Authored by: Ettiene Retief, Chairman of the National Tax and SARS Committee at the South African Institute of Professional Accountants  
 
The decision by the South African Revenue Service (SARS) to re-establish its Large Business Centre (LBC) will undoubtedly ease the administrative and compliance burden of big business and high net-worth individuals.
 
It will also enhance tax collections that have fallen sharply since the centre was dismantled in 2015 following major restructuring under the reign of suspended commissioner Tom Moyane.
 
Under the restructured business model, currently the focus of the Nugent commission of inquiry into governance and administration at the tax agency, the LBC was systematically dismantled to “eliminate duplication and improve efficiencies”, SARS said at the time.
 
The impact of the dismantled LBC
The tax affairs of large corporates and high net-worth individuals are highly complex. Their risk profiles differ vastly from ordinary taxpayers. The potential loss to the fiscus is substantial if they are not managed properly.
 
Before the LBC was dismantled it was responsible for the collection of more than 30% of total tax collections. This included individual income tax, corporate income tax, Value Added Tax, employee taxes, dividends tax, donations tax and royalties tax.
 
The dismantling of the centre led to a decline in the ability of SARS to collect what was due to the fiscus. Concerns were also raised about a decline in compliance. The “one-stop-shop” for large businesses was gone, leaving multi-million-rand enterprises in the same position as ordinary taxpayers.
 
This had a major impact on the way they had to deal with complex issues, the manner and time in which queries was solved, audits conducted, and disputes resolved.
 
Compliance, collections and enforcement  
When the LBC was established in 2004 the aim was to encourage compliance, to ensure responsible enforcement and to offer specialised and sector specific expertise to large businesses.
 
Sector specific expertise was developed in the most crucial sectors in the economy, including financial services, construction, mining and agriculture. The scope of the LBC covered listed and unlisted companies, parastatals and high net worth individuals. Expertise in highly complex tax legislation, notably transfer pricing, was developed to ensure that revenue is taxed where it is generated.
 
The expertise in the LBC was not only in terms of the interpretation and implementation of tax legislation, but also included expert knowledge of the businesses in the different economic sectors.
 
This assisted hugely with greater administrative knowledge, better risk-profiling in terms of audits, and better audit and dispute outcomes.  The LBC ensured that there was one dedicated relationship manager which dealt with clients within specific sectors. This meant that a company raising a specific issue or query with SARS were dealing with the same individuals, who not only understood the essence of the issue, but was able to give feedback to how the matter was being dealt with.
 
The dismantling led to much of the expertise being lost to SARS. An exodus of expertise followed the restructuring process, which was done by the consultancy firm Bain at a cost of more than R160m.
 
Pivotal role of the LBC
The announcement by Acting commissioner Mark Kingon to re-instate the LBC, as well as the Illicit Economy Team, must be welcomed. The acting commissioner said in his statement, announcing the move, that it was based on the “pivotal role” these units play in its service to large corporate taxpayers, and in fighting illicit trade in the country.
 
SAIPA supports the move to re-establish the LBC.
 
There is a deep understanding of the time and effort it will take to rebuild the capacity that existed before the dismantling of the units. However, this will certain increase better administrative outcomes, faster turnaround times and better compliance, audit results and dispute resolution.
 
Although SARS has not put a timeline on when the units will be reinstituted, the fact that dedicated teams have already started the process, is encouraging.
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
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Amid recent media reports of the South African Revenue Service uncovering a trend of non-compliance among tax practitioners in the country, the South African Institute of Professional Accountants (SAIPA) has urged its tax practicing members to annually submit their tax clearance certificates, along with a declaration that they have not been found guilty of any criminal offences; and comply with the required continuing professional development (CPD).
 
SAIPA Technical Executive Faith Ngwenya says failure to comply with these requirements means the Institute will not be able to activate a practitioner as a member, thus not being able to service their clients for tax purposes.
 
The Tax Administration Act (TAA) requires since 2013 that tax practitioners register with a recognised controlling body and the South African Revenue Service (SARS).
 
To register a practitioner must belong to or fall under the jurisdiction of a recognised controlling body, have the minimum qualifications and experience set by the controlling body and have no criminal convictions for certain offences set out in the act.
 
Threat of deregistration
National Treasury proposed in the February 2018 budget an amendment to the TAA to have non-compliant tax practitioners deregistered. Treasury said if a practitioner has not complied on a continuous or repetitive basis and does not correct their behaviour after being notified by SARS, they will be deregistered as a practitioner.
 
In recent weeks, SARS held a meeting with the leadership of the recognised controlling bodies and proposed a two-day workshop to address some of the issues raised during the meeting, including the deregistration of tax practitioners, says Ngwenya.
 
“Deregistration is not happening yet, and the process of how it will be done must still be developed.”
 
Whilst it remains unclear how many of our members are non-compliant from the SARS side, SAIPA has already excluded +/- 1 000 members from the list of tax practitioners in good standing as they have not met our annual compliance test which includes payment of their subscription fees, tax clearance status, criminal record declaration and compliance with CPD.  
 
Impact of deregistration
A member who has been deregistered or is not activated as a member of SAIPA due to non-compliance will not be able to offer tax services.
 
One of the complaints that SAIPA receives from members involves the withholding of taxpayer profiles by the former tax practitioner when a new one has been engaged by the taxpayer. Ngwenya adds that the Institute’s legal and compliance division will investigate these complaints.
 
She notes that practitioners are required to release the profile once the taxpayer has switched to a new practitioner. In some cases, they decline to release the taxpayer’s profile due to, amongst others, alleged non-payment for services rendered. This process can be extremely frustrating for taxpayers.
 
Area of concern
Ngwenya says although SAIPA and other recognised controlling bodies are required to meet stringent registration requirements, tax practitioners who are not registered still slip through the system.
 
Some tax practitioners can “circumvent” the system by registering multiple profiles pretending to be an individual filing his own return, or a company doing its own submissions.
 
“We have raised the issue and it has to be addressed by SARS otherwise it simply makes a mockery of the tax practitioner registration process.”
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
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Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Author: Ettiene Retief, Chairperson of National Tax and SARS committee of the South African Institute of Professional Accountants (SAIPA)
 
Trusts are often seen as the be all and end all of estate planning. However, the way in which our living situations, financial planning, tax and legal provisions have changed over the past few decades, means that trusts are no longer a good financial decision for many people.
 
A recent report by Sanlam investment plan, Glacier, found that the majority of South Africans who reach retirement haven’t made adequate provision for their retirement. Our financial planning problem is living, not dying. People see trusts as the silver-bullet of estate planning but the truth is that only a handful of people will truly benefit from setting up a trust.
 
Changing environment
The average household dynamic and life expectancy of a few decades ago is very different to the situation that we have today. In the past, the man of the household would often join a company for life and when he retired, he would receive a pension fund from the company. With a stay-at-home wife and a few kids, a husband would perhaps see it as a wise financial decision to set up a trust for his wife, who would probably outlive him by at least a decade or so.
 
In this case, protecting wealth made more sense, but people of today are living much longer and the money that they have saved has to go a lot further. Instead of considering your 20-year-old children who still need to study and start a family, many people live well into their 70s, 80s and even 90s. By the time they pass away, their children are often well into their 40s and able to support themselves.
 
Instead of being primarily focused on the amount of wealth that their children will inherit, the average middleclass person should be much more concerned with issues such as whether their wealth will be able to support them until they die. There are instances where people have accumulated an enormous amount of wealth over their lifetime and need to preserve it for future generations, but most people don’t have this problem.
 
If your estate is big enough, then you could still benefit from having a trust, but this only constitutes a small portion of the South African population. The reason why the rest of the people should think twice before establishing a trust is because with recent law changes the use of a trust may increase the tax liability.
 
Tax issues are either misguided or no longer relevant
A trust is taxed significantly more than an individual would be taxed. While there are options available to avoid being taxed heavily, this doesn’t necessarily solve the problem or give effect to the original estate plan.
 
The law in regards to estate duty and tax have changed significantly over the past decade, and some of the standard estate planning principals are no longer relevant. We no longer need the trust to secure the full benefits of the estate exclusions.
 
There is a cost to setting up and continuously administering the trust, as well as a cost to getting the assets into the trust. If the founder of the trust ends up using the value attributed to the trust for his/her retirement years, then the trust has little value in estate planning.
 
With the more recent tax law amendments that focus on the loans created to facilitate transferring the assets to the trust, there is an additional tax liability. Either the loan is interest free, or low interest, which results in a deemed donation each year; alternatively charging the required interest on the loan results in the increase in the loan value (effectively increasing the estate value) as well as increasing the founder’s taxable income with the interest earnings.
 
The current challenge most who have trusts setup to hold assets have, is how to get rid of the contra loan accounts.
 
It is important to note that a trust is not only used for tax planning purposes, as the trust could still be an effective way to protect your assets.
 
Retief concludes by saying that anyone considering setting up a trust, and individuals who currently have assets in a trust, need to be asking their financial advisors a few critical questions such as: is there really value in having a trust and should a restructuring of the trust be considered to derive more benefit from it.
 
Having a trust just because it’s something that made financial sense in the past doesn’t mean that it’s a good idea for you today. There are a lot of repercussions involved in setting up a trust, including the cost incurred to set it up and manage it. Understanding how big your estate is really going to be when you pass and how exactly you and your beneficiaries will benefit from the trust is your first step in the right direction. For the average citizen, however, focusing on a good retirement plan is much more important than being hell-bent on having a trust.

ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
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Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
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The winners of the South African Institute of Professional Accountants’ (SAIPA’s) 2017 Tax Thesis Competition, sponsored by EY, was announced on 19 October at a function that celebrated the 35th year of the existence of the Institute.
 
“We host this competition because we understand and support the impact academic writing has in shaping legislation and influencing our economy,” says Faith Ngwenya, Technical and Standards Executive of SAIPA.
 
A record number of 36 entries were received, including five for the Doctoral and nine for the Masters categories respectively.
 
The honours category was won by Caitlyn Mullins from the University of Cape Town on the topic of taxation of game farming in the Eastern Cape, asking how appropriate the first schedule of the Income Tax Act 58 of 1962 is for computing taxable income.
 
Sarah Elliot, also from the University of Cape Town, won the Master category with her submission. The thesis explored the development, operation, and comparison of the “pay now argue later” principle in South African tax law to local civil debt enforcement and consistency with the constitutional right of access to courts.
 
The doctoral category had to go to a second moderation to distinguish between the two submissions that initially scored the same. After the second moderation that focused on details such as the contribution to body of knowledge, research methodology, and grammatical details, the scores were separated by a mere one point.
 
Dr Ferdinand Schneider was awarded first place in the doctoral category with his topic on the critical evaluation of inter-jurisdictional rules in the South African Value-Added Tax system. Fareed Moosa was awarded the second place. His submission focused on the 1996 Constitution and the Tax Administration Act 28 of 2011 and balancing efficient and effective tax administration with taxpayers’ rights.
 
About the Tax Thesis competition
The Tax Thesis Competition recognises outstanding achievements in academic tax research, the authors of the works and the universities overseeing their contribution. In light of this, tax departments from all South African universities were invited to enter tax thesis and dissertations that have been submitted in fulfilment of the requirements for Honours, Master’s or Doctoral degrees in taxation during the years 2016/2017.
 
For quality control purposes, students had to first submitted their thesis or dissertations to their respective universities. Each tertiary institution then submitted their top three submissions in each of the Honours, Masters and Doctoral degrees as competition entries.
 
The entered theses or dissertations are subjected to rigorous adjudication, carried out by a panel of tax experts from SAIPA and its partners. Every work passes through two stages of assessment. First, they are scored by the panel according to an agreed set of rules. Second, submissions that score above 80% are independently moderated. Ultimately, one winner is chosen in each of the three categories.
 
“Excellence is what we need to pursue as a life-long commitment,” said Hashim Salie, board member of SAIPA, in his closing remarks during the awards function. “Excellence is not always gauged only on wealth of a physical nature, but in the way we address things. Excellence in research is something we have to promote.”
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
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Twitter: @SAIPAcomms
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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

Tax filing season has officially opened and with it comes the responsibilities of compliance for the South African taxpayers. Nobody is exempt from tax unless the person is earning below the threshold and there is no free pass if a practitioner is not filing their forms correctly, so now is the time to ensure compliance, get tax right and avoid fines and unnecessary penalties.
 
“It is vital that taxpayers ensure they are compliant – that their returns are honest, all information is accurate and that their returns reflect a true picture of what happened over the past year,” says Sibusiso Thungo, Tax Specialist, South African Institute of Professional Accountants. “There are few things as stressful, both financially and emotionally, as discovering that your accounts are not compliant and you have huge penalties to pay to SARS.”
 
SAIPA recommends that every taxpayer familiarise themselves with the correct filing dates, information, paperwork and legalities to avoid unnecessary risk or stress. The cost of non-compliance is far higher than the cost of time invested into ensuring that you understand how to file your taxes correctly.
 
Knowledge not excuses
“If you are unsure of how to file your tax return or the paperwork required, then it’s advisable to go to your local SARS branch where the consultants can assist you free of charge or better still, approach a tax practitioner in your area,” says Thungo. “If you are using, or plan to use, a tax practitioner, ensure that they are registered with a recognised controlling body. Ask them for their PR number and contact the relevant authority to ensure it is valid and up-to-date.”
 
The next step is to gather all the supporting documents required by SARS. To know what  document is needed, any amount that you are claiming/declaring that does not appear on the IRP 5 pre-loaded on your Income Tax Return (ITR12) supporting documents should be available should SARS call for them. Create a comprehensive checklist that covers every item required by SARS.
 
“Ensure the documentation is legible and accessible, SARS will reject forms and supporting documentation that cannot be read by their systems,” says Thungo. “Also, some of the tax regulations have changed as of 2017, so taxpayers need to spend some time getting to know the new rules.”
 
Some highlights on the IT 12 tax return amendments; Medical aid has become more detailed and transparent and the tax payer has to differentiate between what has or has not been paid by the scheme throughout the year. People with more than one retirement annuity need to report each one separately, and travel allowance reporting has also changed in terms of how it is claimed, and what can be claimed.
 
Be alert
“There are warning signs to look out for when using a tax practitioner to complete your returns,” says Thungo. “If they promise to get you a refund, that’s always a warning. If they don’t ask you for proof or certificates, that’s also a concern. Just be aware of the requirements so you can be aware of the risks.”
 
To assist taxpayers in preparing for the tax season, in 2016 Tax year SAIPA partnered with SARS to bring the mobile units into their office block (Waterfall Office Park), providing tax advice to all those working in the area. The consultants provided in excess of a hundred taxpayers with free insight into their returns and requirements.

“This year, SAIPA will be extending this offering to nearby office complexes to bring SARS support deeper into the community,” concludes Thungo.
 
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

The South African Institute of Professional Accountants (SAIPA) says some of the amendments of the draft Tax Administration Laws Amendment Bill will have a direct impact on the tax practitioners, particularly small and medium-sized enterprises (SMEs), who need to be in a position to respond effectively through professional development.
 
Faith Ngwenya, Technical Executive at SAIPA, believes it is critical that any practitioner keeps both skills and knowledge up to date to ensure relevance and ability.
 
“These regulatory changes are one of many challenges facing the tax industry and the professionals in the field. Any credible tax professional has to be aware of what is happening in the industry and needs to understand the trends and challenges which could impact the way they work and we see it as our role as SAIPA to empower practitioners with this cutting edge analysis,” Ngwenya emphasises.
 
SMEs
Currently the proposed amendments to the Bill are particularly relevant to the tax practitioner, especially for those who work within the SME sector. The proposed inclusion of personal liabilities companies into the small business corporation section of the Act will have a marked impact on the industry.
 
The Companies Act 71 of 2008 replaced the incorporated companies (Inc) with personal liability companies and Section 1 of the Companies Act defined a private company as a profit company that is not a public, personal liability or state owned company.
 
The exclusion of the personal liability company in the definition of a private company resulted in its exclusion from the income list of entities included in the definition of Small Business Corporation Tax, explains Ngwenya. “This has negatively impacted the many small businesses registered as personal liability entities from benefitting from the SME favourable provisions of the Small Business Corporations.”
 
SAIPA is working with the government and proposing that personal liabilities companies be included on the SBC list and further motivating for National Treasury to consider backdating the proposed change to the inception of the Act. This is but one of the topics that will be discussed at the upcoming Tax Indaba.
 
Tax Indaba
The Tax Indaba will be running from 5-9 September at the Vodaworld Conference Centre in Midrand. Topics include, among others: the tax policy discussion led by Michael Katz and Judge Dennis Davis, a panel on balancing government enforcement against taxpayer rights, the challenges facing small service companies and the changes to the Tax Ombud.
 
The keynote address will be done by the South African Revenue Service' (SARS') Commissioner Tom Moyane.
 
Furthermore, the issues around the Bill will be discussed alongside other challenges, which affect the practitioner’s day-to-day dealings with clients.
 
“These are some of the reasons why it is so important that practitioners are constantly updating their skills and staying up to date with industry insight. You need to track workshops and conferences and find the time to attend. It is at these events where pertinent and topical issues are discussed and practitioners have a chance to speak with other professionals,” Ngwenya urges.
 
“Not only can you upgrade your skills, but you can compare notes and engage with other people. It’s nice to discover that you are not alone when it comes to the problems you face as a professional or as a practioner. The cherry on top of attending this conference will be the structured CPD points that may be accumulated by participating, these will be electronically tracked throughout the conference,” she adds.
 
Attendees can gain insight into tax dispute resolution, how to approach a SARS payroll audit and estate planning for savings and small business.
 
For a complete programme of events visit http://taxindaba.co.za/

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 222 9198, 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 group
Facebook: South African Institute of Professional Accountants

By: Sibusiso Thungo, Tax Manager, South African Institute of Professional Accountants.
 
In early August this year, comments were submitted for the draft 2016 Tax Administration Laws Amendment Bill that brings welcome change and thought-provoking additions.
 
However, Section 16 of the bill has caused a major concern. To clarify, this section speaks of the mandate of the Office of the Tax Ombud to review and investigate any systemic issues related to a service matter; including the application of the provisions of the Tax Administration Act; or procedural or administrative provisions of a Tax Act, as defined in the above Act, only at the request of the minister. It is one of the areas being discussed with the ministry to ensure that the Office of the Ombud has true power to bring on substantial change and oversight.
 
We want to see that the Office of the Ombud is being given the ability to investigate complaints about infringements of taxpayers’ rights by South African Revenue Services (SARS).
 
This includes recent allegations that SARS delays paying refunds, especially around their financial year end. These have never been investigated, so if the Office of the Ombud can achieve this kind of power, then it would be of inordinate value to taxpayers. It means that SARS will be called to question when their actions are not in line with taxpayers’ constitutional rights, or fair and reasonable administrative actions.
 
It must be noted that the above is not something new for the Office of the Ombud, other jurisdictions like Canada, India and Australia have been given a similar mandate.
 
Rise of the Tax Ombud
The Office of the Tax Ombud was originally created in 2013 to engage with the rising concerns of taxpayers when dealing with SARS, as well as to take a vital seat at the taxation table.
 
There was a need to have an intermediary to deal with the complaints laid before SARS. Under the leadership of Judge Bernard Ngoepe, this Office of the Ombud has seen considerable success and played a pivotal role in resolving a significant number of cases.
 
To date, 88% of the cases referred to the Office of the Ombud have been resolved with SARS taking its recommendations into consideration. It has, perhaps surprisingly, found joy on behalf of taxpayers and practitioners in spite of having limited authority and weight. These successes have played no small part in the proposed changes ahead.
 
More time for mandate
Also included within the draft bill are crucial proposed changes to the Office of the Ombud that could potentially give both taxpayers and Ombud greater control and independence when it comes to dealing with SARS and provide taxpayers with a reliable, neutral space in which to address challenging situations or issues.
 
With the current legislation, the Office of the Ombud has only three years to achieve its mandate. The new draft legislation proposes to extend this duration to five years, a very welcome and applauded step, as it can be difficult to instigate real change in only three years. This is particularly true of an office that is so new.
 
By extending the length of time for the Office of the Ombud to run, the draft legislation will allow the office potentially save even more taxpayers’ frustration and concern. Should the legislation be signed off, the office will run for five years effective from 2017, but how it will be managed and when its start date finalised has yet to be determined.
 
Other welcome changes
In addition to the time extension, the Office of the Ombud has been given more power. Previously, when the office wanted to appoint staff, they could only do so in accordance with the SARS Act and after consultation with the SARS commissioner. With the current draft legislation, the office now has the autonomy to independently appoint staff and this will support them in attracting talent. It shows that they are increasingly independent of SARS.
 
Finally, the proposed amendments also place control of the budget into the hands of the Ombud. While the organisation will still be funded by SARS under the proposed legislation, there are at least some steps being taken to shift the boundaries of control.
 
Currently, the recommendations the Office of the Ombud makes are not binding to SARS and taxpayers. They may choose to follow them or not, however if not accepted by a taxpayer or SARS, reasons for such decision must be provided to the Office of the Tax Ombud. SARS has accepted all of these recommendations so far and it is clear that they take the Office of the Ombud seriously. Hopefully this will only bode well for the growth of the office going forward.

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 group
Facebook: South African Institute of Professional Accountants

Heart disease. Cancer. Type 2 diabetes. These are all common diseases linked with the high consumption of sugar and many governments are turning to tax to help cut the sweet and promote healthier lifestyles. In South Africa, the institution of a sugar tax is an idea that needs to be taken far more seriously as sugar-related illnesses continue to rise, impacting the economy and the tax base.

Mexico implemented a soft drink tax in 2013, Norway has had an excise tax on refined sugar products for a while, and in the United Kingdom, George Freeman, the life sciences minister, as well as well-known chef Jamie Oliver, openly backed a sugar tax earlier this year. 

“A recent study has presented interesting data with South Africa at the second highest ranking, ahead of the USA, with regards to the number of deaths attributed to sugar,” says Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committee at SAIPA. “In 2014 a sugar tax was proposed, but not implemented. Will a sugar tax work here? Perhaps the most important question is – can we really afford not to take it seriously and make sure it is implemented?” 

A sweet solution
The introduction of a one peso per litre tax on soda and other sugary drinks by the Mexican government has had some interesting results. While it is still early on in the process, their findings have shown that in 2014 the purchase of soda and other similarly taxed drinks had dropped by 10% compared with the same period the previous year.  In addition, the purchase of bottled water rose by 13%, showing that people were substituting the unhealthy with the healthy.

“Traditionally we have thought of sin taxes as not having any significant kind of impact on changing people’s behaviours and habits,” says Retief. “Empirical evidence suggests that people won’t stop smoking because of a tax, but will stop or reduce consumption due to health risks or when they have decided it’s time to stop. When you’re at a social event, you don’t think about the increased sin tax. However, sugar taxation in other countries has shown positive results and this could potentially transform many issues prevalent in South Africa.”

Sugar is seen as far more socially acceptable than cigarettes. There is no stigma associated with it and it is easily available to anyone, regardless of wealth or station. However, it is conclusively linked to health issues that have a knock-on effect when it comes to working, medical aid, healthcare and the economy. Government’s plans for national health care is hindered by the high costs, and the high incidents of sugar related illnesses has a direct impact on those costs.  

“The diseases caused by the over consumption of sugar have a massive economic impact,” says Retief. “Parents can’t work for as long or care for their families, children fall ill quicker and this impacts economic growth. It is a vicious circle, but is it one that can possibly be broken by taxation and consumer awareness?”

A foolish mistake
“We cannot compare traditional sin taxes with the sugar tax,” says Retief. “We can’t simply apply a sugar tax to make the high-sugar products more expensive, we need to also focus on consumer awareness and the comparative pricing of alternatives, and the sugar taxes collected should be used to fund aggressive education campaigns on healthier alternatives.”

Marketing, advertising and packaging practices could be regulated, with an introduction of warnings about the levels of sugar in certain foods and drinks, and the health risks, similar to the warnings on tobacco products. In the United Kingdom, the traffic light food rating system clearly shows exactly how much sugar is in any given item and allows for the consumer to make an informed choice on purchase. A system like this would be enormously beneficial in South Africa where levels of education impact on understanding around how sugar can damage health and well-being. It will also ensure that the taxpayer of today is around to pay their taxes and boost the economy of tomorrow.

“The future workforce is under threat of serious illnesses due to the overconsumption of sugar,” concludes Retief. “SAIPA is worried about the economy as a whole and the health of the tax base. The impact on companies thanks to increasingly high levels of illness, the taxpayer spend on healthcare instead of other areas means limited economic growth and then there are the concerns around how long a workforce can be economically active.  Now is the time to implement robust change and a sugar tax is the right way to go, as long as it is done well.”

ENDS

MEDIA CONTACT: Cathlen Fourie, 012 644 2833, cathlen@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

Closing the gap between taxpayers and tax practitioners
Seven factors contributing to the expectation gap between taxpayers and tax practitioners in SA

A good relationship and effective communication between taxpayers and tax practitioners, as well as knowledge on tax requirements are among the factors that are likely to contribute towards better tax compliance in the South African context, according to a recent study.

The study on the tax practitioner-client relationship was conducted by Professor Gerhard Nienaber for his PhD thesis and submitted to Norton Rose and SAIPA’s 2014 Tax Thesis Competition.

“The study confirms the fact that tax practitioners play an important role in influencing the behaviour and attitude of their clients on tax compliance, and vice versa,” says Economic Research Analyst for South African Institute of Professional Accountants (SAIPA), Dr Thomas Höppli.

“Given the increasing utilisation of tax practitioners in South Africa, it is important for both tax practitioners and taxpayers to understand the factors that drive taxpayers’ and tax practitioners’ behaviour in order to improve the relationship between them,” says Höppli.

As Nienaber notes, the number of South Africans using the services of tax practitioners is on the increase. But, exactly how much non-compliance to tax laws is related to the tax advice that some tax practitioners give to their clients is still unclear.

 The seven Cs

According to Nienaber’s study, the following “seven Cs” are factors that contribute to the expectation gap between taxpayers and tax practitioners in South Africa.

 “For tax practitioners, more clarity on these factors would make them more aware of ethical issues, and this could result in more accountable decision-making,” says Höppli. “The Tax Administration Act (2011) requires tax practitioners to be registered not only with SARS, but also with a recognised controlling body, such as SAIPA.  For taxpayers, this gives them assurance that their tax practitioner fulfils minimum qualifications, experience and CPD requirements and abides by a code of ethics and conduct.  The regulatory framework thereby ensures that taxpayers receive better, more consistent tax advice.”

 1.      Communication: Frequent and clear communication should take place before, during, and after the tax service engagement between the taxpayer and tax practitioner. “Ongoing communication helps to clear up any issues that may arise between the two parties and promotes greater tax compliance,” he says.

2.      Capability of taxpayers and tax practitioners: The capabilities of both taxpayers and tax practitioners should constantly be improved. This can be achieved by improving taxpayers’ knowledge on basic tax matters in order for them to understand tax processes better, as well as by improving tax practitioners’ competence. “To this end, SAIPA’s Centre for Tax Excellence (CoTE) offers a variety of specialised tax CPDs to keep their members abreast of new information and developments in the tax discipline,” he says.

3.      Confusion on the nature and scope of tax service: The professional role and responsibilities of tax practitioners, together with the nature and scope of the tax service, should be clearly and openly communicated to taxpayers in order to minimise confusion.  It is advisable to reduce the responsibilities and the scope to writing.

4.      Comprehension of fee structure: The fee structure should be transparent in order for taxpayers to understand it better and eliminate misconceptions.

5.      Contribution of external influences on taxpayers: In order to avoid external influences that create confusion amongst taxpayers, Höppli says: “Tax practitioners should identify such possible influences and address them by means of suitable communication.” 

6.      Collecting agent’s systems and processes: The role and responsibilities of SARS should also be openly and clearly stated in order to enlighten taxpayers on its systems and processes. “Although the buck stops with the taxpayer, a good tax practitioner should do all he or she can to ensure the client understands how SARS works,” he adds. “This will help to streamline tax collection and eliminate unnecessary non-compliance and consequent penalties.”

7.      Compliance behaviour of taxpayers and tax practitioners: If taxpayers have an attitude of tax compliance, they tend to be open to and adhere to the tax advice provided by the tax practitioners. The alignment of the tax compliance behaviour of taxpayers and tax practitioners serves as an alleviating action for the expectation gap.


ENDS
_______________________________________________________________________________________________________

MEDIA CONTACT: Cathlen Fourie, 012 644 2833, cathlen@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