Delays in receiving tax refunds: Where to turn to and when to do so
The Office of the Tax Ombud (“the Tax Ombud”) identified certain root causes of the delayed payment of tax refunds as systemic issues and made recommendations to the South African Revenue Service (“SARS”) on how best to address this issue. Despite this, delays in the payment of tax refunds continue to affect taxpayers.
Accordingly, the Tax Ombud continues to be of great assistance to many taxpayers who experience such delays and who approach the Tax Ombud for assistance – particularly given the significantly negative implications such delay in the payment of a tax refund may have on the continuity of a business.
In a t Newsletter (Fairness for All, Case 23, issued on 16 May 2023), the Tax Ombud details the circumstances surrounding a recent matter where they assisted a taxpayer in obtaining an income tax refund.
The taxpayer approached the Tax Ombud with a complaint relating to an expected income tax refund in the amount of approximately R71,000 which SARS was delaying payment of on the basis that there was an outstanding debt in respect of administrative penalties due.
Upon investigation by the Tax Ombud, it noted that the taxpayer did have an outstanding administrative penalty liability pertaining to the late submission of income tax returns, but that this liability was merely R22,500, whereas the assessed account of the taxpayer reflected a refund of approximately R93,500.
The taxpayer had submitted objections in relation to the administrative penalty, but had not made a request for a suspension of payment thereof. SARS could therefore have taken the simple step of equalising the debt and paying out a refund of approximately R71,000. However, as this did not occur, the taxpayer sought the assistance of the Tax Ombud.
The Tax Ombud accepted the complaint of the taxpayer inter alia because the complaint involved the systemic issue (as previously identified by the Tax Ombud) of SARS omitting to lift a stopper placed on an account. When a complaint to the Tax Ombud involves a systemic issue it is not required for the taxpayer to firstly exhaust SARS’s internal complaints resolution mechanism before approaching the Tax Ombud.
The Tax Ombud recommended to SARS that it should finalise the debt equalisation and pay the refund to the taxpayer. SARS implemented this recommendation and the income tax refund was paid accordingly.
Generally speaking the time period of the Ombud process can vary and are, at times, considered to be very long. Where the amounts warrant it, it may be more useful to file a notice of intent to take the matter to either the High Court or the Tax Court as a quicker and more effective route to resolution. The latter is a more expensive approach and as such the quantum in dispute needs to warrant this action. However in our view, this is often the more effective and quicker option to ensure that refunds are paid out to taxpayers.
Should you experience unreasonable delays in the payment of tax refunds by SARS, your closest PKF office should be able to assist you with considering whether it is appropriate to approach the Tax Ombud for assistance or file a notice of intent and would be able to attend to either of these processes on your behalf.