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An underestimation of VAT refunds is not expected to result in an additional tax revenue shortfall says Treasury.
In the 2016-2017 Budget Review, National Treasury estimated that the South African Revenue Services (Sars) would pay VAT refunds of R185.2 billion, however, the revised estimate was now R180.23 billion indicating that Sars had refunded nearly R5 billion less in VAT refunds than was projected for the current fiscal year. Concerns had been raised that if there were legitimate VAT refunds still due, this could worsen the revenue shortfall which already stood at R30.4 billion.
Tax practitioners and the office of the Tax Ombud had raised the issue that VAT refunds had not been paid out timeously. Speculation was that Sars had purposely withheld refunds to boost its collection figures.
Christopher Axelson, Treasury’s director of personal income tax and savings, said that in calculating the revised estimate contained in the 2017-2018 budget, Treasury included tax collection figures up until the end of January, figures that would only be made public at the end of this month. He said based on these figures Treasury was confident that the figures used for the final revenue collection estimates were accurate and were not expecting any significant changes.
Although unable to elaborate, Axelson indicated that the unpublished figures supported a recent Sars statement this week that it had been working hard at processing refund payments.
Keith Engel, head of the South African Institute of Tax Professionals confirmed that many tax practitioners had complained about delays in refunds, especially VAT, although Sars claimed it was paying more refunds than ever. The figures did support Sars’s contention because in the 2015-2016 fiscal year only R167 billion was paid in VAT refunds, nearly R13 billion less than this year.
Engel added, however, that the issue of delayed refunds had been an issue for many years, even prior to the current Sars commissioner.
“Practitioners have long noted that refunds slow from January to March before the year-end budget,” said Engel who added that the current delays were in part due to VAT refund fraud and a requirement to verify bank details.
In a recent interview with City Press, chief executive of the Office of the Tax Ombud, Advocate Eric Mkhawane, said that the issue of VAT refunds was one that the office would be investigating now that its power of investigation had been extended with amendments to the Tax Administration Act.
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