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Received by M&G: 16:20 on March 8, 2017.

From: Sandile Memela, SARS Spokesperson

Dear Pauli

Thanks for your queries. Find SARS responses listed below. However, overall

there seems to be a misinterpretation relating to these emails.

The emails to which you reference, relate to the debt book. At the onset, it is

important to note that the SARS debt book is a compilation of historic debt and

outstanding debt. Crucially, SARS accounts for collections on a cash basis.

Moreover, SARS cannot place any guarantees on retrieving the longstanding

debt in the current fiscal year. Taxpayers have numerous reasons for having

outstanding debt and whilst SARS endeavours to do everything possible within

the confines of the legal framework to ‘collect’ the debt, SARS cannot guarantee

that debt from the debt book will be collectable in the current period – this is part

of our process to managing the risk.

Additionally, this time of year calls for an ‘all hands on deck’ approach with

regards to the final stretch with respect to revenue collection efforts. Focusing on

collectable debt and channelling most of our resources to the revenue collection

drive to ensure that Government can ‘bank’ on the revenue that SARS committed

to is our main priority at this point.
The specific responses to your questions are as follows:

1. The emails very strongly indicate that Sars has been manipulating its debt

book in order to purport a bigger collection figure. What is your comment?

At the onset, SARS is not manipulating the debt book. It is important to note that

the debt book has no direct impact on collection figures as SARS accounts for

collections on a cash basis. Any delay in the raising of assessments beyond this

period would have no impact on the reported collection figure for the current

financial year.

As with other areas of the SARS business, SARS focuses all efforts on meeting

our revenue collection target at this time of year. Officials from the debt space

focus on revenue collection effort and resume their usually responsibilities post 1

April.

2. Were you briefed about the directive to manipulate Sars' debt book?

The SARS debt book has not been manipulated through the delay of

assessments as all assessments are accounted for in the debt book.

3. In February at a special press conference you vehemently denied anything

untoward with regards to refund delays. Do you still hold this view?
We still hold this view. As context, the SARS Investigative Audit conducts all audit

cases in line with audit processes and governance requirements.

The following are possible outcomes of audit cases on completion:

1. No assessments raised (nil adjustment). This means that if a taxpayer’s

original return has a refund, that refund will be paid out directly to the taxpayer.

(This is not blocked and has no bearing on the debt book) OR

If a taxpayer’s original return has a debt due to SARS, that debt would remain

part of the debt book for collection purposes.

2. Reduced refund. This means that if a taxpayer’s original return has a

refund, the audit has determined that the taxpayer is not entitled to the entire

refund and reduces it accordingly. The taxpayer then is paid out the remaining

refund, if any. (This is not blocked and has no bearing on the debt book)

3. Assessment is raised. This assessment has the effect of creating a debt

liability for the taxpayer. This assessment debt reflects on the debt book about a

month after audit completion for collection by the debt staff.

The request in the email, to which you refer has nothing to do with delaying

refunds as refunds do not impact the debt book. Audit cases were conducted and

completed normally during this period with the above outcomes, except a few

cases with large assessments raised per point 3.
During this period, 712 SSME and 47 large business cases were completed as

per the normal audit process with outcomes in all three categories above.

Only 14 SMME and 3 large business cases that could have been completed in

the two-week period prior to 15 February 2017 were finalised on the days

following. These cases had large assessments that would not have been worked

on for collection purposes prior to 31 March 2017.

As part of the revenue collection cycle, the debt team’s focus is on ensuring that

all debt that has been raised is collected therefore the request below.

The number of audit cases completed is line with normal trends for the year and

this period. All taxpayers that are audited through this process are engaged and

continuously communicated with through the course of the audit.

Note that the issue referred to does not relate to normal verification type audits

conducted.

We still hold this view. Any delay in assessments has not been impacted by the

release of legitimate refunds under audit. Refunds have no direct bearing on the

debt book.

4. Do you deny that by cooking the books in this manner, the problem is only

deferred to the next financial year?
Please refer the abovementioned response. However, we must reiterate that

there is no manipulating of the debt book. As part of our revenue collection cycle,

the teams focus moves from raising assessments to a focus on ensuring that all

debt that has been raised is collected. This is to ensure that the fiscus has

sufficient resources and is in line with the SARS mandate.

5. How many assessments have been raised between January 16 and February

15 2017?

712 SMME and 47 Large Business audit assessments across all tax types have

been finalised in this period.

6. How many assessments were delayed and only raised in the period after

February 15?

14 SSME and 3 Large Business assessments were delayed to after 15 February.

7. Do you agree that this gives credence to public complaints about Sars delaying

refunds and the spike in complaints to the Office of the Tax Ombud?

As we have previously indicated, SARS is not delaying refunds to taxpayers.

What is important to note is that the debt book does not impact the payment of

refunds. In respect of audits, there is direct engagement with taxpayers who are
subject to an audit. SARS keeps such taxpayers informed on the progress of

audits.

SARS MEDIA