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SARS system behind delay in tax refunds, ombud finds

Sep 04 2017 14:55
Lameez Omarjee

Johannesburg – Tax Ombud Judge Bernard Ngoepe has found that the system of the South African Revenue Service is behind the delayed payment of refunds to taxpayers.

According to a report released by the tax ombud, based on an investigation into delayed payment of refunds, Ngoepe concluded that the delayed payments is a systemic issue.

The investigation looked at complaints which extend as far back as when the office was first formed in 2013, Ngoepe previously told Fin24. He also told Fin24 that the issue was related to mechanisms applied by the tax authority and not governance.

Some complaints are related to SARS failing to follow standard operating procedures for bank details of taxpayers which have changed. 

“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,” Ngoepe said in the report.

“The removal of the obstacles discussed in the report, as well as any others, would go a long way towards addressing the problem.”

Ngoepe noted that complaints increased during the latter part of 2016 to March 2017. Between November 2016 and March 2017, the ombud received no less than 500 complaints, half of which were validated, according to the report. The number of complaints are not indicative of the "financial magnitude" or the impact of the delay, as one claim could run into millions, the tax ombud found. 

“A number of complaints that the payments of refunds were unduly delayed were justified; the refunds could and should have been paid earlier,” said Ngoepe. “In such instances, no satisfactory explanations were given by SARS for the delays.”

Further, some “mechanisms” used by SARS have justifiably given tax payers the impression that SARS’ intention in some instances is to “avoid parting” with the money it is meant to pay out.

Ngoepe also found that in some instances the resulting financial hardship to the taxpayer due to delayed payment has been “drastic”. Complaints revealed that delayed refunds led to the near collapse of businesses, and ensuing job losses. 

Although the tax ombud found SARS had paid out "as many taxpayers as possible", there are still taxpayers whose refunds are unpaid and who could be facing financial hardship. The outstanding payments may also be of high value and when these payments are eventually made, it could reduce the amount of tax collected over that period. This is why payments must be made timeously, the report read. 

Ngoepe also acknowledged that SARS has had to deal with fraudulent refund claims and the measures it put in place should be understood. Given this, once verification or an audit of the refund is completed, payment should be made without delay, which is not always the case. 

Refunds need to be made as speedily as possible. “Illustrative cases have shown that the system as presently administered by SARS does not always achieve this,” the ombudsman concluded.

The report has been sent to Finance Minister Malusi Gigaba and SARS Commissioner Tom Moyane.

Treasury confirmed to Fin24 that it is still studying the report and cannot yet comment on it.

This is a developing story. 

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tom moyane  |  sars  |  tax ombudsman


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