Tuesday, September 13, 2011

SARS episode Two - Refund what refund?

A few months ago, I detailed how SARS was deliberately delaying paying out tax refunds and today after meeting with Tax Practitioner over the same issue I learned some new facts. Some of the accounts of cases related to me almost defied explanation. The upshot seems to be that SARS has made a serious commitment to stop paying out any refunds due to the fiscus being depleted by prolific government spending. The only aspect of this I did not receive information on, was whether the delaying tactics were wholesale, or if they targeted certain tax brackets only. Some of the scams perpetrated on the taxpayers sound illegal, but according to the Tax Practitioner there is legislation in the pipeline which will in effect make SARS an entity which is above the constitution of South Africa. The legislation will give them seizure without legal process powers which quite honestly remove all constitutional rights from taxpayers. Simply put, if SARS alleges you owe them money, they can, without any legal process, or warrant enter your property and attach any assets as they see fit and hold the assets until such time you settle the alleged debt, irrespective of any extenuating circumstances. Frightening? I think so.
Anyway I digress with too much bad news at once, here are some of the current scams being used by SARS against individuals: 

The banking details scam.

The taxpayer has complied with all of the requirements for a refund, which may take anything upwards of 6 months to complete. SARS then sends the taxpayer a notification demanding the taxpayer confirm their banking details. On the surface this seems reasonable; however the confirmation has to be done in person at a SARS office.  The taxpayer duly sets off and goes to a SARS office, stands in line for an hour or so and presents a bank statement as proof banking details. So far so good, another 30 days go by without a refund and when the taxpayer enquires about the refund, they are told they have to confirm their banking details. Strange, you might say? Well it gets better, for the taxpayers savvy enough to have gotten the previous statement stamped as proof of submission of statement, they are told the statement is out of date and they have submit the most recent one. Another 30 days delay arranged in a few minutes by SARS.
Another interesting twist experienced by a taxpayer was on presenting a certified letter from his bank on demand for banking details, and having it accepted by SARS, and also not receiving the due refund for three months, on enquiry was told that the account he had given SARS via the certified Bank letter was invalid and the payment had been returned three times. The bank had no record of any such transactions. That taxpayer is still waiting for the refund due to him. It has been over 12 months so far.

The documentation scam

This seems to be a favourite scam at SARS due to its simplicity. A return will be filed via e-filing as per the normal procedure. A refund is deemed to be due to the taxpayer and the normal IT 34 notification of such will be sent to the taxpayer via whatever process they have selected to communicate with SARS, stipulating the statutory period for refund payment. This normally two dates, the first date is 21 days from the date of assessment,  the second date is normally 30 days from date of assessment and carries the stipulation that payment will made if there are no further queries raised by SARS in respect of the payment.
The normal strategy by SARS is to then inform the taxpayer that there documents missing from the assessment which normally is done via e-filing and copies are retained by the taxpayer. On checking the taxpayers submission records the missing documents are normally seen in the submitted fields, as they were used to initially calculate the tax due/credit, but in asking for them again, normally the return is reversed and then the refund becomes a tax liability because of the “missing” supporting documents. Supporting documents are then re-submitted along with an official objection to the recalculated tax liability which in some cases is up to the total tax payable, which has already been paid over to SARS.
The time to receive replies on these resubmissions of “missing” documents can run into many months and the average time resolve any queries are escalating to around 18 months. Tax practitioners are being told by SARS inspectors to engage specialist consultants who they recommend to resolve long standing disputes. These consultants are ex-SARS employees who have seen a niche market in which they can make easy money by dealing with their old colleagues in the system and have a steady source ion income guaranteed by internal systemic abuses within SARS.


In line with current legislation to tighten up on VAT fraud the conditions for registering as a VAT payer have been tightened up. Fair comment, the government was losing millions through fraudulent VAT claims. So far so good? So a company that against all odds was doing well enough to have increase their income to the point where they had to by law register for VAT, did the responsible thing and approached Tax Practitioner to assist them in their registration attempts. He duly downloaded the forms from the SARS website, completed his portion and couriered the forms to the client in Mpumalanga. The client completed his portion and then travelled to Nelspruit to lodge the forms and was promptly turned away because the forms were the wrong colour. He was given the same forms, but in the correct colour and told to resubmit them. He then couriered the forms to his Tax Practitioner who filled them in again and this time in order to preserve the colour, scanned them and e-mailed them to the client who printed them in colour, filled in his portion and again travelled to Nelspruit to lodge them. He was turned away because the signature of the Tax practitioner was not an original, he offered to email the form to the SARS office so they could check authenticity, and they refused him.
So the originals were couriered to him the next day by overnight bag. I still don’t know the outcome of this scenario, because it still remains unresolved as of today. The consequence for that particular business is an inability to trade with many of its suppliers, as it cannot supply them with a VAT number or a tax clearance certificate. This but one of many similar situations where en a country struggling to come out of a depression, SARS seems to be one of the biggest growth inhibitors to business in general. 

VAT refunds for companies are another saga altogether, the expected time to get a VAT refund for exports is given at between 18 months and three years for those that have successfully sued SARS after they faced financial ruin due to delayed payments. I will make this the topic of the next post, in order to keep this already long post more readable.

How long have I been waiting? Going on for 15 months so far, all the usual hoops have been jumped through. I wait with baited breath…

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