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Diamond dealers lay cash blame on Sars

27 September 2016   (0 Comments)
Posted by: Author: Kabelo Khumalo
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Author: Kabelo Khumalo (IOL)

Diamond dealers in South Africa have accused the SA Revenue Service (Sars) of causing them cash-flow problems by delaying their Value-Added Tax (VAT) refunds.

President of the World Federation of Diamond Bourses and chairperson of Diamond Dealers Club SA Ernest Blom said yesterday that the delays were threatening the existence of the industry.

Blom told the second SA Diamond Indaba in Midrand, Johannesburg, that there was a need to rejuvenate the industry, but the delay in VAT refunds was rendering these businesses close to bankruptcy.

“Sars at any given time holds back an estimated R300 million of money they should be paying us for VAT paid to them, this is crippling our industry and taking working capital out of it.”

Blom said challenges faced by the industry should not be compounded by things the government could do to assist.

Deputy Mineral Resources Minister Godfrey Oliphant told the Indaba that tax incentives were important in helping local beneficiation in the diamond sector.

“We have been discussing tax incentives with treasury and believe we can reach resolution on this matter,” Oliphant said.

Withholding

Craig Hirst, chief executive of Trident Tax and Accounting Solutions, said there was a concerted effort to withhold money from individuals and companies.

Hirst said the revenue authorities appeared to be in the business of collecting and holding on to as much money as possible with adverse consequences, especially for small businesses.

He said the delay in VAT refunds meant that more costs were accrued in ensuring the money was eventually paid back and had become a strenuous process. “The audit turn-around time has become ridiculous, it’s like Sars are playing a delay and numbers game in how they treat VAT queries,” Hirst charged.

Professor Keith Engel, chief executive of the SA Institute of Tax Professionals (SAIT) said the financial burdens on companies from the delay in getting their VAT were significant.

“Most businesses, particularly where capital assets are acquired, rely on the refund factors into their financing plans. The cost of all items increases by 14 percent until a refund is paid out,” Engel said.

Engel said the Tax Administration Act envisaged a 21-day turnaround period for VAT refunds but the act also empowers Sars to do an audit before they can authorise a refund. “At this stage, Sars seems to be presuming that most VAT returns are suspect. It is critical that VAT not fall on business-to-business transactions for South African businesses to be competitive.”

This article first appeared on iol.co.za.


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