Sars withholding VAT refunds — and more — from taxpayers

tax

The South African Revenue Service (Sars) could have massaged its tax collection figures even more than expected, by not just been withholding VAT refunds, but also not paying out income tax credits.

The Treasury had to lower its revenue projection for 2018-2019 in the medium-term budget by R27bn, with R20bn of this being due to the need to reduce the backlog of VAT refunds. This had the effect of increasing the budget deficit to 4%.

Concerns around the income tax credits were raised by PwC tax policy leader Kyle Mandy during recent public hearings on the medium-term budget policy statement (MTBPS), organised by parliament’s finance committee.

Questioned about whether it was withholding income tax credits, Sars said it would table a response to the allegations in parliament.

DA deputy finance spokesman Alf Lees stressed that it was necessary to get to the bottom of whether Sars had a ‘‘deliberate strategy’’ to withhold VAT refunds together with other monies, such as personal income tax credits, due to taxpayers.

Mandy told MPs that concerns had arisen that Sars has held back income tax refunds for an inordinately long time. Based on information provided by Sars in its annual reports, Mandy said the Sars income tax credit book had more than doubled in the past three years, amounting to R29.4bn in 2017-2018, R24.4bn in 2016-2017, R22.2bn in 2015-2016 and R14.8bn in 2014-2015.

‘‘If it is, indeed, correct that Sars has used such measures in the past to boost revenue collections, were these to be unwound it would have a substantial negative impact on the tax base, forecasts of future tax revenues, the fiscal deficit, and debt levels,’’ Mandy noted.

He urged the committee to actively engage with Sars and the Treasury on these concerns, given the significant fiscal implications that they could have.

“If one accepts that VAT refunds have been held back by Sars in order to boost revenue collections, it would be naïve to believe that this was the only mechanism employed by Sars to do so. We are aware, anecdotally, of other mechanisms apparently employed by Sars in this regard,’’ Mandy said.

Coercion of taxpayers

‘‘Within the tax profession, it is an open secret that Sars has taken such steps through a variety of mechanisms, including the coercion of taxpayers to pay taxes earlier than they are legally payable. What these measures have in common is that they are designed to either accelerate the collection of taxes that would ordinarily only be payable by taxpayers to Sars in the following fiscal year, or to delay the payment of refunds to the subsequent fiscal year (and, in certain instances, permanently eliminate refunds).’’

Many said they were aware of situations where large employees were requested by Sars to make early payment of employees’ taxes that were only payable in April of a year. 

‘‘From what we have heard, this practice is particularly prevalent with regard to state-owned entities (SOEs), but we are also aware of private-sector employers having been approached by Sars with such requests. We understand also that this practice has been applied in the context of VAT payments,’’ Many said.  ‘‘However, we have no knowledge of any such taxpayers actually having complied with Sars’s requests in this regard.’’

He said complaints have been raised by taxpayers in relation to employees’ tax credits not being refunded by Sars, but instead being eliminated by Sars raising assessments or passing journal entries to eliminate these refunds for no valid reason.

‘‘The only inference that can be drawn from this practice is that it is designed to frustrate the payment of refunds whether on a temporary or permanent basis. We understand that this matter should be investigated by the tax ombud as part of his recently announced investigation into PAYE [pay as you earn] statements of account.’’

President Cyril Ramaphosa fired Tom Moyane as Sars commissioner last week. He said in his response to Moyane’s Constitutional Court challenge against an inquiry into the tax body, and a hearing into his fitness to hold office, that it was now apparent that Sars deliberately withheld VAT refunds in a bid to make its tax collection figures look better than they were.

“The large, unanticipated payments for VAT refunds have led to a substantial downward revision in estimated tax revenue for 2018-2019, which, according to the 2018 [medium-term budget], is expected to be R27.4bn below the estimate at the time of the 2018 budget,’ Ramaphosa said in his affidavit. 

‘‘Furthermore, it indicates the revenue shortfalls of the four previous years were worse than reported, as Sars slowed down the payment of VAT refunds to artificially inflate the revenue actually collected over the past four years.’’ 

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Sars clarifies its stance on medical expense claims

The South African Revenue Service (Sars) says there has been no policy change with regards to the risk treatment of medical expense claims.

Some tax practitioners have recently been caught off-guard after medical expense claims that were not paid by a taxpayer’s medical scheme were disallowed. Usually, tax certificates distinguish between medical aid contributions paid during the tax year and “claims not recovered from the scheme”. In the past, Sars generally allowed a medical tax credit for legitimate out-of-pocket expenses on submission of the tax certificate, but this year some tax practitioners have advised that the credit was only allowed if taxpayers also submitted the relevant invoices and receipts related to the amount reflected on their medical tax certificate.

While this is not an issue where taxpayers don’t have large medical expenses, it is of particular concern for some pensioners and taxpayers with disabilities.

Sars says the 2018 Personal Income Tax Filing Season marked the first year in which it pre-populated taxpayer medical aid information on the tax return pertaining to medical aid contributions, medical aid dependents and claims not recovered from the scheme altogether.

“The tax return submission by the taxpayer is therefore validated against this third-party data to ensure accuracy of taxpayer submissions.”

Sars says where taxpayers provide information that is contrary to the available third-party data, the taxpayer will most likely be flagged for a verification or audit.

“This is especially [likely] in instances where the out-of-pocket expenses being claimed are higher than what has been obtained from the third-party data source.”

Where taxpayers are flagged for a verification or an audit, they will be obliged to provide proof of all receipts to confirm that the out-of-pocket expenses were actually incurred. This is aimed at curbing potential fraud that may result in taxpayers requesting a refund due to these expense claims, even though they did not incur the expenses, Sars says.

The Tax Ombud, retired judge Bernard Ngoepe, found in 2017 that Sars unduly delayed the payment of legitimate refunds in certain instances. According to the Medium-Term Budget Policy Statement, the value-added tax (Vat) refund estimate for 2018/19 has been revised upwards by R9 billion and about R11 billion will be paid out to clear the backlog in Sars’s Vat credit book.

Sars says refunds that are legitimately due to taxpayers are not unduly or unnecessarily held back.

“Sars applies due diligence to ensure that such claims are legitimate in order to facilitate the timely payment of genuine refunds. Supporting documentation such as receipts to substantiate and verify the expenses not covered by the medical aid are requested only when the return is routed for further compliance intervention and risk mitigation. In this case, the taxpayer is required to provide such receipts to verify the expense claim.”

The tax season for non-provisional individual taxpayers closes on Wednesday, October 31. The deadline also applies to provisional taxpayers who choose to file at a branch, but provisional taxpayers who make use of eFiling still have until January 31, 2019 to do so.

Sars has assured taxpayers that its eFiling system is stable, despite recent speculation that it is on the verge of collapse.

“eFiling has experienced 99.7% uptime during Tax Season and is geared to receive the large volumes of returns that can easily spike to 150 000 submissions daily when Tax Season hits its last two days,” it said in a statement on Monday.

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Good news for Taxpayers battling refunds, disputes

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The investigation by the Office of the Tax Ombud into the delay of refunds from the tax authority has borne fruit.

Finance minister Tito Mboweni announced in his maiden medium-term budget policy statement that R20 billion in value-added tax (Vat) refunds will be paid to taxpayers.

The additional refunds comprise R11 billion to clear the backlog (refunds withheld) and another R9 billion to provide for the current fiscal year (2018/19).

“We recognise that this has hurt the cash flow of a number of companies, including small businesses,” he said in Parliament.

The Ombud found in a scathing report that the South African Revenue Service (Sars) has, in some instances, been unduly delaying the payment of valid refunds, causing financial hardship.

Despite this report, the number of complaints about the non-payment of refunds still tops the list of complaints received by the Office of the Tax Ombud. It has received more than 800 complaints, representing almost 35% of all complaints.

Dispute resolution

Another issue that has been causing grave concern is the time it takes to solve disputes with the tax authority.

The Ombud has recently received approval from the finance minister to investigate the reasons for Sars’s non-compliance with time frames set out in the Tax Administration Act.

In the 2017/18 Tax Ombud Annual Report, complaints about non-compliance with dispute resolution time frames rank second highest, with 700 complaints accepted for investigation. This represents almost 30% of all the complaints received.

Taxpayers who have been battling with Sars on delays in the dispute process can now directly approach the Office of the Tax Ombud to act on their behalf against the tax authority.

When complaints by taxpayers are recognised by the Tax Ombud as being systemic, taxpayers no longer have to exhaust all avenues before approaching the Ombud for assistance.

Joon Chong, tax partner at law firm Webber Wentzel, says the dispute resolution process has also become quite unfair, mainly because of the time and money it takes to finalise a dispute.

She says taxpayers who want to dispute their assessments have to object and file it within 30 days of receiving the assessment, or apply for an extension of 30 more days if they have reasonable grounds.

Once the objection has been received by Sars, it has 60 days to notify the taxpayer whether the objection is allowed or not.

“That is where the problem comes in. Sars often does not adhere to this timeline. However, it is very strict with the timelines given to the taxpayer in which they should submit their objection. If the time to submit the objection has expired, the objection would be invalid.”

It is then necessary to show grounds for lateness, which becomes a new set of requirements the taxpayer has to meet, says Chong, a member of the South African Institute of Tax Professionals working groups.

Sars has been quick to notify taxpayers when the objection has been rejected and that way the case is kicked back to the taxpayer.

If there were reasonable grounds for the lateness, Sars can extend the time to object by another 30 days. Taxpayers can also plead ‘exceptional circumstances’ for being late and these objections can still be accepted up to three years from receiving the assessment.

“These exceptional circumstances are difficult to meet and the hurdles to cross are very high,” says Chong.

As soon as the objection has been declared invalid, taxpayers are given 20 days to submit a new objection. Although Sars offers reasons in the notice for the rejection of the initial objection, they are not always comprehensive.

Once the new objection has been filed the process starts afresh with the stated timelines. If the objection is again declared invalid, the taxpayer may take the decision not to grant an extension on appeal.

Alternative route

Usually, at this stage, taxpayers opt for the Alternative Dispute Resolution (ADR) route where a Sars representative and the taxpayer attempt to resolve the matter with a Sars-appointed facilitator.

The outcome of this process can be a settlement between the parties, withdrawal of the appeal, or no settlement and the matter will then proceed to the courts.

Taxpayers are loath to follow the court route given the time and money required. It can take as long as a decade to finalise a matter.

While the dispute drags on, the initial assessment stands and, in terms of the ‘Pay Now, Argue Later’ principle, the tax is due and payable.

However, Sars has been willing to grant a suspension of payment if the taxpayer can show that recovery of the tax is not in jeopardy, that there is no fraud and that the taxpayer is in good standing or that the payment will result in irreparable hardship.

The Office of the Tax Ombud and Webber Wentzel will be holding panel discussions in Johannesburg and Cape Town in November to discuss common issues experienced by taxpayers and possible solutions.

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Did Gartner do a Double Irish on Sars?

SARS

Nugent Commission of Inquiry into Sars. As a brief background, in 2014 Gartner performed the Sars IT assessment. From 2014 to 2017, Gartner provided IT management advisory services, having drafted the terms of reference to its contract with Sars. In doing so, it acted illegally.

It appears that Gartner, in assessing Sars’s IT system, identified a ‘burning platform’, and was awarded the subsequent contract to fix it. A burning platform is a metaphor to explain a crisis situation that must be urgently and radically addressed. Barry Hore, previously chief operating officer at Sars, alluded to this in his testimony at the inquiry. A real burning question: was the awarding of the contract to Gartner a done deal? This is becoming more probable as evidence unfolds. 

However, what really piqued my interest, was that Sars had entered into a contract with Gartner in Ireland (presumably Gartner Ireland Limited). Willemse further testified that Gartner in South Africa had merely provided support staff. My first thoughts were: US holding company, Ireland, low tax rate, tax haven, and the Double Irish tax avoidance structure!

No, surely Sars would not lend itself to enabling a corporation that it is contracted with to avoid tax?

Ireland has become synonymous with tax avoidance. Over many years it has not only had a very low tax rate, but it has facilitated various tax avoidance structures through which many US corporations have managed to pay very little corporation tax on non-US profits. Think Google, Facebook, Apple, Starbucks and many others. It remains a popular jurisdiction for multinationals doing business in South Africa.

Sweetheart deals

One particular method of facilitating tax avoidance is known as the ‘Double Irish’. The EU put a stop to this scheme in 2015, but many existing structures can remain until January 2020. Replacement structures have already been developed.

Some companies negotiated sweetheart deals with Ireland, lowering their corporate tax rate, to say 2%. The EU has put a stop to new sweetheart deals, but the ones in place will stand.

Ireland also offers another unique feature. It is possible to have a company incorporated in Ireland, but which is not tax resident anywhere. Such a company would not even be required to complete a tax return. With most jurisdictions, a company has to be tax resident somewhere. If not in the country of residence, then in the other jurisdiction in accordance with the specific double taxation agreement between the two countries. Ireland has now done away with this, but only from 2020.

It is advantageous for a US holding company to establish an entity in Ireland to which all the offshore sales will flow. The US has a peculiar rule, called tick-the-box. It allows the US holding company to choose whether it wants an offshore subsidiary to be treated as a partnership, or as a company. Even though this rule was initially introduced to ease consolidation of large groups, it can be used as a tax avoidance tool. All sorts of complex tax structures can evolve from this.

‘Wiping out’ profits

Making use of the Double Irish strategy enables a corporation to shift its profits to Ireland, where the profits are not taxed, or taxed at a very low rate. Or in tax avoidance parlance, the profits are ‘sheltered’. A simple Double Irish involves two companies, A and B. A makes sales to clients in other countries (such as South Africa), and pays all the income over to the other company, B, as a ‘royalty’ – wiping out all profits. B could be tax resident in a country that has no corporation tax, or that allows a notional interest charge. There are many variations of this, and further jurisdictions will be added depending on the nature of the profits to be sheltered.

Company A will have a ‘sales office’ in, say, South Africa, and will employ only support staff. It will make no profits. It will be reimbursed for its expenditure by A. It may also be charged fees such as licence fees and royalties for using the brand, the IT system and so on. This sales office will not be a ‘permanent establishment’, and will thus not be a tax presence. If the office does qualify as a permanent establishment, Sars will be able to tax the income that is attributable to this office. This is a tricky calculation.

Gartner sells services – this can cover a range of activities, some of which can be delivered remotely over the internet. It is to be noted that value-added tax (Vat) must be charged by any offshore supplier of electronic services, as defined, to any resident in South Africa. That supplier must be registered for Vat.

Questions to keep Sars awake at night

My questions in regard to Gartner, which should keep Sars awake at night, are:

* How much taxable revenue in regard to the R200 million was taxed in South Africa, or was the R200 million paid to Gartner Ireland?

* Is Gartner operating through a taxable presence in South Africa and only liable for taxes on a limited amount of income attributable to that entity?

* Or does Gartner only have a ‘sales office’ in South Africa, staffed by support services, which is reimbursed for its costs. In other words, will there be minimum taxable profits, if any?

* Is Gartner Ireland registered as a Vat vendor in South Africa?

* Does Sars have any idea of the value of sales to South African clients from Gartner Ireland, and how much South African tax is paid on this?

* Did Gartner report the fact that it was rendering consulting services in South Africa to Sars as a reportable arrangement as it required by the Tax Administration Act?

Earlier on, the commission heard that suspended Sars commissioner Tom Moyane had referred to the Sars IT system as a can of worms (he abruptly froze the modernisation project in 2014). Enter Gartner, and four years later the inquiry prises open Pandora’s Box.

* Barbara Curson was senior manager of tax avoidance and reportable arrangements at Sars from 2009 to 2016. She represented Sars at various base erosion and profit shifting focus groups at the Organisation for Economic Co-operation and Development (OECD), including taxation of the digital economy, hybrid mismatch arrangements, excessive interest deductions and mandatory early disclosure. She also represented Sars at the tax avoidance working party at the OECD, as well at the Joint International Tax Shelter Information and Collaboration (Jitsec).

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Davos comes to Sandton

Next week about 1 000 investors will attend President Cyril Ramaphosa’s Investment Summit where they will interact directly with regulators and cabinet ministers in an effort to unlock large amounts of money to get the South African economy going.

According to economic development minister Ebrahim Patel, who briefed the media in Pretoria on Thursday about the upcoming event, business people will make a number of announcements during the event about significant investments and commitments for further investments.

Patel says a third of the delegates are foreigners from at least 25 different countries.

He says the event, which starts the day after finance minister Tito Mboweni’s medium-term budget policy statement on Wednesday, October 24 and will conclude on Saturday, will consist of a series of working sessions. It will be held at the Sandton Convention Centre.

There will be two plenary sessions addressed by Ramaphosa and 20 different activities where attendees will work out what must be done to unlock investment. He said 50 experts will be speaking and leading the discussions.

Chinese business magnate, investor and philanthropist Jack Ma will give the keynote address at the gala dinner on Friday night.

Patel says Ramaphosa will deal with the land issue during the summit and explain the processes and timelines to investors. He adds that South Africans, as well as the investment community, needs finality on the matter, and the government wants the investment community’s support in dealing with it.

Government will also ensure that providers of infrastructure like Transnet and Eskom will be present to hear what obstacles they should address directly from decision makers in business (CEOs and board chairpersons).

Patel says the summit will focus on agriculture and agro-processing, mining and mineral beneficiation, manufacturing, transport infrastructure, water infrastructure, tourism, and creative industries, information and communication technologies (ICT) and venture capital and entrepreneurship.

He says the larger JSE-listed companies that have registered for the summit represent a market capitalisation of R6.5 trillion and virtually the entire South African fund management community, representing R7.7 trillion in assets under management, will also be present.

As to the international presence, 27 Fortune 500 companies with a combined market capitalisation of $4 trillion have confirmed their attendance, and three of China’s top four banks will also be present. Patel says they will have the opportunity to interact directly with cabinet ministers.

Multinational companies that will attend include Airbus, Huawei, Nestlé, General Electric, Siemens, Mitsubishi, and Johnson & Johnson.

Patel says there are at least 40 large national investment conferences every year around the globe and South Africa will now enter this competitive environment by showcasing the opportunities it offers, including its ability to act as a springboard into Africa.

He says the idea is to drill down to practical matters that are stumbling blocks to investment and to find ways to remove them.

He says government wants to reposition itself by improving the efficiency and speed of economic service delivery.

The summit has focused government’s attention on getting things done.

Patel says he often marvels at the way the World Economic Forum in Davos always offers the easiest opportunities “to get to people you need to meet” and says this summit will do the same for South Africa and business people interested in investment in the local economy.

He emphasises that the summit is part of a comprehensive drive to improve economic growth that started with Ramaphosa’s State of the Nation address in February. The drive includes many engagements he has had with business people in South Africa and abroad, as well as the recent Jobs Summit.

Progress will be closely monitored after the summit, and according to Patel, government is currently considering an active web-based report-back system.

 

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Sars presents its annual report to Parliament

Mark Kingon, acting commissioner of the South African Revenue Service (Sars), displayed in-depth organisational knowledge as he briefed Parliament on Sars’s 2018 annual report, delivering a no-holds-barred account of its performance in the year to March 31, 2018.

“We can’t afford mess-ups at Sars,” he said. “Sars is an important organisation for our country; it has to do what is right and correct in every circumstance.”

Recognising the current difficulties faced by Sars, he proclaimed: “We are going in the right direction, but we are facing choppy seas.”

Non-compliance with legislation

Performance bonuses were paid without the Minister of Finance’s approval, with irregular expenditure paid in relation to performance bonuses amounting to R4.3 million.

Sars also incurred irregular expenditure on two contract renewals amounting to R104 million because it had not implemented National Treasury’s new rules in time.

When asked by Parliament to explain, Kingon took it on the chin (even though he was not commissioner at that time): “We dropped the ball. We cannot plead ignorance”. The services rendered under the contracts provide value, and Sars is in the process of having this expenditure condoned.

Tax Ombud

Sars is also in the process of dealing with the Tax Ombud’s finding on refunds. Ten cases have been dealt with, and a new system that will end the problems experienced with stoppers on refunds is being put in place. In addition, the value-added tax (Vat) and Diesel refund accounts would be split.

Read: Tax Ombud’s office has come a long way

Operational matters

Kingon noted the following:
· Sars has halted all non-core litigation in order to focus on its core mandate.
· Sars is still trying to shorten queues at branches by focusing on improved service delivery in other areas. Kingon is optimistic that ultimately taxpayers should be able to self-service and not have to contact a call centre or visit a branch.
· The primary building block of good compliance is good service: “If we serve better we will have a more compliant tax base.” Kingon also said that Sars is trying to get on top of its data and understands where the risks are.
· While there are concerns about the IT system, this aspect was misconstrued in the press; the Sars system is not going to collapse.
· Two critical IT issues are eFiling and the IT infrastructure. The current eFiling platform is reaching the end of its cycle and will be replaced with Html5 for the 2019 tax year. The IT infrastructure has to be refreshed. Sars is currently running on Windows 7, and new equipment will have to be installed so that it can run on Windows 10. This will be done on a phased-in approach over a number of years.

Major highlights include:
· 6.3% revenue growth year on year, with GDP growth of 1.3%
· 94% filing compliance
· 93.63% returns assessed within the first 24 hours of the receipt cycle
· Sars, which processes some R2 trillion per annum, is a target for fraudsters, and fraudulent claims amounting to R2.7 billion were prevented
· 17.2 million tax returns were submitted in 2018 (2017: 16.6 million).

Kingon referred to the employees at the coalface who deal with these matters on a daily basis, often without recognition, and said it is important for him to salute them for the work they are doing.

Illicit economy

Sars is making significant progress in dealing with the illicit economy and has established an illicit economy unit that is currently dealing with 58 cases. Kingon referred to the recent arrest of two officers who were attempting to facilitate trade in fuel where the duties had not been paid; the amount involved was about R3 million.

Primary concerns in the illicit economy are tobacco and fuel. Under-collection of taxes on fuel negatively impacts the Road Accident Fund.

The clothing and textiles sector is also a concern, not only because of the under-collection of duties but also because of the importance of protecting jobs in the economy.

Drugs and currency leaving the country continue to be major areas of concern.

Financial statements

· Total revenue accounts collected for the year, comprising taxes, levies, duties, fees and other monies collected, amounted to R1.3 trillion (2017: R1.2 trillion). These funds are transferred to the National Revenue Fund on a daily basis.

· Total revenue from the rendering of services, other income, and interest received, amounted to R554.7 million (2017: R1 191.2 million). In 2018 National Treasury transferred R10.2 billion to Sars (2017: R11.2 billion).

· Total expenditure for the year, made up mainly by employee costs of R7.5 billion (2017: R7.2 billion), amounted to R10.9 billion (2017: R10.8 billion).

· Executive remuneration amounted to R36 million (2017: R32.2 million).
 
For Sars, the year saw the appointment of a new commissioner (acting) as well as several new chief executives from outside the organisation; there was also the appointment of a new Minister of Finance; and then there’s the Nugent Commission of Inquiry, which has resulted in much of the organisation’s dirty laundry being aired in public.

Sars has been stripped to its core and it will take a lot of effort and support to build it back up to what it once was. Luckily for Kingon and South Africa, there are committed and loyal staff who will be able to knuckle down and attend to the core mandate. However, the evil cobwebs constraining them first have to be removed.

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Tax survey highlights areas for service delivery improvements

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A recent survey by PwC on the tax experience of more than 5 300 of its corporate clients with the South African Revenue Service (Sars) points to an expected increase in tax audits and disputes.

A high number of respondents (85%) said it was likely that Sars would verify or audit the company for post-submission of corporate income tax returns on an annual basis.

Elle-Sarah Rossato, head of tax controversy and dispute resolution at PwC, says the pace at which tax authorities have changed and intensified their approach – both unilaterally and cooperatively with taxpayers – has been rapid.

“In South Africa, this has been complicated by a number of structural, leadership and policy changes within the revenue service over the last five years.” She says the survey aimed to create a “baseline” for constructive engagement with Sars on how it can improve efficiency, trust and credibility.

Rossato, vice-chair of the South African Institute of Tax Professionals tax administration committee, says the survey points to even more “intense tax authority activity” in the near future. The survey was done a month after the Nugent Commission of Inquiry into tax administration and governance at Sars started.

It was also done at the time of the launch of Sars Service Charter, which sets out what taxpayers can expect from Sars in terms of service delivery and timelines.

According to the survey, 71% of the respondents feel Sars never or only sometimes complies with the time periods currently supplied in the Tax Administration Act (TAA). More than 60% of respondents are of the view that the service charter will never, or only sometimes, change the behaviour of Sars officials.

The delayed payment of refunds has been a major pain point for taxpayers. The Office of the Tax Ombud found that the actions of Sars caused financial hardship and were in some instances unlawful.
The PwC survey showed that 62% of the respondents “never or only sometimes” received refunds within the allocated timeframe.

In 2% of the cases, value-added tax (Vat) refunds were paid more than a year after supporting documentation for a verification audit was supplied. The survey also showed that in 30% of the cases, it took six to 12 months to complete an audit, and in 12% of the cases it took longer than 18 months.

The lack of having someone to communicate with, or finding someone who can help with queries about the audit, poses a major problem for corporate taxpayers. According to the survey, 38% of the respondents never received progress reports from Sars on the audit process.

In terms of the TAA, a Sars official must provide the taxpayer with a report indicating the stage of the completion of the audit. The taxpayer is entitled to a status update of the audit within 90 days after commencement of the audit and within 90-day intervals thereafter.

Only 2% of the companies participating in the survey received feedback on the audit process within the prescribed timeframes.

An issue that has increasingly become an area of focus for tax authorities is the transfer pricing policy of a company. This policy sets out the manner in which companies price services and goods to other companies within the same group.

Rossato says that since October last year “transfer pricing risk reviews” (and ensuing audits) have become more common. PwC expects this trend to continue.

“In the context of base erosion and profit shifting (BEPS), multinationals should review their transfer pricing policies, document appropriately and expect to be audited.”

Although not many of the respondents in the survey have been subjected to a transfer pricing audit, 39% of those who had been found it to be a drawn-out process that took more than 18 months.

The Voluntary Disclosure Programme (VDP) forms part of the TAA and according to PwC the uptake on this relief has been “immense”. “However, we have seen increasing resistance from the VDP unit and delays in considering and processing applications.”

The turnaround on applications was 10 months at the time of the survey (July 2018). Around 38% applications were declined because Sars claimed it was not voluntary due to a pending audit, verification or investigation.

Rossato says 30% of the taxpayers recommended that Sars improve the technical skills of its staff. Improved turnaround times, the revival of the Large Business Centre and improvements to the electronic filing system (e-Filing) also remain high on the wish list.

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‘Pay now, argue later’ Sars rule under scrutiny

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The South African Revenue Service’s “pay now, argue later” rule is justified in certain circumstances, particularly when taxpayers with deep pockets try to drag out their dispute with the tax authority for as long as possible, says Tax Ombud Bernard Ngoepe.

However, he says it is an “attractive proposition” that a neutral body, such as the Office of the Tax Ombud, should have the power to decide whether the payment, or a portion of the payment, can be suspended until a dispute is resolved.

The main reason for the rule is to ensure that Sars is not out of pocket during the process of appeal or review.

However, the Davis Tax Committee said in its report on tax administration, which was released a year ago, that the rule has the effect of discouraging taxpayers from engaging in appeal or review processes against Sars, because, psychologically, the taxpayer had already “lost” the money.

“This rule creates a huge bias in favour of Sars. The argument that taxpayers often raise frivolous objections serves to ignore various other available measures of determining the validity of objections,” the Davis report stated.

Thabo Legwaila, a member of the Davis committee and professor in tax law at the University of Johannesburg, said that when the legislator wrote the “pay now, argue later” provision, it did not consider any other options.

In many African countries, taxpayers are allowed to pay a “deposit” when they object to an assessment. In some countries, taxpayers have to pay between 20% and 40% of the assessed amount that is in dispute, to ensure they do not raise frivolous objections to avoid paying tax.

The Davis committee recommended that taxpayers should pay 40% of the claim by Sars.

Legwaila told delegates at the recent Annual Tax Indaba, hosted by bodies such as the South African Institute of Tax Professionals and the South African Institute of Professional Accountants, that another option was to impose higher interest rates on the amount due when there has been a frivolous objection.

He suggested a system whereby an independent body looked at the preliminary facts to determine whether a payment could be suspended. The Davis committee proposed that the role be given to the Tax Ombud.

Eric Mkhawane, the chief executive of the Office of the Tax Ombud, said at the indaba that the rule could not be abolished as it could lead to the collapse of the tax system.

He said the Constitutional Court found the clause to be constitutional because there was a discretionary element. The taxpayer could always approach Sars and request the suspension of payment until the dispute was settled.

Mkhawane agreed that Sars should not decide whether the suspension of payment was granted. If a body such as the Office of the Tax Ombud considered a request for the suspension of payment, it could help to “avoid issues of bias”.

Ngoepe said that when he was judge president, he was approached by the then minister of finance to facilitate hearings of tax matters.

He said some taxpayers would drag out matters because they had deep pockets, and in those instances the “pay now, argue later” rule could be justified.

Taxpayers are required to pay in full if a suspension of payment is not granted.

This article first appeared on iol.co.za.

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How Excellent Customer Service Affects Your Business’ Bottom Line

Business owners say great customer service is important. In fact, it’s so important it can make or break your bottom line. Here’s how to make it work for you.

Why Customer Service Matters So Much

There are several reasons why your customer service matters so much, including:

  • This is how your customers remember you.Having a positive reputation is great, but customers tend to remember negative customer interactions more. Research shows that you’ll need 12 positive experiences to make up for one bad one.
  • Your customer service says a lot about your business. Customers often base the quality of your product on this interaction. This is why you should spend as much time and money on your customer service as you do on your products or services.
  • Customers want to feel like you care about them.By playing to their emotions and treating them with genuine courtesy and respect, they’re far more likely to invest their faith in your business. Pause for just a moment to think about how they pay your bills and that should help you genuinely appreciate them.
  • Good customer service honestly makes everyone’s lives easier.When it’s easy for your customers to contact you, it’s also easier for them to buy your products or services. This is why you should add contact forms and a FAQ page on your website and include customer service tools in your custom-built app. While offering other forms of contact are great, you don’t want to make it impossible to find your phone number.
  • Offering great customer service is a profitable marketing strategy.Word-of-mouth marketing does more than most A+ marketing teams can. Start by getting your customers raving about your company’s customer satisfaction standards then include customer testimonials and happiness ratings to show potential customers how much you’re there for them. When you tap into this and have your customers start your praises of their own accord, you’re tapping into a gold mine.
  • Don’t undervalue customer service because your clients always have alternatives available.It’s relatively easy for them to go to a competitor who’s offering them what you’re not. In fact, studies show that about 78% of consumers have backed out of transactions or failed to make an intended purchase simply because they received sub-par customer service. In today’s global marketplace, businesses that don’t have the tools to make it easier for their customers to do business with them get left behind.
  • Maintaining your customer base will cost you significantly less money than you’ll spend trying to attract new customers.Loyal customers are typically worth as much as ten times more than their first purchase. However, you won’t cash in here if you don’t prioritise customer success. If you’re wondering what the value here is personally for your company, stop and consider the money, time, and other investments you place in onboarding new clients. You’re guaranteed to save in all these areas by having your clients stick around.
  • While it’s important to drive traffic to your business, if you can’t transform this traffic into leads then the sales really aren’t much use. This requires a careful balancing act that you’ll grow better at as time goes on.

Related: Improve Your (Superior) Customer Service By Focusing On The Little Things

To Improve Your Customer Service, Choose the Right Phone System for you and Your Customers

Forbes says a cloud-based phone system helps with improving communication. In many cases this will help fix any problems you’ll experience in providing great customer service because now you can also provide over-the-internet support services. This is beneficial for your customers in several ways, including:

  • Maintaining consistency in customer interactions and minimising the number of touch-points or different contacts that are involved in each customer’s interaction with your company will improve both their satisfaction and their loyalty because fewer transitions between customer service providers means there’s fewer opportunities for an error to occur. Not only is this something research shows, but the same research also shows that each touchpoint in your customer chain must be held accountable for the end result of your customer’s interaction with your business.
  • You need to simplify and clarify any support text that’s on your website.If you can’t do this, they you should get rid of it altogether.  These small changes can help your customers help themselves so they won’t send in as many support requests. If you choose to get rid of your support text altogether, make sure you instruct your customers to email you for help. This may make it easier for you to keep track of your customers’ issues so you make changes that eliminate them in the future.
  • Listen to what’s being said about you on social media then respond appropriately.Every complaint or concern that’s raised online is an opportunity for you to win over additional customers while also solving your customer’s problem and increasing their satisfaction and loyalty.
  • Show your customers that you always put them first by checking with them throughout the onboarding process. Sending an email or a handwritten note expressing your appreciation goes a long way.

Related: When It Comes To Customer Care – Don’t Be Good, Be Awesome

Forbes continues on to say you never know when a complication with your product or service may arise. When it does you’ll want to work quickly to solve your customer’s problem. Even if they simply don’t understand how to use your product or service, it’s still up to you to fix this issue. Unfortunately, there isn’t always a simple solution available. Many times, you can fix it by offering exceptional over-the-phone or over-the-internet support though.

One Last Thing…

While you may feel like there’s a lot of information here to remember, Talkdesk says the most important thing to remember about this topic is it’s really hard to make up for a bad customer experience. Sure, we all make mistakes, but when it comes to customer support you really can’t afford to make them. Remember, it’ll take 12 good experiences for your business to make up for one lousy experience, which means you could lose out on a lot of money.

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Being An Entrepreneur In South Africa – “The Art Of The Hustle”

Hustling” means making sure you are in the right place at the right time; being resourceful; making your luck and working incredibly hard – 24/7 (you cannot be a part-time entrepreneur).

But there is an art to the hustle

Here I share a few common and critical observations gathered from successful entrepreneurs. Characteristics of successful “hustlers” include:

A clear vision and buckets of self-belief – hustlers have a passion for their vision and a driving ambition. It is something they live and have a laser-focus 24/7.

You must have a vision for your business, and you must write this down along with your goals. Write your business plan that includes understanding the numbers, your break-even point and being able to articulate what differentiates your business. Remember unless you are launching utterly new technology or a new product, you are merely displacing other business already operating. You need to separate to achieve traction.

NB: Be ruthless in your differentiation and think out of the box – don’t water this down or compromise on this and make sure your team understands this and buys into this vision.

  • Hustlers love what they do – they do not see it as work. You will always be more successful in something that you enjoy doing.
  • They have a complete disregard for rejection and have a single-minded, long-term vision.

To this end I suggest you stress your business plan by 50% – downside – it will always take you longer and cost you more to get where you want to be! Every successful business has had tough times, and every entrepreneur will tell you this. Be resilient.

  • Hustlers are cold callers – they have no fear in asking and have an innovative knack for being noticed.

Using digital and social networks, there are many low-cost ways of getting your business noticed. Understand the ecosystem or networks that exist around your business and build relationships with the key players, including the competition.

Related: The Ultimate 101 List Of Business Ideas To Start Your Own Business In South Africa

  • Hustlers have an inherent fear of failure and are very self-critical, always striving to be better. They are curious, consistently looking to upskill themselves and have the hunger to learn.

They do, however, fuel themselves with small victories. It is important to celebrate every little win with your team and keep the energy levels high. Your people are the most critical part of your business – ensure they know what is expected of them and that this is contracted. Consistently discuss how they are doing against their targets.

  • Hustlers genuinely care about people, value diversity and understand how their business impacts on society at large.

Don’t confuse being a successful hustler with dishonesty. Successful entrepreneurs understand the importance of good governance and maintaining key relationships. They run small, start-up businesses with the same level of governance rigor as big companies are run – they pay taxes, manage their accounting records and payroll; manage their creditors and understand that their reputation in the market is everything!

  • They have audacious goals and are not afraid of taking risks.

You will fail along the road to success

It is important to fail fast however and pick yourself up quickly. Track your progress against your goals and be real. You will know if you are gaining traction or not and need to make changes.

Lastly, hustlers are authentic – true to themselves.

People very quickly pick up false sincerity. Successful entrepreneurs never apologize for being themselves and are not afraid to show the world who they are.

Good luck. Be yourself and live your dream!

source: https://www.entrepreneurmag.co.za

6 Mental Barriers You Must Tear Down To Succeed

Have you hit a slump in your career? If you are finding it difficult to get ahead, it could be because you’re inadvertently holding yourself back in ways you don’t even realize.

Many of us have unhealthy habits and behaviors that stunt our career growth. By becoming aware of them, it’s possible to begin facing these obstacles head-on so that you can remove potential roadblocks to your future success. Here are six surprising things that are holding you back:

 

  1. You don’t know the basics

What if you were to build a house on top of a weak foundation? It might be fine for a while, but one day, it would inevitably cause problems and affect your quality of life. Similarly in your career, if you don’t take the time to form a strong foundation of knowledge in your field, it may keep you from advancing and growing later on. Therefore, it’s vital to learn (and sometimes to re-learn) the basics.

There’s no shame in hitting the books and learning the basics or re-learning them, even well into your career. You know how when you re-watch a movie or re-read a book you pick up on things you didn’t notice the first time around? It’s very much the same in career education. So whether you’re a baker or an investor or a manager, make sure to develop a strong foundational knowledge of your field of work. It will serve you in many ways as your career advances.

2. Vague goals

Setting clear and specific goals is one of the major building blocks of career success. On the flip side, without specific goals, you’re more likely to suffer from lack of motivation and aimlessness in your career. Want proof? Consider the work of Dr. Edwin Locke, who released a still-relevant article in 1968 entitled “Toward a Theory of Task Motivation and Incentives.” In this research-based article, he determined that clear objective and specific feedback most highly motivated employees.

Working toward extremely specific goals provided a major source of motivation actually to reach the desired result, which improved performance. Moreover, specific and difficult goals led to better task performance than vague or easy goals.

3. Caring too much what others think

According to Aristotle, “There is only one way to avoid criticism: Do nothing, say nothing, and be nothing.” Are you too much of a people pleaser? If so, this tendency could be holding you back from finding the success you deserve.
No matter what you do, you’ll never please everybody. Yes, you should always make your best efforts in any endeavor, and you should always try to be respectful of the opinions of others. However, don’t let other people’s opinions affect your every move. If you do, you’ll constantly operate from a place of fear and will never achieve great things.

  1. You’re trying to figure out everything without a mentor

 Bill Gates, Bob Dylan, Oprah Winfrey. What do these people have in common? They’re all crazy successful…and they all had mentors.
Many people suffer from the belief that to become successful, they have to do the equivalent of climbing Mount Everest alone. However, this mindset is likely stunting their career and slowing down success. Truthfully, seeking out the guidance of a mentor is both a brave and smart career move. A mentor who is further along in their career than you can help advise you, point you in the right direction and help you avoid common pitfalls. There is so much to gain from having a mentor; why hold yourself back by trying to do everything alone?

5. Poor time management

Without a doubt, pursuing a new career or business endeavor takes time. Many people claim that it’s impossible to work toward their dreams because there’s just no time. But is this really true?
The fact is, nobody’s ever going to gift wrap extra time and give it to you like a present. It’s your responsibility to make time. It might involve changing some of your habits like binging on Netflix or getting lost on Facebook for hours on end. Or, it might mean that you wake up early in the morning like Apple CEO Tim Cook, who gets up at 3:45 so he can answer emails and take some time for himself before the responsibilities of the day descend. There are always ways to make time for what matters if you’re truly driven to succeed.

  1. You stopped learning

Lifelong learning is a trait of the most successful people. Don’t you want to be one of them? If you think you know everything, then there’s no possible way for you to continue moving forward in your career or even your life.

As Malcolm X famously said, “Education is the passport to the future, for tomorrow belongs to those who prepare for it today.” When you approach the world as if you can learn from every experience and every person, you’ll reap many benefits. You’ll be able to keep improving, you’ll be able to remain mentally nimble, and since you won’t be a know-it-all, people will probably like you a lot better. Never stop learning if you want to keep growing. Are any of these things secretly holding you back?

This article was originally on Entrepreneur.com

 

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The winds of change are still blowing in SA

President Cyril Ramaphosa pushed some of the right buttons with a reform package to tackle a massive task: revive an economy battered by recession during an emerging market sell-off.

The “stimulus and recovery plan” Ramaphosa announced Friday would redirect R50 billion to projects that can spur growth and cut into South Africa’s 27% unemployment rate. He proposed a multibillion-dollar infrastructure fund and new rules for the mining and energy industries. A review of power, rail and port tariffs, and less demanding visa requirements are also on the table.

With general elections looming next year, an improving economy should help Ramaphosa’s ruling African National Congress regain support lost during the scandal-marred administration of Jacob Zuma that ended when the ANC forced him to quit in February.

While the reforms are a step in the right direction, more detail is needed to know if they’ll work, according to Gina Schoeman, an economist at Citigroup Global Markets.

Positive messaging

“The messaging was very good, and that’s certainly a positive. The difficulty here is trying to work out what the growth implications are,” she said by phone. “We will hopefully be taking money from inefficient areas and starting to spend it more efficiently.”

Africa’s most-industrialized economy is in dire need of pep. It contracted in the first and second quarters, and the central bank projects just 0.7% growth this year. With the country clinging to its last investment-grade credit rating from Moody’s Investors Service, the recovery plan has to be implemented within existing spending limits.

The government will reveal how it will redirect the funds in the mid-term budget next month.

A revised Mining Charter, to give the industry greater certainty on ownership requirements for black investors and mining communities, will be published next week, while the allocation of additional spectrum to mobile-network operators is expected soon. Home Affairs Minister Malusi Gigaba is due to release new visa rules on September 25 that will make it easier for tourists to visit and companies to hire foreigners with limited skills.

In announcing the package, Ramaphosa, a 65-year-old lawyer and former labor union leader who served as Zuma’s vice president for four years, conceded that the economy is facing severe headwinds outside of South Africa’s control, alluding to US President Donald Trump’s trade wars and the general loss of confidence in emerging markets.

“In recent months, the structural weaknesses in our economy have been made worse by global factors such as a rising oil price, weakening sentiment towards emerging markets and deteriorating trade relations between the US and other major economies,” he told reporters in Pretoria, the capital.

While his steps to remove policy uncertainty constraining growth in the mining, telecommunications, and tourism industries are “excellent news,” spending cuts by some departments may prove difficult, said Jeffrey Schultz, an economist at BHP Paribas South Africa.

State action

“We can’t take from social grants, free tertiary education, national health insurance,” he said by phone. “Will it come from smaller public service? We are quite skeptical on the ability to reprioritize the budget meaningfully to move to the needle on growth and investment in the short term.”

The plan sees economic growth is primarily driven by infrastructure investment, with the government contributing R400 billion over the next three fiscal years, mainly from within the existing budget, and additional funds coming from the private sector.

“We have got a recognition that unless the government moves, no one else is going to move in this economy,” Public Enterprises Minister Pravin Gordhan said in an interview with the state broadcaster after the plan’s announcement. “The government is prepared to lead, act as a catalyst, provide funding.”

Market reaction was muted, with the rand declining 0.2% to 14.32 to the dollar in Johannesburg on Friday after initially gaining during the announcement. The currency has slumped 13.5% against the greenback this year, as the ANC’s plans to change the constitution to ease expropriation of land without compensation to address racially skewed ownership patterns compounded the emerging-market jitters.

Ramaphosa has insisted that there won’t be a land grab. On Friday, he announced the appointment of a panel of 10 experts, led by public policy expert Vuyokazi Mahlati, to advise the government on how to implement land reform in a way that also increases agricultural output, promotes growth and protects food security.

“The stimulus package demonstrates the government’s appetite to do things differently to rectify the economy’s structural defects,” said Tanya Cohen, the chief executive officer of lobby group Business Unity South Africa. “Much more needs to be done to get the economy on a growth course.”

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How do you keep up when healthcare is becoming more and more expensive every year? Medical GAP cover can be the answer you’re looking for

GAP cover has been around for quite some time but it has never been more relevant than now. This product has been designed to cover the gap between medical aid rates and what the specialists charge, this applies to unforeseen costs and deductibles not covered by the medical schemes for in-hospital treatment for example when a specialist in-hospital charges private rates, you might have a shortfall on the account.

Between the progressively unpredictable economy and ever-increasing healthcare costs, Cornerstone Healthcare Consulting Services believes that having GAP cover is an excellent way to fight inflation and help cover any shortfalls in medical aid claims. To further highlight the importance of this great medical aid add-on, here are some of our top reasons why you should take out GAP cover as soon as possible.

Private healthcare is becoming more and more expensive

It’s a known fact that healthcare is one of the largest and fastest growing industries in the world and unlike most other industries, the higher the supply, the higher the demand. South Africa has seen a massive increase in private healthcare facilities over the last few years, yet hospital beds remain fuller than ever. When the demand for high-quality healthcare is this high, the prices of these services will remain equally high.

Another reason for high health care costs is the constant influx of new innovations and technology. The medical field is constantly evolving, improving and developing new treatment options for illnesses. These developments can include anything from machinery, medication to surgical procedures and emergency protocols. With new technology often providing higher success rates and fewer side-effects, it is normally exponentially more expensive than existing or older treatment options.

With this in mind, the possibility of shortfalls in your medical expenses may become higher in the future and could easily add up to six-figure numbers depending on the treatment or procedure. That’s why GAP cover should almost be a non-negotiable add on to your current medical aid plan. Having a GAP cover policy will cover any shortfalls in-hospital treatments and certain out-of-hospital procedures. Thereby helping you get the best possible medical treatment without breaking the bank.

Great value for money

If you are a medical aid member, you will know those monthly premiums are anything but cheap. The better, more comprehensive plans can easily set you back more than R4,000.00 per month. If you compare these monthly premiums to that of GAP cover, considering what GAP cover can mean to you and your family, it truly offers extreme value for money.

With many GAP cover plans starting from as little as R200,00 per month per family or per membership, it is certainly one of the most affordable ways to ensure that you and your loved ones receive the quality care they deserve in times of need. Most GAP cover plans are also fully customisable, depending on your specific needs.

It acts as a buffer if you downgrade your medical scheme benefit option

In these uncertain and volatile financial times, downgrading your medical aid plan is often a way to save some money each month until you get back on your feet or perhaps you are not using most of the benefits on your current plan and a downgrade might be appropriate. Whatever your reasons, in most cases, downgrading will mean that the percentage that medical scheme is willing to pay (the medical aid rate) will decrease, thereby increasing the possibility of a higher shortfall.

If you have GAP cover, it will act as a cushy buffer if you must downgrade to a lower medical aid benefit option, because it will continue to cover many shortfalls that you may encounter.

It covers in- and out of hospital expenses

Contrary to popular belief, you do not have to be admitted to the hospital in order to use your GAP cover benefits. GAP cover may cover shortfalls on many out of -hospital benefits such as accidental casualty, MRI scans or CT scans. Although these procedures are mostly performed in hospitals, they are often done without the patient being admitted and therefore it counts as an out-of-hospital procedure.

If you or someone you know is interested in the many benefits of GAP Cover or medical aid and medical insurance, contact us today and let us do all the hard work for you, at no extra cost to you.

Credit: http://www.cfsg.co.za

Tax Ombud to probe Sars (again)

accounting

The Tax Ombud has received approval to launch two separate investigations into the South African Revenue Service (Sars).

The reviews are related to problems with Pay-As-You Earn (PAYE) statement of accounts and alleged non-adherence to dispute resolution timeframes by Sars.

The Ombud previously conducted a similar probe and found that Sars unduly delayed the payment of tax refunds in certain instances.

In terms of the Tax Administration Act (TAA), the Ombud may investigate any systemic and emerging issue with the approval of the Minister of Finance.

In a statement issued on Wednesday, Ngoepe said the request to Minister Nhlanhla Nene was prompted by complaints he received from taxpayers and industry bodies.

“Both Sars and external stakeholders including industry bodies have already been notified. The Office of the Tax Ombud will be engaging Sars, concerned taxpayers and/or their representatives including their relevant industry bodies.

“It is hoped that, as a contribution toward facilitating revenue collection and building confidence in the tax system, necessary recommendations will be made at the end, if need be,” the Ombud said.

The announcement comes just days before the Nugent Commission of Inquiry into tax administration and governance is expected to deliver its interim report to president Cyril Ramaphosa on September 30. The final report is expected by November 30.

The Nugent commission previously heard how Sars became fragmented after the implementation of a new operating model under the now suspended Commissioner Tom Moyane and is expected to make recommendations to put Sars on firmer footing. Moyane was suspended amid allegations of misconduct.

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Sars versus the Taxpayer

SARS

Looking back over the week of the Tax Indaba, an annual event that brings together regional controlling bodies, tax practitioners, tax professionals and the South African Revenue Service (Sars), I am left feeling dissatisfied. No, not with the excellent organisation of the conference, nor with the interesting discussions, but that there is still so much left unsaid. 

Despite Sars acting commissioner Mark Kingon seeming to offer an olive branch – “Sars is committed to the fair treatment of taxpayers … we are committed to changing perceptions by doing our work as expected, with integrity and within the framework of the law without fear or favour … ” fighting talk came from others.

For the first time, the Sars executive sat on a panel discussion at the indaba. That is, most of them. Absent was chief officer of legal counsel Refiloe Mokoena, who was recently issued with a notice of intention to suspend. Ignoring serious internal problems and possible conflicts of interest, the discussion centred on collecting the R1.345 trillion revenue target in the current revenue climate.

Sars is facing many problems, from a lack of skills to a ballooning debt book, and still has to introduce penalties for the non-filing of returns for companies.

Mogola Makola, appointed as chief officer of enforcement in 2017, is taking her title to the letter, threatening in no uncertain terms that “we know who you are and we will see you in jail”.

It will be good news indeed if she is referring to those known tax offenders whose tax investigations were set aside. Or is she referring to those compliant taxpayers who are requested to submit documentation again and again? And does she have such faith in the Sars “risk engine” that she is willing to stand by the tax risks it is spewing out, rather than checking on what the risk identifiers are?

In short:

  • Ongoing dialogue between Sars and tax practitioners is essential. Rhetoric and defensiveness should be dispensed with.
  • The risk engine has veered off track. It’s time for it to undergo a major overhaul. If its risk identifiers were made public, we would no doubt gape in astonishment. But it is not so amusing for low earning employees who are forced to take a couple of days leave to get to a call centre in order to prove why they do not have to be tax-registered.
  • How can Sars improve its service offering and relationship with taxpayers? My suggestion is that Sars senior managers and executives should all spend at least one month a year working in a branch, and dealing with taxpayer queries face to face. Perhaps they will then not be so defensive.
  • New Sars employees should spend a couple of months in the call centre to get acquainted with the business. Yes, this includes executives and senior management.
  • There is a massive disconnect between how Sars perceives itself and how it is perceived by taxpayers. There is a gaping hole in Sars’s understanding of where it is flailing in a complex world of tax avoidance and tax evasion, and its ability to identify loopholes in the law that fuel arbitrage opportunities.

Kingon acknowledges the lapses of Sars and is “committed to changing the narrative”. With a view to building a more efficient and knowledgeable workforce, Sars has embarked on three staff development programs and a basic customs course.

Kingon understands that it is necessary to rebuild the trust between Sars and taxpayers. He also stressed that the revenue service needs to be fair when dealing with taxpayers. He requests support: “People, join hands with us, let’s stop this nonsense”. He is right – he cannot do this on his own. But Sars should take cognisance of its flaws and clean up its house.

Unfortunately it is easier to harass taxpayers within the system, while it takes specialist knowledge, commitment and guts to go after those who aren’t. Harassing compliant taxpayers due to risk engine bleepers or small businesses that get entangled in the maze of complex tax legislation and burdensome administrative procedures will not do much to bring in the R1.345 trillion. Can Sars step up to the mark?

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15 Traits Of Unstoppable People

Unstoppable people keep their inner fires burning by developing the characteristics necessary to become successful.

Unstoppable people are like warriors. They are always ready to take on the world. They are guided by a light from within, full of boundless energy and unwavering in their goals. They have learned to activate their natural talents and develop the skills necessary to achieve whatever they aim for.

How do they do this? Where do they find the stamina and strength to keep going? Unstoppable people keep their inner fires burning by developing the characteristics necessary to become successful. Here are 15 traits that will help you go from being a solid achiever to being a truly unstoppable person.

1. They believe in themselves
Gutsy, bold, badass: Use whatever term you like, but the bottom line is that confidence is key if you want to be unstoppable. You have to have the courage to put yourself out there in the first place. You have to believe that you have what it takes. Mental challenges will be among the biggest obstacles you face – the kind that make you question yourself and what you’re doing. Without a healthy dose of self-confidence, you’ll be tempted to accept defeat when you should be finding a way to bounce back from failure.
2. They develop a clear vision
Every path to success starts with a vision; it’s what gives you direction. It’s your reason for working as hard as you do. Once you have a vision for what you want your future to look like, you need to set a series of goals to achieve this dream – this is your plan for getting there. Your vision is your mission, and should be something you have clearly defined and written down. It’s a chance to put your thoughts, ideas and values into action. It’s also the benchmark you can use to chart your progress, to see how far you’ve come and remind yourself where you’re going.
3. They take action
Unstoppable people don’t wait until they feel “secure” before making big leaps. They jump in and keep going! From that first push to get the ball rolling to those decisive moments when you must correct your course, action is fundamental to success. Making big decisions and taking leaps of faith can be both terrifying and exciting. It’s your chance to think big and be bold. Sometimes inaction is hidden behind other issues, such as poor time management and lack of self-discipline. Stop waiting and stop making excuses. If you want to be relentless, put your energy into action now. Fail to do so and your vision will sit on a shelf, gathering dust.
4. They persist through life’s storms
You can be the most talented, intelligent and creative person out there, but without persistence you are doomed to mediocrity at best. Successful and unstoppable people know they must dig deep and find their grit if they’re to reach their goal. They don’t let hurdles hold them back; they find a way around obstacles to keep moving forward. Persistence is a habit you must develop to get you through tough times and to keep procrastination from getting the best of you. Long-term dreams are a labor of love. You must be there, day in and day out, rejecting discouragement and remaining focused on your objective.
5. They are self-aware
Becoming self-aware allows us to understand ourselves as unique individuals, beyond the roles we play with friends and family or in society. Being self-aware means understanding who you are underneath it all: Your patterns of behaviour, strengths and weaknesses. Unstoppable people take time to understand themselves on a deeper level. By doing so, you’ll be empowered to build on your strengths and see where self-improvement is needed. Self-awareness is key to goal setting, which is paramount to anyone who is unstoppable.
6. They keep life balanced
Sometimes to keep moving forward we must take a step backward. If you’re exhausted, unhealthy, unhappy and unable to maintain your energy, you’re probably treading water. Being relentless means maintaining a healthy equilibrium, and that means tending to the body, mind and soul. Keeping up your physical and mental health is crucial to your ability to pursue everything else on this list. Work-life balance is key to avoiding burnout, releasing chronic stress and avoiding other mental health issues such depression and anxiety.
7. They adapt to change
Unstoppable people don’t panic in the face of change. They understand the importance of being flexible and embracing new developments and innovations. Being adaptable means having an elastic mindset and adjusting as your environment shifts. Every industry will go through disruption and sweeping change. Those who are relentless don’t allow themselves to be thwarted by change. They understand they must be resilient and versatile or risk becoming ineffective and irrelevant. You either learn to bend and flex or you will be broken and discarded.
8. They are fully committed to their goals
Are you letting life happen to you, or are you shaping your life through the power of sheer will and hard work? Unstoppable people develop habits that keep them focused and they cultivate an insatiable hunger to go after their dreams. You must find your inner conviction and then feed that desire by making it a core part of yourself. Why are your goals so important to you? Ask yourself that question, and repeat the answer to yourself every day.
9. They are motivated from within
Unstoppable people have an internal drive that propels them to success. They are intrinsically motivated, meaning they have a deep internal desire or impulse to pursue their goals. When motivation comes from within, it tends to be more meaningful – you feel compelled to keep moving forward even if there is no external reward. Extrinsic motivation, on the other hand, is usually based on an external reward of some kind. You decide to take a new job because it offers better compensation. But the allure of external incentives subside over time. Those who are truly driven and unstoppable aren’t doing it for the fat salary or benefits packages – they are doing it because they feel they must.
10. They take responsibility
Taking responsibility has two parts: You answer for your mistakes and failures, but you also take credit for your successes. Relentless people own their failures as much as they revel in their accomplishments. They acknowledge and learn from both in order to gain the wisdom and knowledge necessary to pursue even bigger dreams and goals. Taking responsibility is about acknowledging that you, and you alone, are in charge of your life. You’re in the driver’s seat, and no one else can dictate your future.
11. They surround themselves with other high achievers
Relationships are an important part of life because we often reflect the attitudes and behaviors of those we spend time with. Spend too much time with negative people and you may find yourself drifting into a pessimistic mindset. Successful and unstoppable people surround themselves with good company. They gravitate toward other go-getters. Look for others who inspire you and whose insights open your mind to new possibilities.
12. They are voracious learners
Our ability to learn and grow is key to our ability to improve and innovate. To be unstoppable, you must embrace learning. You should be an avid consumer of information and be constantly seeking to educate yourself. Becoming a voracious learner feeds your mind by allowing new connections and ideas to flourish. Those who relentlessly pursue their goals never stop seeking to expand their understanding and increase their knowledge of the world around them.
13. They are never fully satisfied
Relentless and persistent people are never fully satisfied with their achievements. They feel compelled to keep pressing on, to keep looking for the next big thing. They don’t allow themselves to slack off or rest on the laurels of their past accomplishments. Unstoppable people are always in pursuit. They stay focused on the next challenge and continue pushing toward the next level of excellence.
14. They develop mental resilience
With ambition comes mental pressure, and sometimes that stress is a heavy burden. Many people crumble under stress, consumed by anxiety and tension. To become unstoppable, you must develop the mental fortitude to handle adversity and failure. Developing mental toughness will keep you strong, determined and focused during the rocky times, and will help keep your emotions in check when you need to be strong. Unrelenting people don’t run from adversity. They realise that facing a stressful situation head-on is a chance to prove that they can overcome and excel under duress. Mental fortitude is the voice that tells you life is tough, but you’re tougher.
15. They don’t waste time on ego or jealousy
There is a huge difference between self-confidence and ego. Self-confidence is when you understand your worth and believe in yourself. Ego is when your sense of self becomes overly inflated and you become focused on self-interest. Ego and arrogance are often closely related to jealousy and resentment. Unstoppable leaders understand that ego and jealousy operate out of fear. They recognise that, if left unchecked, these emotions will get in the way of their own success. Conversely, humility will bring out the best in those around you. Pride and resentment are a waste of time and energy. Someone else’s success is not a threat to your own advancement; their achievements don’t spell your failure. Ditch the defensiveness and stop making it all about you. To be unstoppable, focus on results and keep your mind open to new possibilities
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1. They believe in themselves
Gutsy, bold, badass: Use whatever term you like, but the bottom line is that confidence is key if you want to be unstoppable. You have to have the courage to put yourself out there in the first place. You have to believe that you have what it takes. Mental challenges will be among the biggest obstacles you face – the kind that make you question yourself and what you’re doing. Without a healthy dose of self-confidence, you’ll be tempted to accept defeat when you should be finding a way to bounce back from failure.
2. They develop a clear vision
2. They develop a clear vision clear-vision Every path to success starts with a vision; it’s what gives you direction. It’s your reason for working as hard as you do. Once you have a vision for what you want your future to look like, you need to set a series of goals to achieve this dream – this is your plan for getting there. Your vision is your mission, and should be something you have clearly defined and written down. It’s a chance to put your thoughts, ideas and values into action. It’s also the benchmark you can use to chart your progress, to see how far you’ve come and remind yourself where you’re going.
4. They persist through life’s storms
Unstoppable people don’t wait until they feel “secure” before making big leaps. They jump in and keep going! From that first push to get the ball rolling to those decisive moments when you must correct your course, action is fundamental to success. Making big decisions and taking leaps of faith can be both terrifying and exciting. It’s your chance to think big and be bold. Sometimes inaction is hidden behind other issues, such as poor time management and lack of self-discipline. Stop waiting and stop making excuses. If you want to be relentless, put your energy into action now. Fail to do so and your vision will sit on a shelf, gathering dust.

A Brain Surgeon’s Tips For Handling Stress Head-On

Most people at least try to avoid stress, especially when it comes to business and workplace conflicts. Even successful, high-profile business icons struggle with how to handle stress: Elon Musk recently admitted in a tweet reported on by CNBC that he faces “unrelenting stress.”

That’s alarming to hear from such a famous and successful entrepreneur. And he’s hardly alone in the world of business: But as a businessman myself, and a neurosurgeon, I’ve discovered that the secret to a more fulfilling, successful life and career is to engage with stress, not run away from it.

In fact, many stressors we encounter are actually beneficial. Without the stress of gravity, our bones would soften; without the stress of exercise, our muscles would atrophy; and without the active engagement of our minds, our intellects would weaken and we would become more susceptible to dementia.

What’s more, when we’re not exposed to stress, we’re not learning or growing or getting stronger. Only when we fully engage in stressful situations and face our fears head on can we succeed in our personal and professional lives.

As a surgeon, I’ve encountered numerous high-stress circumstances requiring a cool head and decisive action. The discipline of neurosurgery has helped me develop cognitive dominance: It’s enhanced my situational awareness for making rapid and accurate decisions under stressful conditions, while the clock was ticking.

But if my years of making life-or-death decisions in the operating room have taught me anything, it’s that all of us must have the right tools to conquer one of the fiercest opponents any of us face: stress and fear. So, the next time you face a high-stress situation, try the following strategies for making better decisions under extreme pressure.

Related: Is Your Business Prepared For The Worst? How Your Can Stress-Test Your Business

  1. Always place a drain

While many difficult situations in life are out of our control, others should never occur in the first place.

There’s a rule in brain tumor surgery: Aways place a drain. That preemptive procedure of putting into place a fluid drain gives surgeons more control of the operative micro-environment and makes the removal of a tumor safer by providing a “pop off” valve that can relieve intracranial pressure. By following this rule, we prevent a life-threatening problem during surgery and control our stress in the OR.

What are your safety valves? What are the “rules” you follow in your life that control stress and keep it in check?

One way to manage stress in the workplace is to deal with your overloaded email inbox. If you find yourself drowning in emails, with unanswered messages from months ago still sitting in inbox purgatory, wipe the slate clean and start fresh with an “email bankruptcy.” Simply delete all emails in your inbox with dates that are over a month old and move on.

With so much electronic communication today, who can possibly keep up? Striving to do so will only result in unnecessary stress, distracting you from truly important matters. An email bankruptcy allows you to stay in the current moment and keep your thoughts focused. (Besides, if something is truly important, the sender will follow up.)

Taking simple burdens such as these off your shoulders will free you up to make better, more level-headed decisions in all aspects of life.

  1. Never cut what you can’t see

This pearl is based on the first rule of neurosurgery from my mentor, the master neurosurgeon Peter JannettaNever cut what you can’t see. Just as illumination and magnification are vital to surgeons, making tough decisions under pressure requires first shining a light on an issue and studying the situation closely to determine its true nature and ultimate solution.

I recently encountered significant stress in preparing for the most important toast of my life … for my only daughter’s wedding. I struggled with a flood of emotions the week before and broke down every time I also practiced my toast – a lot. After a lot of thought, I realised my problem stemmed from remorse at missing out on so many events in my daughter’s childhood due to my hectic surgery schedule.

Illuminating the issue allowed me to accept that these thoughts were natural for someone in my profession: Surgeons whose medical duties often bump up against family obligations. Rather than letting regret torpedo my speech, however, I determined to apply myself to being a better, more present parent in her adulthood.

If you’re running up against a roadblock or find yourself in a stressful or tense position, first shine a light on the issue and look at it from multiple perspectives. Ask yourself, “Why am I so anxious about this upcoming business meeting?” or “What’s really making me clash with this particular team member?” Make a point to illuminate, magnify and dissect your problem: The anatomy of the issue might be right in front of you, and you just haven’t been able to recognise it yet.

Related: 49 Inspirational Quotes And Mantras To Help You Overcome The Stress Of Running A Business

  1. Get a second opinion

Avoid your first reaction to any stressful event, as it’s often the wrong one. Almost invariably, your first reaction is going to be geared toward self-preservation, and that’s not generally the best solution to any problem. Instead, find ways to de-personalise the situation, removing emotion from the decision-making process to make smarter choices based on measured facts and different perspectives, not off-the-cuff feelings.

For example, I find it difficult to maintain a balanced perspective when a patient isn’t doing well or has unexpected symptoms after a surgery, so I often turn to one of the five other doctors in my practice for an unbiased, third-party analysis. Reaching out for another opinion is helpful from the perspective of achieving optimum care and deleting the emotional aspect.

If you find yourself stressed, nervous or under the gun, don’t leave the decision on your own shoulders. Get an outside opinion from a trusted partner, colleague, friend or mentor to obtain an unbiased assessment.

By facing stress head-on with these rules, you can gain greater control in work and personal matters, allowing you to practice cognitive dominance in any situation.

 

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A high tax burden does have consequences

South Africa’s tax to gross domestic product (GDP) ratio has increased dramatically over a period of 15 years (2000 to 2015) and is way above the average for Africa and Latin America. South Africa is not alone, however, with a recent study by the Organisation for Economic Cooperation and Development (OECD) showing that 75% of the 80 countries surveyed have seen increases.

The level of taxes in an economy gives an indication of the resources available to government to fund public services and infrastructure, but it also gives a rough estimate of the tax burden on the economy.

The OECD recently released its working document on tax-to-GDP ratios in 80 countries in Africa, Asia, Latin America, and the OECD from 1990 to 2015. (The OECD has 34 member countries, most of which have high-income economies.)

According to the report, the average tax-to-GDP ratio in Africa increased by approximately five percentage points to 19.1% between 2000 and 2015. In South Africa, it increased from 22.4% to 29%. The 2018 Budget Review published in February shows a tax-to-GDP ratio of 25.9% in the 2017/8 fiscal year.

In 2015, the average tax-to-GDP ratio was 23.1% in Latin America and 34% in the OECD. In Asia, Japan had the highest at 30% and Indonesia the lowest at 11.8%.

Ferdie Schneider, head of tax at BDO, says that although South Africa is not comparable with countries in the OECD, we are pretty close to their 2015 average of 34%. The social infrastructure enjoyed by OECD member countries is absent in South Africa. If one compares South Africa with a country in Africa (average 19.1%) and both offer little social security, one can argue that South Africans are overtaxed.

Logan Wort, executive secretary of the African Tax Administration Forum, was quoted at the recent Deloitte Global Trade and Indirect Tax conference as saying that the region’s historically low tax-to-GDP ratios “limit the economic options on the table”.

He says Africa’s tax-to-GDP ratio increased from 15.6% in 2010 to 18.3% in 2017. To some extent this reflects the lower income-per-capita ratio many African economies have compared to other regions.

“However, this may not represent the full picture as Africa loses more money through illicit financial flows than it receives in aid,” says Wort. He believes it is imperative for African revenue authorities to work together to ensure that world tax rules take account of the continent’s needs and that inappropriate standards are not imposed. The authorities also need to coordinate tax policies that encourage intra-regional trade.

Schneider remarks that South Africa’s high tax-to-GDP ratio, compared to the level of social security offered to taxpayers, may be attributed to administrative incompetence, misappropriation and overspending of revenue, corruption and fraud. The dismantling of efficient structures within the South African Revenue Service (Sars) and a mass exodus of highly qualified and experienced people has taken its toll on tax morality and revenue collections.

Although there is no magic figure, South Africa should have a tax-to-GDP ratio closer to 23%, as it had in 1990 (23.9%) and 2000 (22.4%), says Schneider, who is a member of the South African Institute of Tax Professionals (Sait).

The ratio remained relatively stable for a decade (1990 to 2000), then increased by six percentage points in 15 years. “It is obvious that things are getting out of control.” The consequences of overburdening taxpayers include a “brain drain from people wanting to get out of the tax oven”, tax avoidance and even tax evasion.

“When your tax burden is too high, a country is effectively shrinking its tax base – people want to get out from under the load,” says Schneider.

The real danger is that the government then has to look for alternative sources of income where nationalisation, expropriation without compensation and a shift to socialistic ideologies may become the only options.

Many countries in Africa – including Angola, Chad and Nigeria – rely on revenue from oil. South Africa doesn’t have similar resources to replace tax revenue. Schneider says there have been positive trends since the election of President Cyril Ramaphosa, which may impact on the high tax-to-GDP ratio in years to come.

State-owned enterprises – currently a massive drain on the fiscus – are being turned around. Several of these entities have new boards and new CEOs. The exposure of the catastrophic derailments at Sars and the messages and actions by Acting Commissioner Mark Kingon are certainly positive.

“If Sars can be turned around, collections will once again improve and tax morality can be restored,” says Schneider. “We would not have to continue worrying about our tax money.”

What about the fact that South Africa has been hit with a technical recession? Schneider says things has been worse – nine years ago the economy contracted by 2.7%, this time it is only 0.7%.

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Employees Underperforming? How To Respond To These 3 Excuses

Companies are increasing their focus on employee retention. In fact, PayScale’s 2018 Compensation Best Practices report found that 59 percent of respondents considered employee retention a “major concern” for their companies and organisations. This isn’t surprising given that a revolving staff door can make it almost impossible to preserve recent organisational knowledge and keep up with projects and responsibilities.

So, yes, keeping retention top of mind is smart, but sometimes a staff change is unavoidable. When you’re calling the shots, firing people will almost certainly make you uncomfortable. Whether you are running a small start-up or a Fortune 500, you can’t hide behind other people and say the decision was out of your hands.

Then, the bigger your company gets, the harder it will be to respond in order to change quickly and effectively. While employees can grow into their roles, you shouldn’t let your sense of loyalty to your current employees prevent you from making good business decisions.

It’s just logical that some of your original staff members are going to be unable to keep up with the pace and to cease to bring enough value to the company. In those cases, you should maintain a realistic attitude as to when it is time to part ways. And, when those tough conversations need to happen, your sense of loyalty to your employees can be your worst enemy.

A retention reality check

In your personal life, “loyalty” generally means believing in an individual and defending him or her when that person comes under attack. When you become part of a team, however, the definition of loyalty changes.

As a leader, you need to think about your loyalty to all of your employees instead of just one person. When a team member cannot keep up or shows signs of burnout, he or she will likely require co-workers to pick up the slack. When you hold certain people to a lower standard, other employees become resentful, and the poor performer starts to drag the company down.

Related: Dealing With Employee Misconduct

For example, a B2B company we worked with had a marketing employee who had been with the team from the beginning. The company had done well, and its board was pushing for accelerated growth – which required more effective marketing. The employee was a jack-of-all-trades but couldn’t keep up with increased demand. After the difficult decision was made to replace this employee with a more qualified individual, the company quickly hit stretch goals that had previously been elusive.

Often, a leader may be blind to necessary personnel changes, whether willfully or unconsciously. In either case – if this leader is you – the sooner you recognise the problem and take steps to address it, the better off your company will be.

Warning signs that signal a personnel change

It will not always be obvious, but here are three common excuses from employees that might indicate it is time for you to consider a personnel change:

  1. “I don’t have enough time” 

Work stress is prevalent across all industries, and a study from Paychex found that roughly 70 percent of those surveyed reported stress levels of at least 3 on a scale of 1 to 5. Certainly, being pressed for time doesn’t help stress, either.

One of your primary roles as a leader is to clearly define your employees’ jobs and responsibilities. If team members struggle to keep up with their workloads, they are probably stretching themselves thin trying to help others, or putting off work to avoid accountability.

When you talk to an employee who claims to be short on time, determine what his or her current projects are and then contain them. Give this employee specific responsibilities that don’t require relying on co-workers, and see how he or she meets these new expectations and goals. If the employee continues to underperform, look for a replacement, although it is not a bad idea to put out feelers for that replacement before you even have the above discussion.

Related: Richard Branson on How to Train Your Employees

  1. “I cannot control this”

The ability to find a solution to a work problem is an indicator of someone who “owns” the situation. This is a characteristic you need to see in employees. When I worked at Dell, we had a substantial drop in traffic and couldn’t figure out why. Eventually, we discovered that our laptop batteries were catching fire. Unfortunately, you can’t advertise or email your way out of a drop in traffic due to a problem like that; but you can turn to your partners in crisis communication and social media.

If you give employees all the tools necessary to solve problems and they still can’t succeed, it’s time to reevaluate their fit in the company. By letting them go, you ultimately keep them from stagnating. If you struggle with this concept, look toward Startups.co CEO Wil Schroter, who has said he views his company as a school for employees. When employees get to the point that they would learn better elsewhere, it is time for them to move on.

When you let go one of these employees, make sure that the high performers you do have feel appreciated. Talk to their co-workers to ensure that in the interim, everyone’s roles and responsibilities are firmly established. Also, involve the rest of your employees in the subsequent hiring process so they have some control over who is named as the replacement.

  1. “It wasn’t me” 

According to Gallup’s State of the Global Workplace report, worldwide employee engagement sits at a lowly 15 percent. Employees with low engagement often have a decreased sense of responsibility for their work, which wreaks havoc on productivity and accountability.

The most toxic situation is when employees attempt to deflect their own poor performance onto surrounding team members. These individuals rarely admit fault but instead cast broad accusations in an attempt to throw co-workers under the bus. As a last-ditch effort, such employees will even question the data that illuminates their underperformance.

Tough love is the solution here. Like an unfaithful partner who’d rather talk about other people who cheat instead of his own indiscretions, the underperforming employee will try to direct the conversation away from his or her performance. But don’t let that happen: Stay the course and let this employee go.

 

Then, during your subsequent hiring process, be mindful of the departed employee’s character flaw. Ask questions about challenges each candidate faced at previous jobs. Be wary when interviewees shift blame to others or speak poorly about their previous employers.

Most importantly, be realistic about your employees and do your best to fill any gaps with the strongest candidates you can find. And accept the truth: You will never be entirely comfortable about firing people.

If you are, you might not have the empathy required to make a great leader. However, it is part of your job to ensure that your seats are filled with top talent, so be loyal to your whole team and know when to let under-performers go.

 

https://www.entrepreneurmag.co.za

China’s Xi offers another $60bn to Africa, but says no to ‘vanity’ projects

China’s Xi offers another $60bn to Africa, but says no to ‘vanity’ projects

Chinese President Xi Jinping offered another $60 billion in financing for Africa on Monday and wrote off some debt for poorer African nations, while warning against funds going towards “vanity projects”.

Speaking at the opening of a major summit with African leaders, Xi promised development that people on the continent could see and touch, but that would also be green and sustainable.

China has denied engaging in “debt trap” diplomacy, and Xi’s offer of more money comes after a pledge of another $60 billion at the previous summit in South Africa three years ago.

Xi, addressing leaders at Beijing’s Great Hall of the People, said the new $60 billion will include $15 billion of aid, interest-free loans and concessional loans, a credit line of $20 billion, a $10 billion special fund for China-Africa development, and a $5 billion special fund for imports from Africa.

Chinese companies will be encouraged to invest no less than $10 billion in the continent in the next three years, he said.

Government debt from China’s interest free loans due by the end of 2018 will be written off for indebted poor African countries, as well as for developing nations in the continent’s interior and small island nations, Xi said.

“China-Africa cooperation must give Chinese and African people tangible benefits and successes that can be seen, that can be felt,” he said.

China will carry out 50 projects on green development and environmental protection in Africa, focusing on fighting climate change, desertification and wildlife protection, Xi said.

He pledged, without giving details, that China would set up a peace and security fund and a related forum, while continuing to provide free military assistance to the African Union.

Chinese officials have vowed to be more cautious to ensure projects are sustainable. China defends continued lending to Africa on the grounds that the continent still needs debt-funded infrastructure development.

Speaking earlier at a business forum, Xi said China had to be careful about where money was spent.

“China’s cooperation with Africa is clearly targeted at the major bottlenecks to development. Resources for our cooperation are not to be spent on any vanity projects but in places where they count the most,” he said.

Beijing has also fended off criticism it is only interested in resource extraction to feed its own booming economy, that the projects it funds have poor environmental safeguards, and that too many of the workers for them are flown in from China rather than using African labour.

Africa knows best

Chinese officials say this year’s summit will strengthen Africa‘s role in Xi’s Belt and Road initiative to link China by sea and land with Southeast and Central Asia, the Middle East, Europe and Africa through an infrastructure network modelled on the old Silk Road.

Xi said the plan, for which Beijing has pledged $126 billion, would help provide more resources and facilities for Africa and would expand shared markets.

China loaned around $125 billion to the continent from 2000 to 2016, data from the China-Africa Research Initiative at Washington’s Johns Hopkins University School of Advanced International Studies shows.

State media has accused the West of sour grapes over China’s prominent role in Africa and has angrily rejected claims of forcing African countries into a debt trap.

“In terms of cooperation with China, African countries know best,” widely read tabloid the Global Times wrote in an editorial on Monday.

“Western media deliberately portray Africans in misery for collaborating with China and they appear to have discovered big news by finding occasional complaints in the African media about Sino-Africa cooperation,” it said.

Every African country is represented at the business forum apart from eSwatini, self-ruled Taiwan’s last African ally that has so far rejected China’s overtures to ditch Taipei and recognise Beijing.

African presidents in attendance include South Africa‘s Cyril Ramaphosa, Egypt’s Abdel Fattah al-Sisi, Zambia’s Edgar Lungu and Gabon’s Ali Bongo.

There are some controversial guests.

Sudan President Omar al-Bashir, who has been in power for nearly 30 years, is wanted by the International Criminal Court (ICC) for war crimes over killings and persecution in Sudan’s Darfur province between 2003 and 2008.

Xi told him on Sunday that “foreign forces” should not interfere in Sudan’s internal affairs, China’s Foreign Ministry said. China is not a party to the court.

“China has always had reservations about the International Criminal Court’s indictment and arrest order against Sudan’s president. We hope the ICC can prudently handle the relevant issue,” Foreign Ministry spokeswoman Hua Chunying told reporters.

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10 tips to spring clean your budget

10 tips to spring clean your budget

Spring is in the air, and while we get ready to embrace the warm days of summer, we should also brace ourselves for the financial challenges that lie ahead. Giving your budget a good spring clean is a great place to start.

With a double digit fuel price increase expected in September, consumers are faced with yet another financial blow. Combine this with inflation and keeping budgets in check becomes more important than ever. 

Here are 10 tips for reviving and refreshing your finances:

1. Update your income and expenses

By this time of year, many people will have received their annual increase. Have you adjusted your budget accordingly? If the last time you reviewed your budget was in January, consider the significant changes that have taken place since then, like the Vat increase and the numerous petrol price increases. An up-to-date budget gives you a good idea of where you need to save more, or where you now have a couple of rands free to pay off debt a bit faster.

2. Be smart with your spending

It’s not always easy to keep track of your spending, especially when making payments and purchases happens at the tap of a card or a click of the mouse. Luckily, advancements in technology have also made tracking your spending easy too. Take advantage are various budget planners and apps available like 22sevenMyFinancialLifeSpending Tracker.

 3. Make some changes behind the wheel

There’s nothing you can do about the petrol price increase but there are things you can do to help your tank go further. Did you know that at 110km/h your car uses up to 25% more fuel than it would cruising at a more moderate 90km/h? Add to this: keeping a safe following distance, avoiding harsh braking and acceleration, and regular vehicle maintenance checks, and you could reduce your fuel spend significantly.  

4. Update your insurance

Now is the perfect time to ensure that your home contents insurance is up-to-date. If you’ve bought new items for your home, the amount you’re currently insured for may not be sufficient and you could be underinsured. On the flipside, some items may have devalued, you may have sold items or downsized and may want to reduce your home contents cover, which could save you a substantial amount of money

5. Delete unnecessary and outdated fees

Are you paying subscription fees for magazines you don’t read? Membership fees for a gym you never go to? Fees for a bank account you no longer use? This is wasted money that could be going towards saving or paying off debt, so cancel these to free up extra cash.

6. Budget for debt repayments

From credit cards to store cards, it’s easy to get carried away buying on credit. Go through all your statements and pay off outstanding debts or at least put a plan in place to do so. It’s a good idea to pay off debt with the highest interest rate first. So if you have a mortgage bond at an interest rate of 10%, a retail card at a rate of 20% and a personal loan at a rate of 25%, pay off the loan first.

7. Kick bad habits

From piling up paperwork and not keeping accurate records, to slacking on saving, we’ve all done it from time to time but when it becomes a habit, it’s time to take action and make a change. So wherever there are areas to improve, like brushing up on your admin skills or revisiting your saving goals, there’s something that each of us can do to improve our financial health.

 8. Compromise and reprioritise

That pricey perfume, those designer sneakers, and those many meals out… they all add up and sometimes that leaves you making compromises where you shouldn’t. So to ensure you have enough money for the things you and your family need first, and then compromise on the things you want – find a more affordable fragrance, do without the sneakers or have less meals out a month.

 9. Reap from your rewards programmes

Many of us are part of loyalty programmes offered by entities from banks and supermarkets to healthcare providers. Understanding how to make the most out of these programmes is critical to really enjoying their benefits – from earning the most amount of points to receiving the highest possible discount or cash back. Read the terms and conditions and frequently asked questions on the relevant websites to ensure you know exactly how and when you should be rewarded.

10. Stick to your saving goals

Saving is hard but it’s not impossible!  There are many different ways to save from setting up a monthly debit order to an investment account and opening a tax-free savings account to increasing your pension fund contribution and requesting the 13th cheque option from your employer. It’s best to build savings into your budget as a non-negotiable monthly expense, which should help you to be more disciplined and save more.

Implementing simple changes like taking advantage of technology, kicking bad habits and saying goodbye to unnecessary expenses will go a long way to regaining and maintaining control of your budget – putting the spring back in your financial step.

 

Moneyweb.co.za

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South African’s abroad: Know your tax affairs

South African’s abroad: Know your tax affairs

Incorrect information and advice from tax practitioners, or in some cases South African Revenue Service (Sars) officials, has resulted in the misunderstanding of complex South African expatriate tax legislation, which has landed many South African in deep water with Sars.

This has led to many expats being under the incorrect impression that their tax affairs are in order, as a tax practitioner is handling their financial matters.

However, often further investigation reveals that tax submissions are in many cases incorrect, or at least partially so. This could lead to serious legal implications with Sars, should this not be rectified.

Common misconceptions 

Many expats are informed that should they meet a simple days-test (183-61 days) they are no longer required to file tax returns or do not need to declare their foreign income in South Africa. Many expats have therefore been incorrectly filling returns showing only South African sourced income; zero returns or in severe cases not filling returns at all.

If you are a South African working abroad and have not formally ceased your tax residency you are legally required to submit tax returns every year declaring your worldwide income. Should you then meet the requirements of section 10(1)(o)(ii) of the Income Tax Act No.58 of 1962 you will be able to exempt tax on your foreign earnings.

This section states: 
• 10(1) There shall be an exemption from normal tax- 
• (o) on any form of remuneration- 
• (ii) received or accrued to an employee during any year of assessment by way of any salary; leave pay; wage; overtime pay; bonus; gratuity; commission; fee; emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C in respect of services rendered outside the Republic by that employee or on behalf of any employer, if that employee was outside of the republic-
• (aa) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and 
• (bb) for a continuous period exceeding 60 full days during that period of 12 months 
• And those services were rendered during that period or periods

Meeting these requirements will afford you a full exemption on all foreign earned income during this period. However, as of March 1, 2020, an amendment made to section 10(1)(o)(ii) comes into effect, this places a R1 million cap per annum on the exemption. Thus, foreign income earned exceeding this cap will now be subject to tax in South Africa.

Sars won’t find out 

As of June 2017, South Africa joined the Common Reporting Standard (CRS), this was created to combat tax evasion and is the sharing of tax and financial information on a global scale.

Currently there are 97 countries who have already joined the CRS, which includes the European Union; United Kingdom; Australia; Canada; China; Kuwait; New Zealand; Qatar; Saudi Arabia and the United Arab Emirates. Thus, all your global earnings are now being shared from various financial institutions and revenue authorities globally.

This includes:

• Names, addresses, tax numbers and identification numbers relevant to place of birth.

• Bank account numbers.

• Account balances for the relevant calendar year.

• Any capital gains acquired from the sale of properties or investments.

Therefore, when Sars cross references the information they are receiving from the CRS with what you have declared on your tax returns and the two do not align, expats could face implications ranging from penalties to criminal prosecution for tax evasion.

Solutions

Be prudent in your approach to your tax affairs, explore your options and don’t take any information at face value as ignorance is not a valid or legal defence. Seek professional advice from experts in the field of expatriate tax law and ensure that you understand the requirements that affect you.

An incorrect IRP5 could jeopardise foreign income, travel tax claims

An incorrect IRP5 could jeopardise foreign income, travel tax claims

Most individual taxpayers tend to only check their tax certificates (IRP5s) when something goes wrong after submitting their annual tax returns.

In most instances, taxpayers will not be allowed deductions or exemptions if there are errors. According to tax commentators, the most common errors are due to incorrect use of source codes.

Employers are required to correct the errors and to resubmit their IRP5s to the South African Revenue Service (Sars).

This not only delays tax but, says Craig Rocher, tax specialist at Tax Consulting, it may increase the risk of audits and verifications for employees.

The use of wrong source codes has especially been experienced with travel reimbursements and the foreign remuneration exemption.

Daylan Staude, tax lecturer at the University of Fort Hare, says when the IRP5 is coded incorrectly, employees may be deprived of the opportunity to claim relevant allowed deductible expenses.

It is a requirement that the employer complete the IRP5 reconciliation and submit it to Sars before issuing it to their employees.

“This is a little concerning as employees are only provided with an opportunity to check their IRP5s after submission to Sars. Practically, it would make more sense that employees are able to check it before the IRP5 reconciliation is performed and submitted to Sars,” says Staude.

Piet Nel, head of the tax faculty at the South African Institute of Tax Professionals (Sait), says although employees should check their tax certificates, most neglect to do so. He says the codes are available on the Sars website.

A problem identified by several tax commentators relates to the use of the incorrect source code for the tax exemption on foreign income.

Rocher says if the incorrect code is used, the taxpayer will not receive the tax exemption on the income. 
He says that if the employer disclosed all the income (local and foreign earned income) under one code, and it included the foreign income that could qualify as exempt income, the IRP5 has to be corrected.

In many instances this is only realised when the unsuspecting taxpayer receives a huge assessment for the tax exempt income earned abroad.

Sars has become strict in recent years in terms of corrections on the IRP5. Previously the taxpayer could make the change electronically, but this was changed in 2016 to ensure the employer has insight into the change, says Rocher.

NK Accounting Services owner and Sait regional representative Nikki Kennedy, says it is important that the employer indicate the portion of remuneration relating to foreign services. 

To qualify for an exemption from South African income tax the employee has to be outside the country for more than 183 days over a 12-month period, with at least one period of 60 consecutive days within the same 12-month period. 

“If the employer uses one source code (local income) for all the remuneration (local and foreign), instead of splitting out the foreign income under the correct foreign income source code, it makes it very difficult for the qualifying employee to be able to receive the exemption for the foreign income,” she says.

Another common error has been with the incorrect use of source codes when employers have reimbursed employees for travel expenses.

Rocher says the Income Tax Act does not specify the reimbursement rate, however Sars treats amounts in excess of its rate (R3.61 p/km) as taxable at normal income tax rates.

Kennedy says if the rate exceeded the Sars rate and the business travel exceeded 12 000 km then the submission of a logbook is compulsory.

She says that there is a reprieve offered by Sars from the March 1, 2018 tax year where there is no longer a limit on kilometres travelled, bearing in mind that the rate should not exceed the Sars allowable rate per kilometre.

Kennedy says that if the employer used the wrong source this will prolong the finalisation of the assessment.

NomadIQ’s managing partner Barendine Duvenhage, says employees should understand what rate they are being reimbursed at.

If it is higher than R3.61 p/km, they should expect to see two lines on their payslips – one indicating the amount that was reimbursed at the Sars rate and the second line showing the amount that was above the reimbursement rate that will be fully taxable.

The employee can claim a tax deduction for the excess portion when submitting his tax return. However, receiving a refund will depend on the value of the car and the total amount of travel done.

Duvenhage says it is imperative to keep a logbook.

Tax commentators say it is generally not easy for ordinary taxpayers to spot mistakes on an IRP5. However, a good start is to compare the year to date totals on various items on the last payslip in a tax year with the amounts on the IRP5.

Duvenhage says some employers may group certain payments together on the IRP5 making reconciliation difficult. “However, if the totals match, it is a good start.”

She advises people to contact their payroll officers when they cannot reconcile amounts.

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‘Sars regressed after new operating model was implemented’

Two years after the introduction of a new operating model at the South African Revenue Service (Sars) in 2014, it became clear that the revenue authority has regressed and that its once enviable reputation has been badly tarnished, the Nugent Commission of Inquiry into Tax Administration and Governance has heard.

President Cyril Ramaphosa appointed the commission in May after an announcement in his State of the Nation Address that he will take steps to stabilise Sars, restore its credibility and strengthen its capacity to meet revenue targets. The commission resumed its public hearings on Tuesday.

Sars group executive for research, Dr Randall Carolissen, told the inquiry that tax buoyancy – the performance of revenue growth in relation to economy growth – has retreated from an average of 1.2 prior to 2016 to 1.

“Taxpayer compliance continue to slip with the number of outstanding returns growing to about 57 million.”

Carolissen said Sars’s debt book grew from roughly R85 billion since 2015 to about R135 billion (latest available figure). At the same time, its credit book moved from R40 billion in April 2013 to R55 billion at the end of 2016. It spiked to over R70 billion in April 2015 (at highest point).

The contribution of the large business centre to total revenue also slipped from 34.8% in 2015 to 32.2% in 2017. The large business has become fragmented as part of the new operating model.

While Carolissen acknowledged that the economic climate and policy changes also affected revenue collection, and not only a slippage in compliance and internal inefficiencies at Sars, he said there were indications that the model has put Sars backwards from a revenue perspective.

He said contrary to the motivation put forward for the review of the Sars operating model, the revenue authority enjoyed recognition as a world class institution and a premier choice of employment.

It emerged during Carolissen’s testimony that consultancy, Bain, proposed four new operating models to Sars Commissioner, Tom Moyane, but that the model that was finally implemented deviated from Bain’s proposals. It is not yet clear why this happened, but Carolissen said there should be people at Sars that could provide insight into the decision.

“That is the problem,” Judge Robert Nugent, who chairs the inquiry, replied. “There are, I’m sure, people in Sars who are able to answer that. The question is whether they are going to tell me and my colleagues.”

Nugent said it was a major hindrance to the commission that people felt they would pay a price for testifying.

The judge said he feared that they would have to conduct more and more in camera anonymous hearings but stressed that it was important to find an answer to the question.

Carolissen believes Bain should have distanced itself from the drastic departure from their proposed operating model options or cautioned against the implementation thereof as it violated at least one design principle – that of balance in the organisation.

Asked whether he believed Sars should continue with the current operating model, Carolissen said he would rather return to the previous successful strategic path and complement it with skills that would be relevant to Sars in the digital age and allow for some renewal.  

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If no tax debt, SARS must pay refund: notable judgment on Tax Administration Act’s refund provisions

tax

Introduction

Taxpayers often claim that the South African Revenue Service (SARS) delays the payment of refunds. In light of this observation, the judgment in Top Watch (Pty) Ltd v The Commissioner of the South African Revenue Service is particularly notable.(1)

The judgment dealt with the pertinent and relevant issue of whether the respondent, SARS, was legally justified in refusing to pay certain value added tax (VAT) refunds to the applicant (the taxpayer) on the grounds that the he owed an income tax debt, which SARS alleged was due and payable.

Facts

The taxpayer claimed that VAT refunds were due to him in respect of the February 2014, July 2014, August 2014 and July 2017 VAT periods. However, in respect of the July 2017 VAT period, SARS alleged that no refund was due; instead, it held that the taxpayer owed an amount. Although SARS conceded that the VAT refunds for the February 2014, July 2014 and August 2014 VAT periods were due and payable, it refused to authorise payment of the refunds.

Pretorius, a legal specialist employed by SARS, deposed to an affidavit in which he alleged that the taxpayer had been assessed for an income tax liability of approximately R1.76 million, which far exceeded the refund amounts due to the taxpayer. To substantiate this allegation, Pretorius relied on the supporting affidavit of Oberholzer, a SARS operational specialist, who stated that he had:

  • audited the taxpayer between 25 November 2016 and 8 March 2018 for income tax in respect of the March 2012 to February 2015 period; and
  • concluded that the taxpayer owed approximately R1.76 million.

To substantiate this allegation, Oberholzer cited a document attached as POC1, which the court noted was almost illegible. During argument, the court was told that the document was an extract of SARS’s accounting data system of which the heading read “Assessed account – remittance data view”.

Decision

Based on the facts set out above, SARS contended that it had been legally correct to refuse to pay the VAT refunds, as the taxpayer’s income tax liability had been set-off against them. The taxpayer argued that SARS’s stance was wrong in law, but that its argument acknowledged that the VAT refunds were due and payable, as this was a pre-condition for set-off, with which the court agreed.

The court considered the provisions in the Tax Administration Act (28/2011) dealing with refunds. Sections 190(1) and (2) of the act state that SARS must pay a refund if:

  • a person is entitled to it under a tax act; and
  • the amount refundable is reflected in an assessment unless a verification, inspection or audit of the refund is being conducted under Chapter 5 of the Tax Administration Act.

Based on these provisions, the taxpayer argued that SARS must pay the VAT refunds and raised two arguments in this regard. First, it argued that the “verification, inspection or audit” referred to in Section 190(2) applies only to a refund itself and not to all aspects of a person’s tax affairs. Therefore, outstanding income tax debt cannot prevent payment of VAT refunds due to the taxpayer.

Second, the taxpayer argued that no tax debt was established on the papers. In this regard, the court referred to Section 191 of the Tax Administration Act, which states that if a taxpayer has an outstanding tax debt, an amount that is refundable under Section 190 must be “treated as a payment by the taxpayer that is recorded in the taxpayer’s account under Section 165, to the extent of the amount outstanding, and any remaining amount must be set off against any outstanding debt under the Customs and Excise Act”.

The taxpayer argued that the POC1 document was not an assessment and that only an assessment that has been communicated to a taxpayer is eligible for set-off. In this regard, the court considered Section 169(1) of the Tax Administration Act, which states that “an amount of tax due or payable in terms of a tax Act is a tax debt due to SARS”. It also considered various Supreme Court of Appeal judgments on what constitutes an ‘assessment’ and a ‘tax debt’. One of these judgments held that an amount of tax cannot be regarded as having become recoverable through judicial intervention until the taxpayer has been informed of the assessment.

The court held that set-off can take place only where:

  • there are debts between persons who have reciprocal debts, which are both due and payable; and
  • both debts have been liquidated.

As the alleged income tax liability was not captured in an assessment that had been communicated to the taxpayer, there was no proof that the income tax debt existed and, therefore, set-off could not take place.

The court concluded that SARS must pay the taxpayer’s claim for payment of the VAT refunds for the February 2014, June 2014 and August 2014 VAT periods, including interest on these amounts. The court also ordered SARS to pay the taxpayer’s costs.

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Rand needn’t worry the Sarb, study concludes

Rand needn’t worry the Sarb, study concludes

Accounting

Who’s afraid of a weaker rand? Not the South African Reserve Bank (Sarb), according to a new study examining the pass-through of currency fluctuations to inflation.

The authors set out to find out why the correlation between the exchange rate and price growth has weakened in the past two decades, which coincided with South Africa adopting an inflation-targeting policy. They conclude that the central bank’s credibility is the main determinant.

“Improving monetary-policy credibility has helped reduce the exchange rate pass-through to inflation,” wrote Alain Kabundi, an economist at the World Bank, and Montfort Mlachila, the International Monetary Fund’s senior representative in the country, wrote in the paper published on the Reserve Bank’s website. “This is quite a remarkable achievement given the numerous shocks — including large food and fuel-price shocks, the global financial crisis, sharp fluctuations in the rand — that the economy has gone through.” 

The study has implications for countries like Turkey, where political interference in monetary policy has undermined the independence of the central bank, sending the lira to a record low and inflation to the highest level in 15 years. In South Africa, by contrast, annual inflation has been within the target band for more than a year even as the rand depreciated.

“This finding is important because monetary-policy authorities do not have to worry to a great degree about exchange-rate fluctuations — over which they have made a policy choice not to influence — when deciding on monetary-policy actions,” the authors wrote. “The authorities can therefore mainly focus on domestic factors over which they have greater control.”

South Africa’s central bank doesn’t target a level for the rand, and has repeatedly said it won’t take policy action in support of the currency unless weakness feeds through to wider inflation. It cut its policy rate twice in the past 13 months, without pushing inflation above the 6% upper limit of its target range.

In Turkey, authorities have had to raise interest rates and take other measures to prop up the currency, with limited success. Investors are pushing for further action, including significant rate increases and even capital controls, as the lira’s meltdown hurts consumers’ sentiment and wallets and increases the debt burden of companies that borrowed heavily in dollars.

© 2018 Bloomberg

THE NEW TRAVEL ALLOWANCES: HOW DO THEY AFFECT YOU AND ARE THEY WORKING?

For the new tax year changes were made to how we are reimbursed for business travelling expenses.


Why did SARS make changes and to which type of travel allowance?

Travel allowances have been around for a long time. Initially, they gave considerable benefits to people earning salaries as the fringe benefits tax was less than the economic benefit. SARS in trying to close this gap have made many alterations to travel allowances which have made them quite complex.

There are three types of allowance compensating employees for business travel:
  1. Where the employer provides a company-owned car for the employee

  2. A travel allowance is given to some staff members whereby the employee uses his or her own vehicle

  3. A reimbursement of business travel expenses where the employee is paid a rate per kilometre travelled.
In practice, the first two methods involve a considerable amount of administration and estimation. For example, if a company pays out a travel allowance, it has to work out the cost of a vehicle and the running costs. Employees are given allowances according to their job status and thus the employer will usually offer a different allowance to, say, a junior manager versus a senior manager. The employer also has to work out how much business mileage the employee will do and deduct PAYE accordingly. The employee has to keep a logbook and has to complete the travel allowance section when doing his or her Income Tax return.

The third method has until now only applied if the employee did 12,000 kilometres or less business travel during the tax year.  The company paid a per-kilometre rate, usually the SARS rate, currently R3.61 per kilometre. If the SARS rate was paid, the process was simple and no PAYE was deducted. If however the employer paid more than the SARS rate or paid out an actual allowance, then the difference was taxed and PAYE was deducted.   

The problem with this third method was it was limited to staff doing 12,000 or less business travel kilometres.

The 2018/2019 changes are to the third method above and are intended to simplify matters for businesses, employees and SARS.


The changes made  

SARS have scrapped the 12,000 p.a. kilometre cap and have encouraged employers to only pay out the SARS kilometre rate (i.e. to do away with the first two methods above). This will considerably simplify things for both sides as both employer and employee will have less administration workload. It will also make assessing taxes easier for SARS.


Examples best illustrate this – 

Example 1:  SARS rate of R3.61 per kilometre used to reimburse travel expenses.

An employee does 30,000 kilometres business travel in the 2018/2019 year

He gets paid out: R108,300. (30,000 kilometres X 3.61 a kilometre)

PAYE: Nil.

Note: the employee needs to keep a logbook to justify the 30,000 kilometres business travel.


Example 2: The employee does 30,000 kilometres business travel and is paid R5 per kilometre plus is given an allowance of R10,000.

PAYE is deducted on the difference between R5-00 and the SARS rate of R3-61 

or 

30,000 X R1-39 = R41,700

Plus R10,000  

Total R51,700 is added to the employee’s taxable income and PAYE is deducted as per the tax tables. 

Note: As part of the PAYE process, Skills Development Levy (SDL) and Unemployment insurance (UIF) are also deducted.

The employee will have to complete the travel allowance section in his or her Income Tax return and will either get a refund or have to pay in additional tax.

In the event that the employee gets a refund of some or all the PAYE paid, the company will not be able to get back the additional SDL and UIF it has paid (the company picks up half of the UIF cost and all of the SDL cost). This is because there is no mechanism to claw back these amounts if the employee gets a refund when doing his or her Income Tax return.

In summary, the SARS revised allowance is clearly easier for all parties. However employees will almost certainly resist using this method, particularly the more senior employees who will see their travel allowance eroded.

Time will tell how successful the revised travel allowance will be.   

Rand rallies as dollar stalls, stocks recover

Rand rallies as dollar stalls, stocks recover

south africa

The rand gained on Friday as US job growth slowed more than expected, easing pressure on emerging market currencies that have retreated this week on likely return of a greenback rally.

At 1530 GMT the rand was 1.25% firmer at 13.28, revved up after the release of the US nonfarm payrolls data.

The softer-than-anticipated data pushed the dollar lower, pausing a four-day rally spurred by a bout of risk aversion following US sanctions on Turkey, another wave of trade war concerns, and China’s decision to further devalue its currency.

While the soft US jobs figures helped the rand claw back losses following President Cyril Ramaphosa’s Tuesday speech declaring the ruling party would press ahead with amending the constitution to speed-up land reform, traders said the rand was set to weaken next week.

“As the final move in the dollar plays out the USDZAR will rally to 13.61 with an extended rally back to the 13.90’s top,” analysts at Nedbank Neels Heyneke and Mehul Daya said in a note.

The rand tested the 200-week moving average at 13.40, indicating an overall long-term trend weaker.

Bonds were firmer, with the yield on the benchmark paper due in 2026 down 0.5 basis points to 8.68%.

On the bourse, the market ended Friday over one% higher, led by advancers such as packaging company Mondi and diversified precious metals producer Sibanye .

The All-share index was up 1.15% to 57,118 points while the top 40 index rose by 1.29% to 50,988 points.

Mondi jumped almost 6% after it reported a 25% increase in half-year underlying profit on Friday..

Sibanye-Stillwater said on Friday it expected to swing to a half-year profit from a steep loss last year, boosted by its platinum business and the inclusion of its US operations.

Shares in Sibanye closed higher by 5.30% to R8.71.