Ombud gets go-ahead to probe Sars over delayed refunds

Tax Ombud Judge Bernard Ngoepe confirmed on Monday he had obtained the approval of Minister of Finance Pravin Gordhan to review the apparent multitude of delayed tax refunds.

“The approach to the minister was prompted by the number of complaints received by the Tax Ombud from taxpayers,” the statement issued by the Ombud’s office stated.

South African Institute of Tax Professionals (Sait) CEO Professor Keith Engel wondered if Sars’ risk engine was really going after risk, or was it simply seeing high value and complexity, all of which contributed to delayed payouts.

“So certain people might be identified as an individual who runs a business on the side, so certain individuals might be more complicated [hence] they are being targeted. And that’s where maybe the issue is, because Sars is making it sound like all 11% should automatically be audited.Why? What is the choice of that 11%, assuming Sars’ numbers are correct.”

Engel said there was a feeling among the tax community and among Sait members that there was something “funny” going on, and it had been going on a long time.

“They believe it has grown worse, it supports their argument Sars is being pushed towards targets, like Pravin Gordhan’s complaint [that] Sars was not meeting its targets.”

“To make yourself honest, is to make yourself a target,” said Engel.

“The problem is Sars never really went after the other [dishonest individuals]. That’s why Sars had the specialised unit. Those guys were designed to get the people who were evaders, who were just not filing at all. And that part of Sars is not that big or maybe even less functional than before,” Engel said.

There were a number of narratives about Sars, said Engel.

“There’s one which says Sars is becoming a corrupt organisation, for which there is no proof. Then there is the narrative which states that Sars is a target driven organisation, because that is what it is; then there’s also the one which states Sars is being forced into targets which makes it a victim of its own circumstance and never solves the problems.”

Now the pressure was piling up, said Engel, and rather than going after the informal and illegal business and tenderpreneurs, Sars was just going after its old sources.

“So a lot of the issues are just bad habits which have been ingrained for far too long.”

A Sars e-filing practitioner – who requested his name be withheld for fear of a Sars backlash –  said there could be a number of reasons why Sars was not refunding people.

“They simply don’t have the money, or they are completely inefficient and are neglecting their duties, or they are holding onto the money to boost their collection figures and will payout after financial year end,” he said.

“In my opinion it is probably a combination of all three,” he said. “Some people have massive Vat refunds that they need to continue doing business. This action of SARS has led to some businesses having to close their doors.”

Sars said earlier this month it welcomed the review of its systems and promised its full co-operation with the Ombud.

It noted it had had to react to increased fraud by tightening up its risk rules yet despite this, only referred 11% of cases were referred for detailed audit while “98.2%” of personal income tax payments were paid within 72 hours.

Sars spokesperson Sandile Memela told Moneyweb in October not everyone had been affected.

“Of the 3.5 million returns received, 5% of these were identified for verification of personal details. We now have approximately 50 000 returns that require verification of personal details. These remaining taxpayers have been notified to visit their nearest branch to verify their personal details,” Memela said.

In November, Sars noted of the 6 662 490 individual taxpayers expected to submit returns for the 2014/15 tax year, 4 788 334 (71.9%) had been assessed.

“In ensuing years, the level of assessment for any given tax year increases as more outstanding returns are submitted and processed,” it stated in its report on tax statistics for 2016.

According to Moneyweb, about 15% of 2 133 complaints reviewed by the Tax Ombud in the 2015/16 financial year related to refunds.