Abuse of confidence
THE VAT RETURN can be quite a challenge for a business, all the more so because it has to be made once every three months or even once a month. Moreover, companies may recover VAT one time and have to pay VAT the next. It is characteristic of the government that it likes to collect, but is far less willing to spend when it comes to paying. Getting money back from the VAT authorities takes a long time and often involves an additional tax audit. Instead of reclaiming the VAT credit, the taxpayer can opt to have that amount credited to a current account with the VAT authorities.
THAT CURRENT ACCOUNT between the VAT debtor and the VAT authorities can best be compared with a current account held with a bank. Such an account does not yield interest. However, the taxpayer can claim his credit balance at any time – through the VAT return, that is. If he has to pay VAT at a subsequent return, this can immediately be debited from the current account.
The companies that do not claim their VAT credit, but transfer this to the current account, do the government a favour in more than one way: they save the government an extra check on the VAT refund and provide it with an interest-free loan into the bargain. To put it mildly, this scheme is not unfavourable for the State. Any right-minded person would appreciate it – not so the government, whose greed borders on the pathological. In a recent internal position it even cooked up the reasoning that the VAT credits of the taxpayer finally accrue to it after a three-year time limit. This is motivated by the stipulation that the right to repayment expires after three years.
THAT REASONING invites challenging. The government completely disregards the fact that the right to repayment has already been exercised by transferring the VAT credit balance of the taxpayer to the current account. If banks made even so much as a suggestion that the positive balances of the current accounts of their clients were to accrue to them, they would be persecuted for theft and abuse of confidence.
Don’t the faculties of law in this country teach people that a transfer to a current account is a payment? And that, at best, the current account can only expire – which is in fact an absurd interpretation favouring the tax administration – after the common-law time limit of ten years? And yet, the tax administration is of the opinion that its method is justified, without taking account of the fact that it openly flouts both the provisions and the high principles of the rule of law. Nevertheless, these principles are adamant: in case of doubt about a tax provision, its interpretation is always in favour of the taxpayer. A taxation is in essence a severe breach of the property right. The government does not hesitate to double that offence.
THE FRIGHTENING LESSON for the VAT payer is therefore that he’d better check the balance of his current account. When making his next return, he will think again before deciding not to reclaim his credit and transfer it to his current account with the VAT authorities. Who wants to provide an interest-free loan to the government, at the risk of it being considered a generous gift to the treasury after three years? And the government should be asked the question how wise it is to bite the hand that feeds it.