More than a year after the Ombud’s rather critical report on the South African Revenue Service’s (SARS’) value-added tax (VAT) refund structure was issued, frustration among taxpayers has been intensified by the revenue service’s excessive verification demands, which seem to be driven by the aim to delay legitimate VAT refunds.

The most brazen example brought to our attention, was when SARS withdrew money from a taxpayer’s bank account without following due procedure. Upon proving his case, the taxpayer was owed the funds back and a refund was due. SARS immediately requested a verification of bank details. Let me repeat that. SARS requested a verification of bank details from an account they had just drawn funds from.

Holding horses
Two possible conclusions can be drawn from this practise. Either, SARS officials aren’t properly equipped in their duties or the verification request was deliberate in an attempt to delay a refund. Reviewing the example above, we will let you decide.

The biggest aspect of tax that seems to be subject to excessive requests for verification is the area of Value-Added Tax (VAT). The frustrations arising out of SARS’s verification process on VAT not only aggravates the taxpayer but also endangers the livelihood of the enterprise they operate. Particularly we have found that, when refunds start exceeding the R1-million amount, the process becomes somewhat further drawn out.

Fraud is real
It is common knowledge that SARS’ verification process is to prevent fraudulent VAT claims. In a modern world with modern criminals, fraud is a real concern. The integrity of the VAT system needs to be protected and no doubt SARS has the full support of the taxpaying community in preventing fraudulent depletion of Treasury funds through fraudulent VAT claims. No need to add to the ongoing political looting that is the talk of the town currently.

Kicker
What is to be done though, where SARS has no basis for a request for verification and yet persistently requests same? For those throwing their hands in the air right now, I understand your frustration. Why should your legitimate VAT refund be delayed?

The short answer is, it shouldn’t. At least, that’s what the Ombud said. The Nugent Commission is likely to come to the same conclusion. Refunds are being delayed because, ultimately, SARS doesn’t want to pay them. It affects the collection figures. Probably also affects performance bonuses too?

What should you do?
In our experience, the easiest route is to go direct. To call SARS to order and get a response. Too many taxpayers believe that, once their refund is within the system that is SARS, there is no hope and it becomes a wait and pray type of game.
How do you go direct? You use your years of experience and expertise to garner a result. If you’re short on these, contact a professional.

Author

Christopher Renwick
Senior Tax Attorney

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