HOW TO SPEED UP THE VAT REFUND PROCESS
IT IS one of those things you need to personally experience, otherwise you will never fully comprehend how frustrating things can become.
When you are audited by Sars officials before payment of your VAT refund, expect a long road and frustration, often when your business really needs the cash flow.
This is not an isolated occurrence for frustrated taxpayers. In his Budget speech Finance Minister Tito Mboweni said Sars is committed to reducing the R31 billion VAT backlog.
Clearly, the frustration felt by taxpayers is appropriate given such a massive backlog.
But why is this so difficult? There are many theories – ranging from administrative deficiencies to internal targets. But frustration across the board has hit its peak with respect to VAT refunds being paid (or, rather, not paid) by Sars.
We must warn here that there is always another side to the story. VAT refund fraud has happened, it may even be rife, especially as counterfeiting can create a near perfect-appearing tax invoice.
It is understandable that, given the number of fraudsters and chancers, Sars is hesitant to simply hand out refunds to every VAT claimant without careful scrutiny. The Sars auditor is obliged to correctly apply the law, even though it takes a little longer.
The Perfect Storm: Many compliant taxpayers feel they are mistreated on their VAT refunds, partly due to the perfect storm of a shrinking economy, financial strain, administrative delays and perceived deliberate delays when Sars owes you money, compared to Sars sudden efficiency when you owe them.
These delays and difficulties place financial strain on the business fraternity, sometimes it even boils down to survival.
The backlog must surely be forcing many small businesses out of the market. This will have a knock-on effect of disrupting the economy further. If this continues, at what point will the effects be felt by sizeable enterprises?
Sars Auditors and Dispute Resolution: So, how do we deal with this? What do you do when you face bureaucratic hoops created by constant requests for documentation that support the rebate, with an apparently vexatious Sars?
The Tax Administration Act provides a very strong and balanced Sars dispute resolution process. The typical accountant or attorney can deal with the process of alternative dispute resolution, complaint escalation and even tax ombudsman submission, but we find that this sometimes has limited results.
When you know you are correct, there is always the Tax Board or Tax Court. Never approach the court on weak facts, so, typically, have your case “tested”, which is a proper review of the merits. Where you are a compliant taxpayer, consider fast tracking your matter:
Submit an appeal without the “ADR” option. This means that the matter goes straight to Tax Board / Tax Court. ADR is frequently used for settling matters.
The correct tax board/court application normally gets resolved way before stepping into the court. Highly competent persons concede before Sars decides to litigate and this is almost always a totally different experience than dealing with an auditor who does not want to release a refund.
Do not take on the legal route lightly. It is essential that you comply with the rules to the letter to ensure your matter is compliant so that no further administrative delays occur, or, even worse, that you have an adverse decision due to an administrative failure.
Your well-constructed heads of argument submitted with your notice to the appropriate forum should be presented to Sars’ National Appeals Committee by the assigned clerk or court specialist.
The legal route is very much embedded in our tax law as part of the despute resolution process and we foresee that the correct representation will become an integral part of resolving complex and high-value Sars matters.