Question NW76 to the Minister of Finance

Reply:

The South African Revenue Service, in processing all refunds, will always seek to balance the protection of the fiscus from illegitimate refund claims and the optimal processing of all those refunds that are legitimate. This balance is further enhanced when considering that more than R50bn in illegitimate refunds are prevented from flowing out of the fiscus every year.

SARS has for the period ending 31 December 2021 paid R193bn in refunds of which 72% (R138bn) was paid within 21 days. It is worth noting that almost 80% of all refund claims are paid without audit or verification thus confirming our compliance theory that most taxpayers are honest and want to meet their tax obligations fully. The remaining 20% is the combination of those taxpayers who make genuine errors as well as those who unfortunately seek to defraud the fiscus. It must be noted that the law does not prescribe a minimum period for the completion of an audit or verification, therefore rendering the notion of overdue refunds a misnomer in law. However, SARS has committed to various turnaround times in its service charter in line with the desire to provide superior service to taxpayers.

The following table reflects the number of VAT credit returns submitted since March 2019 with total value and a column indicating credit balance in relation to those submissions. Some of the credits submitted will be outstanding and are reflected in the rolling credit balance. As can be generally noted on the percentage unpaid refunds, the amounts yet to be paid for these periods are much less than the original submission.

It must be noted that the unpaid refunds column is inclusive of all statuses i.e. cases where supporting documents have been requested and vendors have not submitted to date. Such vendors are categorized as Continuous Noncompliant (CNC). To date, SARS has over R11.5bn CNC cases for VAT which largely cannot be processed until the taxpayer responds to the SARS query.

As can be noted on the table, there is an increase in value of unpaid refunds from March 2021 onwards as reflected in the current balance per month which is in line with the increased number of return submissions and values coupled with an increased focus on the risk mitigation against refunds fraud (this focus in risk mitigation has resulted in R59 billion revenue protection across all tax refunds in current fiscal year). This is to ensure that SARS maintains the balance of protecting the fiscus from illegitimate refund claims whilst processing legitimate refunds. It must be noted as well that there are challenges experienced in matching the available capacity and the generated case load as the risk system responds to compliance risks that are inherent in the filed returns.

SARS at any given time will have amounts outstanding on refunds for a number of reasons including the following:

1. Audit within 21 days amounting to R8.5 billion,
2. Audit above 21 days amounting to R20.6 billion,
3. Continues Non-Compliant CNC) amounting to R9.1 billion, *
4. Suspected fraud amounting to R0.369 billion,
5. Outstanding Returns amounting to R1.8 billion, and
6. Invalid Banking details amounting to R0.5 billion.

* CNC includes cases where SARS is awaiting taxpayer response on long outstanding documents having granted in excess of 35 days for taxpayer to respond.