“… the OTO commits to continue doing everything possible to ensure that taxpayers are not forced to pay a cent more than what is required.” (Judge Bernard Makgabo Ngoepe, the Tax Ombud)
The list of the top 10 complaints made against SARS over the last eight years to the Office of the Tax Ombud (OTO), published in its recent newsletter, makes for interesting reading, and highlights the areas where taxpayers are most likely to encounter pitfalls in their dealings with SARS.
The Top 10 complaints made against SARS
Source: OTO Fair Play Issue 22
The Ombud has also launched a new taxpayer rights awareness campaign, #TaxpayersRightsMatter, to help improve taxpayers’ understanding of their rights and the recourse available if their rights are not upheld by SARS.
What are your rights as a taxpayer?
Issues with refunds feature quite prominently on the list of complaints, as do delays and ignored requests or complaints. These certainly constitute infringements of taxpayers’ rights, when considering the brief overview below of the rights related to these complaints.
The interaction between SARS and taxpayers is governed by the TAA (Tax Administration Act), and SARS’ Service Charter also stipulates service levels and time frames.
The TAA, like all laws in South Africa, is also subject to the Constitution and the Rule of Law. Conduct inconsistent with the Constitution is invalid and illegal.
Some key features and principles of the Constitution are included in other Acts such as the TAA, PAIA (Promotion of Access to Information Act) and PAJA (Promotion of Administrative Justice Act).
How to protect your personal and business rights
“It is equally important to know if we have a happy and engaged workforce as it is to have a profitable bottom line.” (Vern Dosch, Wired Differently)
Managing any workforce, but particularly a large one across many units, sometimes in multiple countries, is far from easy. From your staffing levels and scheduling to making sure your labour costs are within budget and your forecasts are accurate, there are a number of elements involved in ensuring your workforce management is streamlined. There are however fewer areas of a business which are more important to get right if you hope to keep your workforce happy and ensure profitability. Here are 5 tips for efficiently managing your employees.
Although you might be used to spreadsheet scheduling, modern employee scheduling software can save you time, and ultimately money, in your day-to-day operations. These tools allow managers to create schedules with intuitive drag-and-drop interfaces, send push notifications to employees, and update schedules in real time. By creating stability, it also delivers a more pleasant experience for managers and employees alike, which keeps morale high and work moving smoothly.
Further, two-way communication is key. You should not be afraid to engage your staff on scheduling difficulties. Often, being on the floor can give them insights into just where things are bottlenecking. You may also be surprised at how willing staff can be to assist when there is a problem. Simply communicating the business needs to staff and encouraging their input into scheduling preferences can help identify and cover the gaps you are facing. It is also empowering for them.
To avoid these issues, it’s crucial that you clearly put all your policies and procedures in writing along with the related consequences for breaking them. This will ensure there aren’t any misunderstandings within your team, and new employees will immediately know what they’re getting themselves into. The stability and clarity brought about by doing this will also take pressure off employees who may feel additional stress if the boundaries are not clearly demarcated.
Many companies with payroll issues experience them simply because the people responsible are not experienced, or don’t have the correct tools at hand. Delays can be caused when commissions are miscalculated, tax deductions are incorrect, or hours are input erroneously. The best solution is to bring on a trained and certified accountant or bookkeeper to handle these issues and to give them the right software to ensure the job is done correctly and accurately – your employees can’t focus if they are worried their bills won’t be paid.
Interestingly, recent studies have shown that what an employee earns is not as important for happiness as the benefits they get with that salary. For full-time employees, their salary is only part of their total compensation. The rest is what’s referred to as the benefits package, which typically includes health insurance, paid time off, and sometimes education opportunities. A recent survey conducted by The Harris Poll for the American Institute of CPAs (AICPA), found that 80 percent of respondents would choose a job with benefits over an identical job with 30 percent more salary but no benefits.
If you want to attract top talent and retain your employees, it’s important to put together a benefits package that will bring candidates to your business over your competitors’. In fact, it’s so important that the Willis Towers Watson survey reported that more than two-thirds of employers surveyed (69%) “plan to differentiate and customise their benefit programs over the next two years.”
Forecasting for workforce management should look at the number of sales broken down per hour and per employee, the percentage of salary cost compared to sales, your payroll costs and other more nuanced data such as your absence percentage, which encompasses sick leave and holidays, as well as the amount of time it takes to train staff, how large your on-call freelance staff contingent is, and how many part-time workers you have that could be bumped up to full time in a crisis.
When you balance your planned costs against your results, you create the most profitable resource plan. Better forecasting goes hand in hand with smarter scheduling and gives you the data you need to make sure you always have the right people in the right place at the right time.
Ultimately, it’s important to find a solution that works for you and your teams that allows you to effectively communicate requirements without crossing boundaries and causing friction. Many large corporates have turned to Zoom, or Teams for meeting purposes as email chains can cause information to become lost. Don’t be afraid to set up a work WhatsApp group or a Slack channel but undertake not to use them out of office hours.
“Human resources isn’t a thing we do, it’s the thing that runs our business” (American real estate developer, Steve Wynne)
An effective employee benefit strategy is more of an advantage to an employer than may at first meet the eye. Although providing benefits naturally comes at a price, it also comes with substantial benefits, plus you stand to regain a portion of your investment from SARS in tax deductions.
Moreover, providing benefits that employees can’t readily access on their own could position you as an employer of choice in your industry, affording you the best pick of available talent. This leads to better products and service, meaning your business wins.
The year-old Africa Insights from the 2019/2020 Benefit Trends Survey shows that employers are getting more creative concerning the mental and physical wellbeing of their staff, as these companies are more aware of the benefits of a healthier staff.
A report by Johannesburg based HR firm, Willis Towers Watson states “A third of African employers are planning/considering stress or resilience management programs. A quarter is planning/considering mental health or substance abuse programs. 23% is planning/considering health coaching.”
Employee benefit packages are not forced by law on business policy; however the World Health Organisation (WHO) has drawn a link between employee benefits and a physically and mentally healthier workforce. The organisation’s Healthy Workplace Framework and Model, which is a guideline to creating a healthier working environment, says “the mind and body are one, and what affects one, inevitably affects the other.”
The document also advises that “If the insurance costs for health benefits in your enterprise keep increasing, even after implementing healthy workplace programmes, that does not necessarily mean the programmes have failed. Look at industry benchmarks for comparison. If health insurance costs have increased by 20% in similar industries, yet have only increased by 5% in your enterprise, that is an indicator of success.”
Five major reasons why SMEs should consider employee benefits
Changing or initiating an employee benefits strategy involves new financial responsibilities so take professional advice on the best way to go about it.
“The implied policy rate path of the Quarterly Projection Model indicates an increase of 25 basis points in the fourth quarter of 2021 and further increases in each quarter of 2022, 2023 and 2024.” (Lesetja Kganyago, SARB Governor)
After cutting interest rates by 275 basis points to record lows in response to the economic crisis brought about by the COVID-19 lockdowns, the South African Reserve Bank (SARB) recently announced the first interest rate hike in three years. The vote was split 3-2, indicating conflicting sentiments within SARB as it looks to address inflation fears while supporting a recovery.
At its November 2021 Monetary Policy Committee (MPC) meeting, the SARB hiked its main repo rate from a record low of 3.50% by 25 basis points to 3.75%, citing growing concerns about upside inflation risks.
The repo rate hike came earlier than many economists had expected, and certainly earlier than consumers and business had anticipated.
It also signals a turn in the interest rate cycle, with further increases forecast by SARB for each quarter over the next three years. While such a normalisation in rates is to be expected, its early arrival and likely extent surprised many.
Some economists estimate hikes of 150 basis points over the next two years, with others expecting around 250 basis points within the next 18 months! It is generally expected that increases will continue until pre-pandemic levels are reached at around 6.5%.
Of course, when interest rates are changed, it has a ripple effect throughout the broader economy. This is because low rates make it more affordable to borrow money, which encourages consumer and business spending and investment, and can also boost asset prices. Rising interest rates have the opposite effect.
It is important for business owners to understand how interest rate increases can affect and influence how their companies operate and perform, because of course businesses generally depend on a healthy economic environment to thrive.
Smaller businesses in particular feel the effects of changing interest rates more keenly because they have lower cash reserves and are generally more vulnerable to economic shocks.
However, if you understand the impact of interest rates on your business, you can adjust to interest rate changes to protect yourself from negative effects.
Let’s start off then by analysing the possible impact of higher interest rates on your business –
What might the impact be on your business?
When interest rates are low, consumers tend to borrow more money, and also to spend more on products and services, because they have more disposable income.
As interest rates rise, consumers with debts ranging from home loans to vehicle finance to credit cards and personal loans will pay more interest to all those creditors. In South Africa, where the debt repayment to income ratio is as high as 66.7% (2021: Q2) when interest rates are at historic lows, interest rate increases can be problematic.
An increase in interest rates typically impacts consumer spending habits negatively, because with their debt costs increasing across their credit lines, they have less disposable income to spend on products and services.
The impact of a change in interest rates on customers varies from business to business. In a rising rate environment, consumer-driven businesses often see a reduction in sales. Companies that make luxury goods are hit hardest when interest rates rise because most customers first cut back on non-essentials when their disposable income decreases.
How to buffer your business
Re-evaluate projects or expansions planned for the next few years and the impact of interest rates increases on the viability of these plans.
Thank you for your support in 2021.
Have a Wonderful Festive Season, and a Happy and Prosperous 2022.
Enjoy the Break!
“Success in a hybrid work environment requires employers to move beyond viewing remote or hybrid environments as a temporary or short term strategy and to treat it as an opportunity” (Vice President of Gartner, George Penn)
The gradual transition from the conventional office environment to a remote, tech-savvy workforce has been topical in various industries for a while. However the pandemic has accelerated acceptance of the reality of remote working.
The recent Digital Corporation in South Africa 2021 study, conducted by IT research organisation World Wide Worx with the support of Syspro, Dell Technologies, Intel and Cycan, looked into the hybrid work place model among enterprises in South Africa. It found that a third of respondent companies did not foresee their workforce returning to the office environment.
The hybrid workplace is an operating model incorporating both remote and in-office working. This is made feasible by cloud computing together with collaborative tools such as direct messaging tools like WeChat, WhatsApp and Facebook Messenger, as well as task management tools like Asana, Google Workspace and Trello.
The above-mentioned research also analysed the spending habits and investment trends of companies concerning hybrid environment technologies, among other things.
Budgeting is a critical consideration in remote working. Cloud computing – an important aspect of hybrid working, is second only to business intelligence, which is software designed to retrieve, analyse and report data for business improvement, in terms of budgeting for specific technologies in South Africa, according to the report
“Spending is surprisingly uniform across numerous operational categories, from computers and cyber-security to accounting and ecommerce,” says Arthur Goldstuck, CEO of World Wide Worx and principal analyst on the project.
Furthermore, remote working involves tax considerations for both employees and employers – an area best tackled only with professional advice.
For example, employers are often requested to issue letters confirming that employees performed their duties mainly in a home office and the difficulty is that the employer has to vouch that all requirements were met.
In general, the hybrid workforce debate is of particular interest to SMEs, particularly since they may be able repurpose the savings of reducing office space and overheads.
The three pillars of a functional hybrid working model
The University of Cape Town’s Graduate School of Business lists the following pillars as vital to a functional hybrid working model:
Take professional advice on how hybrid working can impact your business’ bottom line.
“Think of giving not as a duty but as a privilege.” (John D. Rockefeller Jr.)
Christmas is a time for giving, and in our local business environment, as well as in many other markets around the world, it may even be unofficially expected of companies to give generously to their employees, to their clients and suppliers, and to the communities in which they operate. Many companies give generously in these ways, but may not be aware of the tax implications of their generosity.
In this article, we briefly look at some of the tax implications of various forms of giving, to emphasise that before any corporate giving decisions are made, companies should seek professional advice about the tax implications.
Giving to employees
Some examples include gift vouchers, prizes or awards; physical items such as a mobile device; and intangible gifts such as flights or accommodation. This applies whether the gift is given to an employee or an employee’s family member, such as a spouse or child. The cost to the employer of any such gift must be reflected as a taxable fringe benefit on the employee’s payslip, and PAYE must be calculated and deducted.
There are some exceptions. For example, in the case of a long service award (15 years or more), the first R5 000 of the cost of such a gift is not taxable, but any amount in excess thereof is taxable as described above. Other possible exceptions include where the employer incurs no cost in conferring the gifts, or where the gifts are utilised by the employees for business purposes. However, even these simplified scenarios are subject to complex considerations and should first be discussed with a professional.
Giving to clients/suppliers
In the past, this deduction was prone to abuse. Consequently, a claim for entertainment expenses is likely to be flagged for investigation by SARS, and taxpayers should not risk this unless they have verified their tax position with a specialist and are certain they are able to prove the expenses claimed are again, genuinely business-related.In addition, input VAT cannot be claimed on entertainment expenses, including but certainly not limited to business lunches and dinners; annual functions; and expenses incurred for entertaining clients at restaurants, bars and night clubs.
Giving to charities
The deduction may, however, not exceed 10% of the donor’s taxable income during any year of assessment. Should the company (donor) have given more than 10% of taxable income in one year, the excess over 10% can be carried over to the next year.
Staff can also get tax relief on their PAYE through “payroll giving” whereby the employer donates on their behalf up to 5% of remuneration to qualifying section 18A PBOs. The donation relief will be reflected on the employee’s IRP5 at the end of the year.
Ask for professional advice to structure your company’s donations in the most appropriate and tax-efficient manner. You may also require assistance to declare and pay donations tax, as it does not form part of the business’ normal tax returns. Following a donation, you will need to submit a donor declaration (IT144 form) and pay any donations tax owing by the end of the month following the month during which the donation was made.
“Cyber Attack: An attack, via cyberspace, targeting an enterprise’s use of cyberspace for the purpose of disrupting, disabling, destroying, or maliciously controlling a computing environment/infrastructure; or destroying the integrity of the data or stealing controlled information.” (CSRC – Computer Security Resource Center)
South African businesses, already facing significant risk of cyberattacks, have been warned to step up their cybersecurity as the festive season is expected to see significantly more and increasingly sophisticated cyberattacks. Below are listed some of the common types of cyberattacks.
Common cyberattacks
SARS: a favourite cyberattack ruse
SARS says that there is a steady increase in scams and attacks in which the SARS brand is abused, via the Internet, emails, spoofed websites, SMSes, unsolicited telephone calls and even social networking sites such as Facebook, Twitter and others.
A firm criminal favourite are phishing scams involving false “spoofed” emails made to look as if they were sent by SARS. These fraudulent emails contain links to fake forms and malicious websites purporting to be authentic and lure unsuspecting taxpayers to disclose private and confidential information such as bank account details. Examples include emails that appear to be from “returns @sars.co.za” or “refunds @sars.co.za” indicating that taxpayers are eligible to receive tax refunds.
The latest scams involve smishing, which is phishing via SMSs, and vishing which most recently involves taxpayers being called by a person purporting to be a SARS employee to inform them that SARS owes them money.
Another common cyberattack approach involves refund scams in which identity thieves use a legitimate taxpayer’s identity to file a tax return and claim a refund fraudulently. Yet another threat involves cybercriminals using personal or company information to change the banking details on the taxpayers’ SARS profiles.
A further version involves criminals purporting to be SARS auditors or employees contacting businesses using all the means described above to inform taxpayers that they are under investigation and that an audit will be conducted.
SARS Tips for Improved Cybersecurity
Speak to your accountant first!
It is easy for criminals to dupe unsuspecting taxpayers, and yet, at the same time, taxpayers should never simply dismiss or ignore a notice or demand from SARS as a scam.
The best line of defence against cyberattacks that misuse the SARS brand is to get advice before taking any action. If you suspect the legality of a particular communication or believe you have been contacted by a fake SARS representative, immediately contact your accountant, who will be able to verify the communication or report suspicious activity for you.
This will ensure that you never fail to respond timeously and correctly to legitimate SARS communications, while also safeguarding you from becoming a victim of a cyberattack, especially during the upcoming festive season which promises to be a busy one for cybercriminals.
