The CIPRO situation: Response from the Taxpayers’ Foundation of South Africa

The Taxpayers’ Foundation was alarmed to see the situation described by Mark Silberman in the article “The CIPRO situation”.

We have two major concerns emanating from this article. Firstly, at the very least, SARS’s controls are lax enough to allow criminals to exploit the situation. At worst, and this is not yet proven, there may have been some co-operation from employees within SARS in order to affect the hijacking of companies and the theft of tax refunds due to those companies. This is essentially identity theft on a much larger scale.

Although the major problem lies with inefficiencies at CIPRO, its lack of systems and security measures, the knowledge of a SARS refund leads to the establishment of the counterfeit company’s bank account and the theft of the refund.

If an investigation reveals that there are corrupt individuals in SARS, it is of grave concern that they could be in a position to abuse their access to information and we would like to know what steps SARS is taking establish their existence and, if necessary, to root them out.

We also need to question the ease with which bank account details can be changed at SARS – is a tax number necessary and, if so, how is that obtained? If there are rogue elements within SARS, what assurances do taxpayers have that their details will be kept confidential and will not be prey to a similar scam involving individual identity theft. The fact that SARS will now be exercising its right to withdraw outstanding sums directly from a taxpayers’ bank account makes this all the more concerning.

The second issue which disturbs us concerns the funds themselves. What has happened to the missing tax refunds? From the article mentioned above, it would appear that between R100m and R200m has been stolen. We call on SARS to inform us how the organisation is handling this theft. Who is responsible for it? Is the theft from SARS or from the company? Is SARS still liable to refund the companies? If so, and it is not recovered from the counterfeit companies, that would imply that the taxpayer must foot the bill.

R100m translates into 2,000 RDP houses that would not be built – ever – if the money is not recovered. Or 1,000 nurses salaries for a year that would not be paid. If the total theft amounts to R200m, we could have built twice as many homes or paid for twice as many nurses.

Poor controls can be pervasive and damaging where SARS has powers to access bank accounts. We support Silberman’s recommendation for improvement. We believe that either SARS or, more appropriately, CIPRO must foot the bill. The Taxpayers’ Foundation will not accept a stance that taxpayers must incur this loss.
CIPRO, in consultation with SARS need to resolve this issue rapidly.

TAXtalk: www.taxtalk.co.za

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