SARS on a ‘razor edge’ – coming after these South Africans

The South African Revenue Service (SARS) has committed itself to paying VAT refunds to qualifying taxpayers as and when they become due; however, there are bad-faith actors trying to play the system.

Andre Daniels, a legal manager for tax controversy and dispute resolution at Tax Consulting SA, said that this commitment by SARS forms part of its goal to make compliance easy for taxpayers.

In the group’s latest financial year report for 2022/23, a record R381 billion in refunds were paid, of which R319 billion were VAT refunds, said Daniels.

Although the tax authority reported high levels of refunds, it also uncovered a significant spike in suspicious registration by VAT vendors in April this year, requiring an urgent review of the VAT registration process, said Tax Consulting SA.

Daniels said that it is imperative that SARS makes sure that it balances the ease of registration with the risk of abuse and attempts by individuals to obtain a VAT number and claim fraudulent refunds.

“SARS must walk this razor’s edge with the greatest of finesse,” said the tax manager.

The Revenue Service is now trying to crack down on these fraudulent registrations.

According to SARS’ analysis, a significant number of registrations are being deliberately established with the intention of defrauding SARS, which consequently harms both honest taxpayers and the country’s revenue. As a result of this, the taxman has implemented the following with immediate effect:

• All new applications for VAT registration will be subjected to a more stringent verification process which could include the applicant being required to present themselves, in person, to the branch closest to where the business enterprise is located for validation and accreditation.

• Where applicants are expected to visit a branch, the visit must be pre-booked on the SARS website by clicking on the “Book an Appointment” icon.

• All supporting documents that are required for registration validation must be submitted at the branch on the day of the appointment.

• VAT registration will only be affected when SARS has satisfied itself that the application is lawful.

When addressing the VAT problem SARS faces, the company commissioner, Edward Kieswetter, issued a warning threatening to identify and pursue those perpetrators involved in fraudulent VAT claims, said Daniels.

“Taxpayers would be wise to heed this warning, as the commissioner has, on numerous occasions, indicated that SARS is going after fraudulent taxpayers, with the promise of making non-compliance difficult and costly.”

“We have seen this come to fruition where SARS has already been handing over non-compliant taxpayers to the National Director for Public Prosecutions,” said Daniels.

According to Tax Consulting SA, SARS is taking a ‘no-nonsense’ approach in pursuing non-compliant taxpayers and handing them over for prosecution.

It has become increasingly important for taxpayers to ensure that they are not in the red regarding SARS.

SARS offers taxpayers the opportunity to clear their name through the Voluntary Disclosure Programme (VDP), which taxpayers are encouraged to follow when there are instances of non-compliance unbeknownst to SARS.

Voluntariness is one of the requirements contained in the Tax Administration Act, which regulates the VDP.

However, if taxpayers have already come to SARS’ attention through an audit or have received a final demand letter, they can not make use of the VDP.

In such cases, a taxpayer can consider tax debt relief measures outlined in the TAA, including the option of a Compromise of Tax Debt application where a taxpayer lacks legal grounds for an objection and struggles to settle their tax debt.

Daniels said: “When a taxpayer is granted relief under either the VDP or Compromise, penalties and/or interest may be waived, and the applicant receives amnesty from criminal prosecution.”

“It is thus of utmost importance that taxpayers who have become aware of any non-disclosure or any tax defaults to come forward and apply for relief through the VDP, or Compromise, where eligible. These mechanisms provide a limited window of opportunity to become fully compliant and before SARS comes knocking.”

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