Tax ombud Judge Bernard Ngoepe has written to Finance Minister Pravin Gordhan asking permission to investigate whether “systemic problems” in the South African Revenue Service (Sars) are to blame for the many public complaints about the delayed payment of refunds.
This comes on the back of a Mail & Guardian exposé last week about a number of emails indicating that Sars is possibly manipulating its numbers (“Is taxman massaging the numbers?”). Sars vehemently denied rolling over refunds to the next financial year, a move that would artificially create the perception of a better revenue collection figure.
But the emails the M&G has seen contain an instruction to Sars auditors at a key stage of the Sars’ collection year to “delay raising [tax] assessments” until they fall outside the current financial year.
The instruction further states that only assessments that are “collectable” may be raised. If an assessment is not raised, it is not formally logged on to the Sars system and the taxpayer is not notified of the outcome of the assessment. If the assessment is not logged on the Sars system, neither Sars nor the taxpayer would be aware of the outcome, which means no refunds would be paid.
Not raising an assessment further means that Sars would be avoiding its obligation to pay interest to the taxpayer — a tactic described as “almost fraudulent” by a tax lawyer.
The instruction apparently relates specifically to cases in which the tax assessment exceeds R10-million and would make a material difference to the final collection figure.
“Sars’s figures on its systems are factual, accurate and correct. Sars will not put its integrity and reputation at risk through fictitious facts and figures,” its spokesperson, Sandile Memela, said.
Eight tax lawyers and practitioners confirmed that many of their clients are owed tens of millions of rands in refunds, or that there appears to be a delay in announcing the outcome of their tax assessments.
One tax practitioner claimed one of her clients, a medium-sized company, is on the brink of collapse because of a severe cash-flow problem caused by an inordinate delay in value-added tax (VAT) refunds.
On March 31, Sars commissioner Tom Moyane is expected to announce how much tax was collected in the past year, minus all the refunds. But this figure is now suspect and will reflect negatively on the perception of Sars’s ability to collect revenue fairly, concerned senior government sources said.
Public complaints about Sars delaying the payment of refunds has spiked dramatically in the past year, Ngoepe said this week.
Gordhan’s office confirmed receiving his request and said the treasury’s legal department is assessing it.
Meanwhile, Moyane has reported Judge Dennis Davis, the chairperson of the Davis Tax Commission, to Gordhan. Moyane claims Davis had unfairly criticised Sars in public and that the relationship between Sars and Davis has broken down to such an extent that Gordhan should remove Davis from the commission.
In a separate development, Moyane also reported Gordhan to President Jacob Zuma, saying his relationship with the finance minister had broken down.
Davis confirmed that he is concerned about Sars, but expressed surprise at the attack, saying Sars relied only on media reports to report him and did not discuss the issue with him personally.