SARS ‘unfairly’ delayed paying tax refunds: ombudsman

05 September 2017 | Economic factors

The Tax Ombudsman has found that the South African Revenue Service’s system unfairly delayed payment of refunds to taxpayers.

In the release of its findings, the ombud said that the findings were not only based on complaints received during the previous tax year, but over the course of multiple years.

The number of such complaints has run into hundreds recently within a short space of time, it said.

“In the period November 2016 to March 2017, we received no less than 500 such complaints; half of which were validated. While the number of complaints received is important, this is not necessarily indicative of the financial magnitude or impact of the problem because, one claim may run into millions,” it said.

“The impact of the withholding of refunds may be devastating to the taxpayer. What appears to be a small claim may have serious cash flow impact on that small taxpayer company, or an individual.”

The complaints included situations in which SARS reportedly employed certain mechanisms to unduly delay, or even avoid, paying out refunds due to them, the ombudsman said.

This resulted in financial hardships to them and, in some instances, the near collapse of their businesses, while in other cases the loss of jobs ensued.

Among other reasons, SARS blamed the delay on: its IT system not correctly serving up attached documentation; fraudulent claims; and automatic set-offs.

However, in its findings, the Obudsman found that some of the reported obstacles holding up tax refunds were unjustified.

“It is clear that the system allows for SARS to unduly delay the payment of verified refunds to taxpayers in certain circumstances. This has become a systemic issue. The system does not sufficiently protect taxpayers,” the report said.

“A number of complaints that the payments of refunds were unduly delayed were justified; the refunds could and should have been paid earlier,” said ombudsman, Judge Bernard Ngoepe.

“In such instances, no satisfactory explanations were given by SARS for the delays.”

You can read the full report here.