The SA Revenue Services (SARS) averted R4 billion worth of VAT fraud due to its new verification system.
Speaking at the presentation of the SARS 2010/11 annual report to the Parliamentary Standing Committee on Finance yesterday, commissioner Oupa Magashula said it is the service's focus on the modernisation of its systems that allowed such an achievement.
He said the modernisation of VAT, which began at the start of this financial year, is already enhancing speed and accuracy.
“Currently, over 88% of VAT declarations are processed within 24 hours and, where due, refunds are paid within 48 hours. This has seen the VAT credits reduce from R27.8 billion at the start of the financial year to R22 billion currently - a decline of almost 21%. Further improvements are anticipated as the VAT modernisation continues.”
Fiscus saving
Magashula said account maintenance challenges are most pronounced in respect of VAT where SARS processes over three million returns annually. Due to the large portion of refunds, VAT also has the greatest scope for abuse.
“Once paid, illegitimate refunds are very difficult - if not impossible - to recover as the criminals quickly move the money and then disappear. To prevent this, SARS has introduced a number of measures over the past few years specifically aimed at reducing the risk of VAT fraud.
“This included an additional verification process introduced at the beginning of this year in response to an increase in VAT refunds which were not supported by a similar increase in corporate income tax.”
“To date, almost a quarter of all vendors given this option have opted to revise their refund claims downwards in the total amount of over R4 billion rather than to submit supporting documents. This is a direct saving to the fiscus.”
Also, SARS this year introduced a self-management functionality for VAT vendors in which they are able to see and manage their own VAT accounts.
Inadequate legacy
The modernisation of its systems and payment processes is a critical part of SARS' attempt to address account maintenance challenges which lie at the heart of the debt and credit books, according to the commissioner.
Where an error is made with tax declarations, it remains as an unpaid debt or a credit liability on the core system until the taxpayer or SARS has rectified this error.
“Our legacy systems and debt management tools are inadequate to efficiently manage this incredibly complex and constantly changing area of account management and we need to resolve this issue before the switch to accrual accounting,” said Magashula.
“For this reason we are making a significant investment through the modernisation programme in account maintenance and debt management, providing further checks and balances and providing taxpayers the ability to view and manage their own accounts.”
He added that this is already having a significant impact and during the 2010/11 financial year SARS was able to make significant in-roads into curtailing the growth in the debt due to just R6.6 billion.
On the credit side, SARS ended the financial year with a total of R49.8 billion in payment liabilities, compared to R42.2 billion in 2010.
SARS collected a total of R674.2 billion in the 2010/11 financial year, R2 billion above target. This reflected a growth of R76 billion or 13% against revenue collections in 2009/10.
SARS also has a customs modernisation programme, which seeks to provide an automated, electronic risk-based process of goods clearance.
Electronic popularity
Some of the key achievements made by SARS due to the modernisation process included an 85% first contact resolution in contact centres and a 79% uptake in electronic declarations from entities operating from Southern Africa Customs Union countries.
“The development and promotion of e-Filing as an online electronic channel was an integral component of the modernisation strategy. Over the past five years, we have been able to increase the number of registered e-Filing users from about half a million at the end of 2006 to just over six million at the end of March 2011- a 12-fold increase,” said Magashula.
This growth in electronic submissions has helped SARS to improve service. During Tax Season 2009, 2.3 million returns were assessed within 24 hours. This volume increased by 18% in 2010, to 2.7 million returns.
The SARS call centre handled a total of over five million calls. The year saw a decline in the abandonment rate from 14% in 2009/10 to 9% in 2010/11.
“The popularity of electronic channels has resulted in a significant drop in the number of paper returns submitted for processing. By March 2010, the number of paper returns had already reduced to 8% (345 000) of individual income tax return submissions for that year. By March 2011 the number has almost halved to 4.2% or 186 000 returns with taxpayers preferring to complete their submissions electronically.”
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