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Tax Ombud gets nod to investigate SARS

Mar 20 2017 17:44
Adiel Ismail

Cape Town - The South African Revenue Service (SARS), which was initially taken by surprise over the Tax Ombuds' decision to investigate the institutes systems, has thrown its full support behind the probe.

"SARS would like to place on record its full support of the investigation by the Tax Ombud," it said in a statement on Monday.

The investigation comes just months after legislative amendments allowed the Office of the Tax Ombudsman to be more independent of SARS.

The Tax Ombud investigation relates to delays in paying out tax refunds to individuals and companies following a flood of complaints. This comes amid reports accusing SARS of withholding tax refunds in order to boost its tax collection figures, but SARS denied this.

READ: Don't personalise Treasury/SARS issue - Gordhan

Finance Minister Pravin Gordhan last month expressed concern over SARS's revenue collection, which was more than R30bn short – the largest deficit in eight years.

Tax Ombudsman Judge Bernard Ngoepe turned to Gordhan for permission to launch a probe into whether “systemic problems” at the SARS are the reason for widespread delays in the payment of refunds.

SARS said on Monday that Deputy Finance Minister Mcebisi Jonas informed the revenue collector that permission was granted for the investigation.

"The Office of the Tax Ombud and the Ministry of Finance can be assured of full cooperation from SARS during the investigation. It is in the interest of SARS and the public to finally find closure and finality to this issue," it said.

"SARS looks forward to cooperating with the Tax Ombud and providing any assistance going forward."

The tax agency said it is confident about the strength and ‘robustness’ of their systems and processes, pointing out that it is also hopeful that the results of the investigation will provide the public with the requisite confidence in their systems.

SARS said much of the current taxpayer complaints pertain to VAT refunds, noting that 98.2% of personal income tax payments are processed within 72 hours.

READ: Something is rotten in RSA, cautions tax ombud

Keith Engel, head of the SA Institute of Tax Professionals, told City Press last month the issue of VAT refunds was particularly challenging for small businesses.

“Interest on refunds is payable, but SARS often only provides interest upon the taxpayer’s request,” said Engel, who added that businesses with small profit margins were particularly affected.

“Although SARS tells us that 90% of refunds are paid in time, that still means 10% are not and the value of those refunds can be substantial – accounting for hundreds of millions of rands or even more,” CEO of the Office of the Tax Ombudsman Advocate Eric Mkhawane told City Press in February.

He explained that due to fraudulent behaviour, SARS implemented a system of verification of banking details to process refunds.

"It must 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," said SARS.

It added that due to an increase in fraud, it had to react by tightening risk rules. "Despite such actions SARS has only referred 11% of cases for detailed audit."

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