Increase in delayed VAT refunds costs vendors, say tax consultants
DELAYED refunds on value-added tax (VAT) have increased significantly, causing cashflow problems for especially small and medium-sized enterprises. This is according to tax practitioners interviewed this week, who said it was also increasing the cost of doing business as businesses need to pay professionals to get back what was rightfully theirs in the first place. South African Institute of Tax Professionals VAT committee chairman Victor Terblanche said the VAT Act did not provide a timeframe for the payment of VAT refunds, or a timeframe for the finalisation of audits. “The act does provide for the payment of interest if the refund is not paid within 21 days following the submission of the VAT return,” he said. “The act is quite clear. It does not say that SARS has a discretion to pay interest. The act says interest shall be paid at the prescribed rate.” According to the SA Revenue Service (SARS), 54% of refunds are made within 48 hours, 63% within 14 days, and 88% within 60 days. Trident Tax and Accounting Solutions chief executive Craig Hirst said it was not an issue of SARS officials not getting through the workload. “It is definitely an issue of delaying refunds and playing the money game . . . queries to SARS end up in vague answers with no help offered,” he said. Terblanche said he claimed for a tax audit. “In some instances we find that SARS also then raises assessments without requesting information or providing the taxpayer with a letter of findings to enable him to respond to audit queries.” He said this escalated the cost for small businesses, as they then had to follow the objection process, which meant it took even longer to get their refunds back. Hirst said it was clear that SARS was on a drive to collect and hold onto as much cash as possible, even if it meant “stepping outside the act”.
“If a taxpayer must write to SARS to get interest on a late refund then SARS is clearly playing the numbers game – maybe one in 20 will know or think of writing that letter,” Hirst said. “These are dirty tactics from an organisation that is supposed to be an example of the law.” Terblanche said the act previously contained a section which stated that SARS had to supply the vendor with written reasons when a refund was not paid. “This section has been scrapped clandestinely from the act.” In certain instances SARS did not have to pay the interest, but Terblanche said many of the provisions were either outdated or not aligned with the Tax Administration Act. One instance is when SARS has not been provided with the vendor’s banking details, and cannot verify them. However, he said the reality was that the vendor would not have been able to register as a VAT vendor without SARS obtaining its banking details and being able to verify them. In response, a SARS spokesman said: “It must be noted that not all refunds are authentic and fraud and identity theft is rampant. “SARS has introduced a system of verifying banking details with the banks and if the information in the possession of SARS is not aligned with the information in the bank, SARS will not pay out such a refund.” This may also lead to a delay in paying out the refund where SARS has not been notified of a change of banking details, in which case the delay was not occasioned by SARS, but by the vendor who did not comply with the Tax Administration Act. “In this case, no interest is payable and the vendor will have to convince SARS that the delay was not occasioned by the vendor but by SARS. Also, invalid or incomplete documentation will lead to a delay in refunds.” SARS said there was no incentive for it to delay payment of a valid refund, since the associated payment of interest was a cost to the National Revenue Fund.
