Durban - South Africa’s “cash-strapped” revenue service stands accused of holding the economy to ransom as VAT refunds are delayed, sometimes for up to a year.
Farmers, exporters, vendors and the mining sector say lengthy delays based on ongoing and unnecessary queries on VAT refund applications by Sars are putting their operations at risk.
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While Sars has denied a funding crunch and said delays were due to a “tightening of controls”, a survey by the South African Institute of Tax Professionals (SAIT) shows that of 311 tax professionals, 25% said their clients were experiencing delays based on frivolous queries. These could be from three months to more than a year.
Reasons cited were ongoing audits and document requests (72%) and 24% said they were getting no feedback on why refunds were delayed.
Piet Nel, who heads the technical department at the institute, agreed some delays were inexplicable. “It appears when taxpayers complain to the Tax Ombud (and the ruling is in their favour) the refunds are still being delayed. Also we get reports the refund is still being withheld after the vendor, or taxpayer, has submitted all documents, and in many cases the vendor or taxpayer was being told by Sars the refund would be made shortly. Then the refund is not made.”
Eric Mkhawane, chief executive of the Office of the Tax Ombud said they had raised the issue with Sars. “We have received numerous complaints. Sars is entitled to withhold the refunds in determining the legitimacy thereof. However, once taxpayers have complied with all requirements and Sars has finalised the audit, inspection or verification, there is no legal basis to withhold refunds,” he said.
Robin Barnsley, a commercial egg producer in the Midlands, said he was at the end of his tether. “Every time we put in for a VAT refund Sars will come up with an excuse not to pay it. This is seriously affecting our cash flow,” he said.
South coast banana farmer, Blaine Peckham said it appeared Sars was in a “cash crunch”.
“What Sars does when you put in for a refund, they lodge a query which gives them another 90 days. When the 90 days are up they will then ask for your business registration. That gives them another 90 days. Then they will ask for your diesel audit. Also they don’t pay you interest on the delayed refund,” he said.
Brian Aitken, a commercial timber farmer with interests in Mozambique and northern KwaZulu-Natal believed Sars was “cash strapped”.
“We are owed millions in VAT refunds by the Mozambican government, but at least they are honest. They come back and say they can’t pay you. Here they just keep asking for more documentation or nitpick,” he said.
Melanie Veness, chief executive of the Pietermaritzburg Business Chamber and Cobus Oelofse from the Ilembe Chamber confirmed that members were experiencing “significant” delays. “This is creating immense cash-flow pressure for some businesses.”
Oelofse said they had taken the matter to SAIT and the South African Institute of Chartered Accountants. “Sars has told us they are clamping down on VAT fraud. That is a credible excuse, but it is having a serious knock-on effect.”
Spokesman for Sars, Sandile Memela, said in the year to date R113 billion was paid out in VAT refunds. “This is 3% more than last year. This is a clear indication that Sars is not intentionally withholding legitimate refunds.”
He said 11% of all VAT returns submitted were subject to an audit review process. “Sars is constantly reviewing its risk systems while also tightening its controls,” he said.
* To lodge a complaint with the Tax Ombud, call 0800 662 837 or visit www.taxombud.gov.za .
THE MERCURY