The aim of the amendments is to equalise the payment of interest paid by SARS across all tax types, Jed Michaletos, a director in customs and excise at Deloitte, said yesterday. “This is a first that SARS will have to pay compounded interest on refunds,” Michaletos said.
The Treasury had decided to move to the charging of compound interest instead of simple interest across all tax types, he said.
The position at present is that SARS pays no interest on refunds, and taxpayers pay simple interest on outstanding sums owed. In future, both SARS and taxpayers will pay compound interest.
It was expected SARS could be liable for hundreds of millions of rand in refunds and duty drawbacks, which would attract compound interest, said analysts.
Alison Wood, a litigation specialist in customs law at Werksmans Attorneys, said: “The interest issue has long been a bone of contention for importers and manufacturers. Currently they have to pay interest to SARS on outstanding amounts but SARS does not have to reciprocate when it owes them the money,” she said.
“By making SARS liable for interest too, the amendments aim to remedy what is clearly an unfair, possibly even unconstitutional situation.”
Spokesman Adrian Lackay says SARS was never charged interest on refunds in the past. The proposed amendments made provision for the imposition of interest under certain instances, he said.
Michaletos said rules still had to be published relating to the time and manner of payment of interest by SARS. However, it was expected that SARS would be given a reasonable period within which to make payment of a refund, he said. The proposed amendment would in effect allow the commissioner to “prescribe by rule” the date and period for which SARS was allowed to pay the interest.
Wood pointed out that when the act is amended SARS would also be able to levy interest on any penalties payable — “and this interest will be compounded daily”.
She said there was likely to be a steep rise in the amount of interest due by importers and manufacturers who owed money to SARS. “When the clock starts ticking, they could find themselves incurring interest also on penalties which are usually in the region of 10%-25% of the outstanding duties and value-added tax.”
Source: Business Day
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