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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