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SARS may be happy with its debt collectors, but the move has drawn flak

06 August 2016   (0 Comments)
Posted by: Author: Amanda Visser
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Author: Amanda Visser (BDlive)

SARS says it is satisfied with the services of the three debt collectors it has appointed.

Outsourcing of debt collection is a controversial practice that has twice been tried by the US Internal Revenue Service (IRS) with limited success.

The South African Revenue Service (SARS) appointed three private companies in June for a period of six months to collect a portion of its R100bn debt book. They will focus on undisputed debt and unsecured debt older than four years.

SARS spokesman Sandile Memela would not be drawn on the cost of outsourcing a portion of its debt book.

"The three agencies were appointed in accordance with SARS procurement policies, which included a cost evaluation," he says.

The three agencies are CSS Credit Solutions, NDS Credit Management and Trifecta Capital.

"The cost of service is based on a percentage of the revenue collected, subject to targets being met. Depending on performance, SARS may change or add to the list of agencies appointed," Memela says.

The South African Revenue Service Act allows SARS to do all that is "necessary or expedient" to perform its functions properly.

In the US the IRS has again embarked on this route of debt collection, despite severe criticism about the success of the first two efforts.

US national taxpayer advocate Nina Olson has warned that the IRS has twice in 18 years attempted to outsource the collection of tax debts to private companies.

The national taxpayer advocate is appointed by the Treasury secretary and reports to the internal revenue commissioner.

"Twice the experiment has ended in failure," Olson says. "The IRS awarded contracts to five private collection agencies in June 1996…. The IRS terminated the programme after concluding it lost money when opportunity costs were taken into account."

IRS data show the cost of the 2006-09 programme exceeded the amount it retained by $12.4m, Olson says in a footnote in her letter to the House of Representatives.

Chérie Carstens, tax technical team leader at the South African Institute of Tax Professionals (SAIT), says the SARS debt that has been outsourced is not economical for the agency’s collection team to collect.

She too would not be drawn on the cost of outsourcing a core function of the collection agency, merely stating that a tender process was followed.

SAIT has received several queries from its members relating to the private debt collectors, mainly to confirm whether they are legitimate or not.

"We received another complaint about collectors calling after hours, as late as 9pm."

From a discussion with one of the service providers, it became clear that some people do not want to talk about their taxes during office hours, hence the two-tier approach of calling during and after office hours.

Tax practitioners have since been removed from the after-hours tier and this seems to be confirmed by the fact that complaints regarding late calls have minimised, says Carstens.

Olson this year expressed her concern about the huge spike in the number of scam callers seeking immediate "tax payments" from unsuspecting taxpayers in the past couple of years.

She says there is a risk scammers will study the dynamics of the private collection agency calls and try to mimic them to fool taxpayers.

"As the IRS develops the (latest) programme’s procedures, it will have to take steps to minimise the risk of taxpayer confusion."

SAIT’s Carstens says the best thing for taxpayers to do when receiving a call from a debt collector is either to contact the SARS call centre to confirm the debt, or to log into their eFiling profile to view their statement of account.

"Never pay into an unknown bank account. Only pay into SARS accounts and preferably via eFiling," Carstens advises.

Memela says taxpayers can contact the SARS contact centre to validate an agency’s mandate to engage them.

"Money should at all times be deposited in a SARS account. No debt collector may ask taxpayers to receive money, or pay moneys into their accounts," he says.

• SARS Contact Centre at 0800 00 7277 (0800 00 SARS)

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