New VAT system has businesses tearing hair out

Disclaimer: Please note that this article is at least 12 months old.
Any information herein was accurate when published on 10 October 2011

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SARS acknowledges on its website that its second highest number of phone-in queries at the moment is to answer the question: "How do the new VAT changes affect me?" This query is trumped only by a question on deadlines for tax filing.

There has been a "dramatic" increase in the number of vendors that are selected for further verification of their VAT returns since the implementation of the new risk system in 2010, according to Christo Theron, partner at BDO SA.

But tax advisers also acknowledge that VAT fraud has cost the fiscus hundreds of millions of rand and continues to pose a serious risk.

The South African Revenue Service (SARS) has been modernising and simplifying tax processes in line with international best since 2007 already and during 2010 it announced that certain changes would be made to the VAT Vendor Declaration Form (VAT201) aimed at improving systems processing and addressing SARSs efficiency regarding risk assessment and tax compliance. A new payment reference number was also introduced to replace the previous "reference number".

But concerns have been raised the compliance burden is hitting businesses.

"The requirement to provide supporting documentation for each VAT return is placing an undue compliance burden on taxpayers," said Theron on Monday.

This comes after the revenue authorities introduced a new sophisticated risk engine and other enhancements to the VAT system as part of its on-going modernisation programme and its attempt to curb what it claims are increasingly fraudulent VAT claims.

The improvements include a new VAT 201 form, an automated risk assessment tool and a case management system to track the progress of VAT assessments, audits and refund payments.

The new process replaces the previous manual method, where each VAT return was assessed for risk by SARS officials who either approved the return or referred it for audit.

"This process proved to be problematic as it was open to human error as well as potential interference and corruption," said Theron.

The vendors are required to submit documents in support of their declaration or to submit a revised return if an error is suspected. On successful validation of the information by SARS, VAT returns are processed and payments of refunds effected where applicable.

If the following errors are identified the vendors will apparently not receive payment of their VAT refunds:

  • the banking details are outdated;
  • historic VAT returns are outstanding; or
  • there are any other outstanding taxes;

But SARS is holding its line in trying to make the system more efficient and user friendly.

On September 26, it introduced a set of new features to help VAT vendors meet their tax obligations. These features form part of SARSs objective to modernise VAT for greater efficiency and improved customer service. The features are a VAT payment allocation function and the introduction of a new format VAT Statement of Account.

The VAT payment allocation function is expected to enable vendors to allocate payments, to reallocate payments and to locate missing payments. All these functions are available on eFiling and can be performed by vendors without requiring any SARS intervention.

SARS also introduced a "Refund Dashboard" in September to enable taxpayers to view the reasons why their refunds may not have been paid out and what actions may be required.

Source: 10 October 2011

Disclaimer: Please note that this article is at least 12 months old.
Any information herein was accurate when published on 10 October 2011