by Alf Lees MP – DA Shadow Deputy Minister of Finance
The DA is pleased that the Tax Ombud, Judge Bernard Ngoepe, has asked for permission from Finance Minister Gordhan to investigate possible systemic problems with the payment of refunds by the South African revenue Service (SARS).
All efforts by SARS must be to ensure the efficiency and credibility of the VAT system, which includes the payment of refunds of diesel and Employment Tax Incentive (ETI) claims. The DA has been reliably informed of serious backlogs across the board which is a clear indication of the weak administration and technology at SARS.
On the 3rd of February 2017, I wrote to Minister Gordhan and requested that he use his authority as contained in section 16(1)(b) of the Tax Administration Act to request the Tax Ombud to conduct an investigation into:
• Whether or not;
o There are systemic failures with regard to SARS refunds of tax/VAT?
o There are grounds to conclude that SARS are deliberately delaying the payment of tax/VAT refunds?
• Identifying the sections of legislation that SARS may be using in order to “legally” delay the payment of refunds.
• Identifying any other methods that SARS may be using in order to delay the payment of tax/VAT refunds.
• Recommend solutions that will ensure that tax/VAT refunds are paid out promptly by SARS and within 30 days of the submission of returns.
At the same time, I suggested to Minister Gordhan that:
“As an alternative approach, and as the Davis Tax Commission is currently reviewing the SARS operating model, we request that the Minister consider referring this vital issue to the Davis Tax Commission to review as part of the operational model review.”
After I had not received a response from Minister Gordhan by the 8th of March 2017, I sent a follow-up reminder and received the following response:
“Dear Mr Lees. My sincere apologies for not sending an acknowledgement. Your matter has been escalated to the Tax Ombud for review and is receiving the necessary attention.”
I have no doubt that Judge Ngoepe initiated his request to investigate to Minister Gordhan on the basis of my letter to Minister Gordhan.
The delays with VAT, diesel and ETI refunds directly impacts on the creation of new jobs and negatively impacts small businesses which often rely on timeous refunds to keep their cash flow positive. However, it does artificially inflate the tax revenue collected.
The need for a far-reaching investigation is clear and the DA welcomes the fact that the Tax Ombud has taken up our call.