Authored by: Christopher Renwick, Attorney at Tax Consulting
 
More than a year after the Ombud’s rather critical report on the South African Revenue Service’s (SARS’) value-added tax (VAT) refund structure was issued, frustration among taxpayers has been intensified by the revenue service’s excessive verification demands, which seem to be driven by the aim to delay legitimate VAT refunds.
 
The most brazen example brought to our attention, was when SARS withdrew money from a taxpayer’s bank account without following due procedure. Upon proving his case, the taxpayer was owed the funds back and a refund was due. SARS immediately requested a verification of bank details. Let me repeat that. SARS requested a verification of bank details from an account they had just drawn funds from.
 
Holding horses
Two possible conclusions can be drawn from this practise. Either, SARS officials aren’t properly equipped in their duties or the verification request was deliberate in an attempt to delay a refund. Reviewing the example above, we will let you decide.
 
The biggest aspect of tax that seems to be subject to excessive requests for verification is the area of Value-Added Tax (VAT). The frustrations arising out of SARS’s verification process on VAT not only aggravates the taxpayer but also endangers the livelihood of the enterprise they operate. Particularly we have found that, when refunds start exceeding the R1-million amount, the process becomes somewhat further drawn out.
 
Fraud is real
It is common knowledge that SARS’ verification process is to prevent fraudulent VAT claims. In a modern world with modern criminals, fraud is a real concern. The integrity of the VAT system needs to be protected and no doubt SARS has the full support of the taxpaying community in preventing fraudulent depletion of Treasury funds through fraudulent VAT claims. No need to add to the ongoing political looting that is the talk of the town currently.
 
Kicker
What is to be done though, where SARS has no basis for a request for verification and yet persistently requests same? For those throwing their hands in the air right now, I understand your frustration. Why should your legitimate VAT refund be delayed?
 
The short answer is, it shouldn’t. At least, that’s what the Ombud said. The Nugent Commission is likely to come to the same conclusion. Refunds are being delayed because, ultimately, SARS doesn’t want to pay them. It affects the collection figures. Probably also affects performance bonuses too?
 
What should you do?
In our experience, the easiest route is to go direct. To call SARS to order and get a response. Too many taxpayers believe that, once their refund is within the system that is SARS, there is no hope and it becomes a wait and pray type of game.
How do you go direct? You use your years of experience and expertise to garner a result. If you’re short on these, contact a professional.
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za
 
ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.
 
For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook: Tax Consulting South Afric

Authored by: Darren Britz, Attorney at Tax Consulting
 
With the wave of anti-SARS sentiment currently washing over South Africa, paying historical value-added tax (VAT) may be a hard pill to swallow. This has resulted in many companies understating or underpaying their VAT and subsequently incurring colossal penalties in addition to the tax payable.
 
However, paying historical VAT remains the most sensible course of action for any business with longevity and reputation in mind.  It is at this point where SARS’ Voluntary Disclosure Programme (VDP) comes in, affording the opportunity to any taxpayers with unpaid taxes, including income tax, pay as you earn (PAYE) and most importantly VAT.
 
The blinding spot light
In the tax realm, two topics continue to dominate the media spot light; namely SARS’ systemic delay of VAT refunds and the Nugent Commission’s airing of SARS’ dirty laundry. It is perhaps not difficult to understand why tax morality in South Africa is at an all-time low, and why businesses continue to underpay on their VAT liabilities to SARS.
 
To add insult to injury, the Tax Ombud earlier this month announced a fresh investigation into claims that SARS are not playing fair in how they handle taxpayer’s disputes. Undoubtedly, this will add to the already slippery and sharply steep slope that is taxpayer morality. 
 
While the sentiment is well shared, there is a broader consideration which is continually left out of the conversation. I am referring to the end game: eventually, SARS comes out on top. Remember, it is a criminal offence for a company to fail to pay its VAT and directors also face risk of being held accountable. At the same time, no SARS officials have been held to account for their handling of taxpayer dispute and refunds. Not yet anyway.
 
Collecting with determination
Tax collections and SARS enforcement measures are by no means comparable with other facets of South African life, such as perhaps the collection of e-tolls payments and speeding fines, which everyday seem to be losing more traction. The collection mechanisms at SARS continue to operate, with varying tactics, including tough audits, quick court judgments and taking money directly from taxpayers’ bank accounts.
 
In that regard, SARS has hit the accelerator in its VAT collections and has gone far beyond their denying taxpayers VAT refunds, albeit that the latter was confirmed by the Tax Ombud. VAT audits are occurring more frequently and with harsher outcomes for repeat offenders or in respect of significant tax liabilities which extends over several years.
 
Penalties aren’t optional
It should come as no surprise that outstanding VAT debts will accrue both interests, roughly 10 – 11% per annum as well as percentage-based penalties. While a standard 10% VAT penalty is more often imposed, a worst-case scenario, where SARS finds evidence of deliberate tax avoidance, will permit the imposition of a penalty up to 200% of the VAT payable. Of course, nothing prevents SARS from making the allegation of tax avoidance, so the cards in SARS’ deck are well stacked.
 
It also goes without saying that audit findings and penalty impositions remain on your tax record and therefore there is a risk of remaining on SARS’ radar for future audits. Once a SARS auditor has smelled blood, expect a difficult, agenda driven audit.
 
VDP Relief
If we push through the anti-SARS, anti-taxpaying mania and consider the possible solutions open to taxpayers, SARS VDP is at the forefront. The relief afforded includes:

• Remittance of full understatement penalties;
• Remittance of full administrative non-compliance penalties; and
• Amnesty from criminal prosecution.

 
A successful VDP, in most cases, allows for full remission of penalties. This leaves then just the tax and interest payable which, while leaving a sting, permits a total regularisation of tax affairs and avoidance of criminal prosecution. 

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za
 
ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.
 
For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook: Tax Consulting South Africa