Delay in refunds could've lead to inflated tax revenue, SARS inquiry hears

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Delays in the payment of tax refunds is in the top three reported complaints, the Nugent Commission of Inquiry into the SA Revenue Service (SARS) heard on Friday.

CEO in the office of the Tax Ombudsman Eric Mkhawane said taxpayers and businesses have, as a result, increasingly approached the ombudsman to intervene.

“People have been complaining a lot about refunds since late 2016, they are saying the refunds were being withheld without any reason,” he said.

He said some of the common challenges raised by taxpayers was that they were required to visit a SARS branch to update their banking details, but the money would not be paid up to three months after satisfying that requirement. 

“There is no legal basis for a taxpayer to have to wait after providing all the banking requirements,” Mkhawane told the commission, adding that the ombudsman had raised the issue with SARS.

He said the verification of banking details was required even if a customer had not changed banks and was justified as a way to eliminate fraud.

Mkhawane stated that some of the refunds were eventually paid after the end of the financial year, following the ombudsman’s intervention.

He said the delays meant that the funds which were withheld were counted as part of revenue collected by SARS. This could potentially lead to inflated tax revenue.

The payment of refunds is one of the many operational challenges that have marred the once-efficient revenue services in recent years.

Evidence presented by current and former employees in the inquiry into tax administration and governance at SARS has shown that the ineffective operational structure adopted by the service in 2015 was the root of the challenges.

The operational model implemented during the leadership of suspended SARS commissioner, Tom Moyane, also led to the shutting of a key unit dealing with the collection of taxes from large businesses as well as the dismantling of enforcement units.

The inquiry has heard that SARS is in the process of re-establishing the large business centre which accounted for 30% of tax revenue.

The inquiry will resume on Tuesday.

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