Author: Sibusiso Thungo, Tax Specialist at the South African Institute of Professional Accountants
 
The eagerly awaited report by the Office of the Tax Ombud on the delay in the payment of refunds by the South African Revenue Service (SARS) is a victory for individuals and companies taxpayers.
 
The Ombud initiated its investigation after receiving 500 complaints relating to the delay in payments within a period of six months. It found the number of complaints sufficient to initiate the investigation into the systemic nature of the complaints.
 
SAIPA praises the legislature for recently amending the Tax Administration Act (TAA) to allow the Ombud’s office to investigate complaints which indicate that there is a systemic problem.
 
The Ombud’s report found the current system allows for SARS to unduly delay the payment of verified refunds to taxpayers in certain circumstances. Taxpayers argued that, in this respect, the tax collection system was being implemented unfairly by SARS.
 
This resulted in financial hardships to them and, in some instances, the near collapse of their businesses; in others, loss of jobs ensued.
 
Complaints by taxpayers are not new
SAIPA welcomes the report, although the issues raised in the report are not new. It has, however finally been addressed by the Ombud. Industry bodies such as SAIPA, the South African Institute of Chartered Accountants (SAICA) and the South African Institute of Tax Professionals (SAIT) have raised these issues with SARS in the past.  Their concerns were never sufficiently addressed as they should have been.
 
The Ombud’s report should serve as a lesson to SARS to take matters - which are raised with them - seriously and not to wait until it becomes necessary to resort to the Ombud to investigate its conduct. This is an extremely important report, and the findings and recommendations cannot be ignored.
 
The complaints have been raised by taxpayers who have endured hardship and who took refuge with the Ombud to resolve the matter. The fact that some taxpayers did not want to be identified for fear of intimidation does not take away from the fact that their complaints were justified.
 
The report clearly illustrates that SARS has to improve its systems and that some of its internal processes will have to be revisited. SARS is being guided by the TAA and it is clearly in a position to apply the act correctly. The Ombud found that SARS “acted outside of the legal framework” in some instances, which caused financial hardship to taxpayers. The financial hardship was found to be “drastic’’ in some instances due to SARS failure to pay the refunds on time.
 
Matters of concern
One of the practices which was highlighted in the report referred to the raising of assessments to reduce the overpayment of tax (credits) to zero for the 2016 and 2017 financial years.
 
The Ombud said the information provided by SARS did not give a complete picture of the full financial impact this practice has had on refunds. The practice of raising assessments solely to absorb credits simply because a taxpayer has not explained an overpayment is of grave concern.
 
Another complaint which has been raised on numerous occasions related to the verification of bank details. Although the verification has been concluded, SARS still waited 21 days before paying legitimate refunds.  As much as we support any SARS fight against fraud, however using unfair practises cannot be allowed to continue.
 
SAIPA finds it concerning that in some instances SARS did not respond or provide comments to the office of the Tax Ombud, and in other instances they had concern with proving responses on the findings related to the complaints wherein no illustrated cases were found.
 
It would have been prudent for the tax authority to respond or to find solutions to the issues raised by the Ombud. In my view SARS has been more defensive in its responses, than trying to resolve the issues. The report is clearly not about pointing fingers, but to improve current systems and to resolve issues which have been raised in many instances by different stakeholders and taxpayers.
 
True independence of Tax Ombud
This investigation has offered taxpayers a much better understanding of the role of the Tax Ombud. This has without a doubt confirmed the independence of Tax Ombud Bernard Ngoepe and his office.
 
The outcome will surely boost taxpayers’ confidence in the office. It will also boost their trust that they are being protected.
 
It is a victory for taxpayer and for companies who have been placed in financial distress, despite being complaint. The report ensures the fair treatment of taxpayers.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Author: Ragiema Thokan-Mahomed, Legal, Ethics and Compliance Executive,
South African Institute of Professional Accountants (SAIPA)  
 
The increasing number of matters involving fraud, corruption and money laundering emphasises the role of the professional accountant to report any non-compliance with laws and regulations.
 
In July this year the International Ethics Standards Board for Accountants, established by the International Federation of Accountants (IFAC), introduced a new section to their code of ethics. The draft was out and available since 2016.
 
Non-compliance goes far beyond reportable irregularities, and includes actual or suspected non-compliance with data protection, securities trading, terrorist financing and environmental protection.
 
The newly added Section 360 in the code of ethics guides accountants to act in the public’s interest when they become aware, or suspect a NOCLAR (non-compliance with laws and regulations)
 
Roles and responsibilities of professional accountants
The code states that a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest (section 100.1 of the IESBA).
 
When responding to a NOCLAR, the professional accountant is required to comply with the fundamental principles of integrity, objectivity, professional competence and due care and professional behaviour.
 
Once they become aware of the NOCLAR they have to report it to their direct superior, and if they are the most senior person they have to consult with the board of directors or anybody who is involved in corporate governance in the organization.
 
The responsible people must be allowed time to rectify, remediate or mitigate the consequences of the identified or suspected non-compliance as long as there is no urgency in the matter.
 
SAIPA advises accountants to follow the internal route first. If they feel there is insufficient action to rectify the non-compliance, they can approach the regional forums and their professional bodies. If there still remain unease they should consult legal counsel.
 
The code acknowledges that a senior professional accountant is expected to apply knowledge, professional judgment and expertise. However, he is not expected to have a level of understanding of laws and regulations beyond that which is required for the professional accountant’s role within the employing organisation.
 
 
The newly added section provides accountants with an override to the principle of confidentiality when reporting the non-compliance is in the best interest of the public. Once they have taken appropriate action, they must feel comfortable that the noncompliance has been fully dealt with and remember to document everything.
 
Dealing with threats and intimidation
Professional accountants need to maintain their independence and objectivity, and not succumb to intimidation or threats when they encounter and report non-compliance.
 
South African legislation supports this professional duty in the form of the Protected Disclosures Act.
 
The code states that where it is not possible to reduce the threat to an acceptable level, a professional accountant shall refuse to remain associated with information that is considered misleading or may cancel their mandate to ensure that the code is upheld
 
The Letter of Engagement should reflect clearly that the client’s information will be held confidential, but if there is a legal or professional duty to disclose non-compliance the professional accountant will not hesitate to do so. This sets the ground rules for the client to understand that the professional accountant will not tolerate non-compliance if it impacts on the public’s best interest. The accountant has a trained eye, and can determine if something seems untoward.
 
Meticulous record-keeping
It is critical for the professional accountant to meticulously document what he has done to address the non-compliance. This will act as proof that he adhered to the requirements and responsibilities set out in the new section of the code.
 
It is advisable to document the nature of the matter, the results of discussions with a superior or, and where applicable, those charged with governance.
 
It is important to document the response of the accountant’s superior, the courses of action taken by the professional accountant and the judgments made and the decisions that were taken.
 
The International Ethics Standards Board for Accountants:
https://www.saipa.co.za/wp-content/uploads/2017/01/2016-IESBA-Handbook.pdf

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

There has been a marked increased in the number of schools and learners participating in this year’s National Accounting Olympiad due to a growing interest in the Accountancy Profession as well as massive awareness drive initiated by the South African Institute of Professional Accountants (SAIPA), says Zobuzwe Ngobese, Marketing and Business Development Executive at SAIPA.
 
“The increase from 310 to 390 schools and 3510 to 7069 learners is quite encouraging and is also due to the fact that in 2017 we introduced the Olympiad to grade 11 for the first time. Next year we want to reach even more schools to make the subject of accounting popular again because our economy needs more accountants in order to grow,” he says.
 
The top four Grade 12 learners nationally, in no specific order, are Adam Melnick from Yeshiva College in Gauteng, Juanè Cronjè from Die Hoërskool DF Malan in the Western Cape, Philip Visagè from Hugenote High School also in the Western Cape and Sara Saleh of Lenasia Muslim School in Gauteng.
 
Gauteng had the most schools participating in the Olympiad, accounting for 145 of the 390 schools that took part.
 
SAIPA has this year opened the competition to Grade 11 pupils for the first time since the inception of the competition in 2002, with the top five national candidates in this division, in no specific order, being Alet Muller from Hoër Meisieskool Bloemhof in the Western Cape, Deandre De Meyer of Stellenberg High School located in the Western Cape, Felicia Makondo of EPP Mhinga Secondary School in Limpopo, Nabeel Fazluddin from King Edward VII School in Gauteng and Sean Scorer from Amanzimtoti High School          in KwaZulu-Natal.
 
On October 10th, SAIPA will be announcing the Grade 11 and Grade 12 winners at a Gala Awards evening in Johannesburg.
 
Broadening the scope
In addition to including Grade 11 pupils in the competition, SAIPA has also partnered with Gauteng with Future Forward, which specialises in developing youth orientated intervention programs. The institute’s regional administrators have this year purposefully targeted additional schools in their areas.
 
The aim with the Olympiad, which is open to pupils studying Accountancy or Mathematics in private and public schools, is to make Accounting a subject of choice for learners and to expose them as early as possible to the Accountancy profession, says Ngobese.
 
Performance indicators
The competition is divided into two rounds and Grade 11 pupils had to achieve a score of 60% or more to advance to the second round and Grade 12 pupils had to score 65% or more to qualify for writing the second paper.
 
Out of the 1 750 learners in Grade 11, 255 progressed to the second round and 1 095 out of 5 319 in Grade 12 went on to write the second paper. The overall result for the 5 319 learners in Grade 12 shows that the majority – 2 495 learners - scored 40% or more.
 
In the case of Grade 11 pupils, only 14.5% of the 1 750 pupils scored 60% or more in the final round. The majority – 955 pupils – scored 40% or more.
 
The top performers will receive a bursary, valued between R10 000 and R25 000, which is paid to the tertiary institution of their choice.
 
“This year the bursary is subject to the recipients pursuing studies in the Accountancy profession. The main aim with the competition is to grow the numbers in the profession,” remarks Ngobese.
 
Maintaining high standards
Ngobese says both papers in the competition have been moderated. “They are challenging, but doable,” he says, adding that the results of the Grade 11 pupils are a reflection of the fact that this is the first time they have been exposed to the competition.
 
“We are confident that the results will improve. The Grade 12 pupils have had access to a study guide, compiled by SAIPA, with past examination papers. The Grade 11 pupils will have access to that in the Olympiads going forward.”
 
Ngobese notes that part of SAIPA’s future strategy is to open the Olympiad to pupils from Grade 10 to Grade 12. He says in many instances pupils have already made their career decisions when they reach their final school year.
 
“If we can expose pupils as early as possible to Accountancy as a profession the more likely it is that they will choose it as their career path.”
 
Accounting is a critical skill and with the threat of Mathematics no longer being compulsory at high school, the numbers may start dwindling, says Ngobese.

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Author: Faith Ngwenya, Technical Executive at the South African Institute of Professional Accountants
 
Government faces two key issues: severe and worsening unemployment on the one hand, and a growing gap between what the fiscus needs and the tax it can collect. Taking decisive action to grow the SME sector has the potential to resolve, at least partially, both issues.
 
I often think that a country’s tax regime tells the real story about its fiscal health and its priorities. With the Davis Commission in full swing, and tax revenues under pressure as the economy slows and with no reduction in the calls on the fiscus, that story is not a particularly inspiring one at present.
 
Heightened political tension and the growing realisation that a large proportion of the tax money collected over the past two decades, as well as the multi-faceted economic transformation programme, have been “captured” have raised the stakes more than somewhat.
 
It’s against this backdrop that the forthcoming Tax Indaba will meet. It promises to be an interesting meeting, as stakeholders debate a way forward. One of the most pressing topics will be how to strike the right balance between helping SARS close the gap between what it needs to collect and what it can collect on the one hand, and how to stimulate the kind of economic growth that will produce the sustainable jobs we need to reduce poverty. I am looking forward to being part of a panel that will wrestle with this challenge.
 
The panel discussion is titled Small and Medium Businesses: Engine for Growth Versus the Tax Gap. It goes right to heart of the issue because, as researchers believe, SMEs account for up to “91% of formalised businesses, provide employment to about 60% of the labour force and total economic output accounts for roughly 34% of GDP”, to quote The Banking Association South Africa.[1]
 
Government has recognised the importance of SMEs by creating a Ministry for Small Business, and putting several initiatives in place—but still our SME sector is not vigorous, and it’s not generating the jobs we need for a strong economy and a stable society. I increasingly feel that, as a country, we must stop fooling ourselves: everything is not alright and we need to take more decisive action to support SME growth. That’s the only way we will grow our GDP and create jobs—and incidentally bridge the tax gap that the fiscus currently faces.
 
First things first
One important principle we need to accept is that growth has to come first, and tax revenues will follow. This requires the fiscal authorities to take a longer-term view, sacrificing short-term tax revenue in order to expand the tax base sustainably. It often seems as though Government initiatives are not harmonised, and even seem to be pulling in different directions.
 
For example, Government has introduced the Small Business Corporate Tax rate that allows qualifying SMEs to be taxed at a lower rate than the 28 percent normally levied on companies. It has also initiated the Employment Tax Incentive (ETI) to encourage companies to employ young people in order to give them the vital work experience they need to integrate into the formal economy.
 
The lower tax rate for SMEs is obviously a good thing, and so is the ETI, but then one finds that the ETI only applies to very low wage earners and lasts for only 24 months. Isn’t that really incentivising companies to keep wages down? It certainly does not support the creation of long-term employment. Research shows that South Africa has one of the highest failure rates of small businesses.
 
If we truly want to help them succeed, and fast-track their ability to create jobs, then the fiscus must be prepared to sacrifice some tax revenue through mechanisms like the ETI over the medium term to ensure that we maximise the number of sustainable, higher wage jobs created. This will also culminate in a more stable, broader tax base.
 
Indeed, according to research by The Small Enterprise Development Agency (SEDA) in 2007, 75 percent of new SMEs fail in the first year, one of the highest rates in the world.[2]
With an unemployment rate at its highest in 13 years, and the local economy in recession even as the global economy is starting to recover, I would argue that we need to take decisive, concerted action. Integrated, well-designed tax relief for small businesses is a vital ingredient of any plan to boost the economy, create sustainable jobs and ultimately close the tax gap.
 
The Tax Indaba will take place on 11-15 September 2017 at the Sandton Convention Centre, in Johannesburg. The panel Small and Medium Businesses: Engine for Growth Versus the Tax Gap will take place on the second day of the event from 09:45 to 10:30.
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants