office of the Tax Ombud says it is not yet satisfied with the manner in which the South African Revenue Service (Sars) is dealing with delays with regard to tax refunds.

“There’s some improvements, but we can’t say for sure that there are no issues. There are still issues,” the CEO of the Tax Ombud’s Office, Eric Mkhawane, told Moneyweb on the sidelines of its fifth birthday celebration.

According to the Ombud’s 2017/18 Annual Report the majority of complaints reviewed between April 1, 2017 and March 31, 2018, related to refunds, with dispute resolution and assessments also high up on the list of taxpayer headaches (see below).

Source: Tax Ombud Annual Report 2017/18 (click to enlarge)

After getting approval from then finance minister Pravin Gordhan to investigate the issue as a systemic problem in March 2017, Tax Ombud Judge Bernard Ngoepe found that Sars’s system allowed it to unduly delay the payment of verified refunds to taxpayers in certain cases. A systemic issue is regarded as the underlying reason for a complaint and may impact many taxpayers.

The Ombud’s latest report still lists the delay in the payment of refunds as its number one serious or systemic issue. It has been part of the Ombud’s ‘inventory’ for the last 52 months.

“Various engagements have taken place between the OTO [Office of the Tax Ombud] and Sars. In the last engagement the OTO requested Sars to provide specifics on the implementation of each of the OTO’s recommendations to enable it to monitor the effectiveness efficiently. Sars is yet to respond,” the report says.

Mkhawane says the Ombud has asked Sars to provide it with the specifics of what it is doing to address the issues. Where Sars has terminated a specific practice that was previously causing delays, the Ombud wants to know when this happened so that it can monitor whether there is any progress.

“If you look at our report [you will see that] we do indicate that we are monitoring a specific issue … We will remove that systemic issue once we are satisfied that they have implemented [a remedy] fully and there are no more complaints,” he adds.

Acting Sars Commissioner Mark Kingon says Sars dealt with the Ombud’s 12 findings that were highlighted in terms of refunds.

Two specific issues are still a work in progress.

The first relates to the so-called ‘special stoppers’ that were previously placed on refunds where a high risk of fraud was believed to exist. It usually required taxpayers to visit a branch to submit supporting documents. Kingon says Sars is changing the whole process with regard to stoppers and the hope is that it will be finalised by year-end.

The second relates to a recommendation by the Ombud that Vat and diesel refunds, which are declared on the same return, be split to avoid delays. Kingon says Sars has implemented improvements but the process is quite intricate and may take some time. “That is work in progress and that is quite complicated – not something we can just do overnight.”

In a statement issued on Tuesday, the Ombud said resolving the top 10 complaints related to refunds resulted in R446 million in Vat and corporate income tax refunds being paid out to taxpayers. The highest amount paid was a Vat refund of roughly R158 million, followed by one of almost R91 million.

Ngoepe announced in September that he has received approval to launch two separate investigations into Sars. The reviews are related to problems with Pay-As-You-Earn (PAYE) statements of account and alleged non-adherence to dispute resolution timeframes. 

Kingon says Sars has received the request related to the dispute timelines and has appointed people to coordinate the matter.

“We are fully aware that we are not adhering in every circumstance to the timelines. It is a concern of mine in terms of process.”

With regards to changes in the amounts reflected on PAYE statements of account, which may result in taxpayers having difficulty in obtaining tax clearance certificates (a possible requirement for tenders), Kingon says there is a bit of background to the issue, but that Sars recognises the concerns. It is working with the Ombud to help its investigation.

Mkhawane did not want to provide a deadline for the completion of the investigations and said it would depend on the interaction.

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My own experience some time ago was that as long as e-filing can handle an issue, everything runs smoothly. It’s the moment something falls outside e-filing process that the trouble starts. Then it’s like talking to a wall.

Still waiting after a month and EVERY year an audit! SARS is garbage!

SARS audits/reviews almost all assessments that are in a refund position. Then they also get up to 60 days (according to their website) to finalise the case. This gives them 60 days additionally to pay out refunds.

Also, a refund is simply an indication that you’ve paid too much tax, or have some deductions.

Being in a nil assessment or a payable assessment also makes you less likely to be selected for an audit.

So SARS is mainly doing refund audits in order to slow down the rate at which refunds are paid.

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