Tax ombud finds Sars employs delaying tactics

The report identified several mechanisms that Sars has used to delay the payment of tax refunds and has further urged the tax authority to terminate them while at the same time acknowledging that these methods had been employed to combat fraud in some instances.

"It is clear that the system allows for Sars to unduly delay the payment of verified refunds to taxpayers in certain circumstances. This has become a systemic issue.

"The system does not sufficiently protect taxpayers. The removal of the obstacles would go a long way towards addressing the problem," the judge said in his conclusion.

Judge Ngoepe's investigation was prompted by the sharp increase in the number of complaints by taxpayers, who in some cases said the practice of delayed refunds caused them serious cash flow problems, especially in the case of individuals and small companies.

These complaints have been forthcoming over a number of years, having been raised in several annual reports of the tax ombud. They reached a peak in the period December 2016 to March 2017.

The complaint by taxpayers was that Sars employed certain mechanisms to unduly delay, or even avoid, paying out refunds due to them. They argued that the tax collection system was being implemented unfairly by Sars, resulting in financial hardship and in some cases the near collapse of their businesses and job losses. The judge noted that in some cases, the financial hardship was drastic.

For example, the report criticises the placing of "stoppers" to halt the payment of refunds every time a new return for the next period was filed. "The system blocks already verified refunds the moment a subsequent return is submitted by the taxpayer. Therefore, even where specific returns are not identified for audit/verification, the mere submission of the next return results in the payment of the refund being stopped. This may have a knock-on effect, especially in the case of VAT where the periods for declaration are close to each other," the judge says in his report.

"Sars should keep to time frames, so that a refund is paid out before being overtaken by the next submission. In any case, [legally] Sars " is not entitled to secure a hopeful debt out of a next return by withholding a refund which is already due."

Professional associations complained that the lifting of "special stoppers" took unduly long, sometimes more than two months, which the report said was a justified complaint.

The judge identified various other mechanisms Sars used to delay payment, such as the need to verify bank details in person at a Sars branch. Even when these requirements were complied with, refunds were not forthcoming. Another cause of delays was the failure to link submitted documents to the main file held by Sars.

DA deputy finance spokesman Alf Lees said his party would propose legislative amendments to ensure refunds were paid out without delay.

Lees said the findings of the report contradicted the assurances given by SARS commissioner Tom Moyane that there were no undue delays in the payment of refunds.