Delays in the payment of tax refunds is one of the top three reported complaints against the South African Revenue Service (SARS).

This is according to CEO in the office of the Tax Ombudsman, Eric Mkhawane, who said taxpayers and businesses have as a result increasingly approached the ombudsman to intervene.

Speaking at the Nugent Commission of Inquiry into SARS, Mkhawane said that “people have been complaining a lot about refunds since late 2016, they are saying the refunds were being withheld without any reason”, reported News24.

He said some of the other common challenges raised by taxpayers was that they were required to visit a SARS branch to update their banking details, but the money would not be paid up to three months after satisfying that requirement.

“There is no legal basis for a taxpayer to have to wait after providing all the banking requirements,” Mkhawane told the commission, adding that the ombudsman had raised the issue with SARS.

‘Systemic issues’

With income tax season now well underway, the Tax Ombudsman recently published a notice focusing on some of the ‘systemic issues’ plaguing taxpayers when dealing with SARS.

“For the Office of the Tax Ombud (OTO), a systemic issue is a particular matter that can be regarded as the underlying cause for a complaint that affects, or will affect, a number of taxpayers in the tax system,” it explained.

“Systemic issues may arise due to how specific systems in the SARS function; the way in which SARS’s policies, practices or procedures are drafted and implemented; or even the manner in which legislative provisions are applied or disregarded.”

The OTO said that it considers a number of factors when identifying and evaluating various issues encountered by taxpayers, thus resulting in a formal recommendation being issued which is based on the following factors:

The impact on taxpayer rights;

The negative impact on SARS;

The seriousness of the issue; and

The number of taxpayers affected.

Below are five of the most prominent systemic issues identified by the OTO.

1. Delay in the payment of refunds in so far as it relates to –

Failure to link submitted documentation requested by SARS to the main file;

The unwarranted placing of Special Stoppers;

Using the filing of new returns as an excuse to block refunds;

Delay in the lifting of stoppers and lack of a timeframe for doing so;

Refunds for one period being withheld while an audit/verification is in progress on another period;

Using historic returns to delay the payment of refunds;

Raising assessments to clear unallocated credits;

Requesting further information during an audit;

Assessments successfully disputed, but refund still not paid out;

Raising assessments prematurely;

Debt set-off, not withstanding a request for suspension of payment; and

Verification assigned to the auditor but not finalised within the prescribed timeframe.

2. Incorrect allocation by SARS of payments made by taxpayers

Payments made by taxpayers may be incorrectly allocated, resulting in a debt being recorded on SARS’s systems. In many occasions, SARS institutes collection steps to recover this incorrect debt.

3. Taxpayers being affected by employer’s non-compliance with legislation relating to IRP5s

While employers have a legal obligation to submit reconciliations, issue IRP5s and amend incorrect IRP5s, there is no mechanism to enforce these actions.

This results in SARS sending these taxpayers to their employers, who refer taxpayers back to SARS. SARS branches are not consistent with following SARS’s own procedure in attending to these matters, added the OTO.

4. Inconsistency by SARS in providing taxpayers with timelines for finalisation of audits/verifications

Taxpayers are given different turnaround times for completion of an audit/ verification when phoning the SARS contact centre.

The turnaround times are extended every time the taxpayer follows up after the expiry of the initial turnaround time.

5. Victims of identity theft being held liable for tax debts

SARS holds taxpayers who were victims of identity theft liable for the tax debt, even in instances where SARS was aware of the alleged fraud and was investigating the same.

Read: Expect delays when taking on SARS this tax season