New taxpayer verification process painful, but necessary

Taxpayers will in future have to appear in person at a branch office of the South African Revenue Service (Sars) if any of their details registered with the agency change.

In the past this verification was only necessary when the taxpayer’s banking details changed. However, they will have to visit a branch if a telephone number or an address changes.

Taxpayers will have to take their identification documents with them and will be fingerprinted and photographed in order for Sars to verify whether their records correspond with that of the Department of Home Affairs.

Des Kruger, a member of the tax legal technical work group at the South African Institute of Tax Professionals (Sait), says due to the level of fraud in the country, Sars was forced to take steps to prevent it.

“As crazy as the verification system may be, and cumbersome, and burdensome, and painful, especially this time of the year where the queues outside the local Sars offices stretch forever, the sad fact is that there is so much fraud that Sars was compelled to do something,” says Kruger, consultant at law firm Webber Wentzel.

He adds that legislative changes allow Sars to request biometric information “if the information is required to ensure… proper identification of the (taxpayer) or counteracting identity theft or fraud”.

Kruger says Sars has a legal right to compel a taxpayer to provide fingerprints and be photographed. It should not be a major concern to meet these requirements, provided the requisite fingerprints and photo verification process does not take forever to verify.

It should also not result in an unreasonable delay in the time it takes to pay out a refund due to a taxpayer, says Kruger.

Sars says in its 2015-16 annual report approximately 1.8 million refunds amounting to R15 billion were paid out and more than 95% of refunds were paid out within 72 hours. The agency also conducted 1.8 million audits.

Willem Oberholzer, tax specialist at audit and advisory firm Nkonki, says it is understandable that Sars will want to verify any change in banking details in order to curtail fraud.

“If you consider the vast amount of money that is being refunded to taxpayers, the verification process seems like a step in the right direction,” he says.

“The only concern might be whether the Sars offices can handle the influx of taxpayers for the physical verification when taxpayers are required to present themselves in person.”

Oberholzer says direct confirmation or verification from the banks, which by law have already verified the existence of the clients, might be a less invasive form of verification.

Sait CEO Keith Engel, says Sars “frequently” audits or seeks to verify claims made on returns. Sars is distrustful of paperwork that can easily be fabricated.

The Sars system will pick-up electronic filing profiles where taxpayers repeatedly adjust certain blocks in order to improve their net outcome by eliminating amounts owing in favour of a refund.

Sars provides rapid refunds in many cases, but its risk engine is sensitive and deviations can easily trigger an audit, says Engel.

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