Investigation to throw light on tax refunds

Deputy finance minister, Mcebisi Jonas has given tax ombud, Judge Bernard Ngoepe the go-ahead to investigate.

Tax practitioners have raised a red flag over delays in the payment of tax refunds for some time, but Sars strongly rejects the allegations that it is doing this deliberately. It has also denied claims that its administrative deficiencies contributed to the R30bn shortfall in tax revenue in the 2016-17 fiscal year.

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Concern about the shortfall was raised by the finance minister, Pravin Gordhan, in a briefing ahead of his budget speech in the National Assembly and he has had engagements with senior Sars executives about the matter.

The tax ombud has seen a spike in complaints about delayed payment of tax refunds by Sars, which CEO, Eric Mkhawane, said on Tuesday represented about 50% of all complaints. This was why Ngoepe asked Gordhan for permission to conduct an inquiry into possible systemic reasons for the delays.

Mkhawane said the delays, some lasting months, occurred even when taxpayers had complied with all the requirements of Sars. The negative financial consequences for the taxpayer could be severe, he added, noting that there had been a "public outcry" over the delays.

Mkhawane expected the probe to be completed in one or two months.

While the tax ombud had helped solve individual cases of delayed tax refund payments, it had not been able to address the issue systemically, he said. The investigation would allow it to deal with the problem in a holistic way and look at the underlying causes.

"We want to bolster confidence in the tax administration and to have an accountable, responsive revenue authority," Mkhawane said.

The ombud conducts investigations emanating from complaints by individuals or companies, and investigations into systemic problems or issues at Sars, which require Gordhan's approval.

Sars has been informed by Jonas about the investigation.

Sars spokesman, Sandile Memela, said the tax authority welcomed and would fully cooperate with the investigation, which would bolster taxpayer confidence in its systems. It would also bring "finality and closure" to the issue.

Memela noted that as of January, Sars had paid out R155bn in value-added tax (VAT) refunds, which was R12.6bn more than the same period in the previous year. A total 89% of tax refunds were paid within 72 hours, with the remaining 11% being identified by the risk engine as requiring detailed audits. Difficulties in getting the right documentation sometimes delayed the process of dealing with these cases.

Regarding personal income tax, payments were made within 72 hours in 98.2% of cases.

"Much of the current taxpayer complaints pertain to VAT refunds. It must be highlighted that Sars has an obligation to ensure both service and compliance, which includes complying with the legislation and ensuring that all incorrect activities are managed correctly, which could include fraud," Memela said.

Due to an increase in fraud, SARS had to tighten "risk rules".

"We remain confident about the strength and 'robustness' of the Sars systems and processes. In fact, Sars is determined to ensure that our systems and processes simplify the process of meeting one's tax obligations," Memela said.

DA deputy finance spokesman, Alf Lees, welcomed the investigation, which he hoped would be "swift and thorough". The tax ombud needed to look into issues with the system and process, he said.

"The DA has been reliably informed of backlogs across the board, which is an indication of weak administration and technology at SARS," Lees said.