Updates – UIF, BEE, SARS and Cyber Crime
Some timely updates on topics we have covered previously: Canned: The UIF Tax Holiday
In his February Budget speech, the Minister of Finance announced a one year reduction in UIF (Unemployment Insurance Fund) payments from a monthly maximum of R148.92 individual deduction to R10 per individual. This was to reduce the R72 billion surplus sitting in the fund. This would have put R15 billion back into consumers’ and businesses’ pockets (the employer matches the individual’s contribution to UIF). The proposal has been withdrawn, at least for the moment, “to allow more time for consultation”. This is a pity as a UIF tax holiday would have helped counteract the impact of the income tax increase also announced in the February speech. How Broad Based Is Black Economic Empowerment Going To Be? Ownership Element Plan Ditched
The Department of Trade and Industry (DTI) released new sector codes early in May. Although a detailed handbook of how to implement the codes is still outstanding, there were some welcome clarifications such as businesses with existing scorecards can keep these to 30 October 2015. What was surprising was the DTI clarification concerning the ownership element. This downgraded employee and broad based ownership schemes – out of 25 points, broad based schemes could, per the proposal, only claim 3 points. As approximately 80% of BEE deals have been done on this basis, this created confusion and anger from business. DTI then issued a further clarification saying that existing BEE deals would not be affected and would still get maximum points. It also said a task team had been set up to give recommendations to the Minister within the next 30 days. Then on 15 May, the DTI withdrew this notice altogether, with the end result that broad based ownership will no longer be penalised as was proposed.
No mention is made of the task team in the withdrawal notice. What seems to be driving the DTI’s thinking is the idea that moving to individual equity ownership will give more meaningful participation to black shareholders. The DTI also see broad based ownership programs as a potential vehicle for fronting. Companies should carefully consider this new thinking and seek advice if in doubt, as it could have serious ramifications for your business. SARS Exceeds Its Collection Target – But Expect More Tax Increases
With much fanfare SARS announced recently that it had exceeded its 2014-2015 collection targets by R7.4 billion. The reason for the fanfare was SARS has had bad press of late – resignations of key officials, investigation of a rogue spy unit set up by SARS – and pundits were predicting that SARS would not be able to keep up its high performance standards. This should be put in context:
- The R7.4 billion additional inflow was against the estimate made by Minister Nene in the February 2015 Budget address. Compared to the original Budget, the collections are actually down by R7 billion.
- When you look closer at the numbers, personal income tax accounts for 35.6% of total collections. This is not sustainable and has risen from 29.5% of collections in 2008. The problem is that corporate tax, VAT and other indirect taxes are dependent on a growing economy to show growth in government revenues and the future outlook for the economy is for relatively low growth. This puts a question mark on future SARS collections.
- R8 billion was collected from gains made by individual taxpayers who were on corporate share incentive programs – effectively the difference by which the amended collection targets were exceeded. In 2010, legislation was changed which made individuals liable for tax the moment their share incentives vested (i.e. they were entitled to cash in their share options). As most share incentive schemes take several years to vest and how well they perform depends on market performance, this will be an uncertain future source of income.
- Finally, it needs to be accepted that stepping up compliance programs cannot bring in increasing revenue indefinitely.
The government is committed to its social welfare programmes but is going to find it difficult to fund them out of an under-pressure revenue base. It is unlikely that VAT will be raised and other indirect taxes such as the fuel levy have already been substantially increased. That leaves personal income tax and it looks more and more likely that there will be more income tax increases. Beware Cyber Crime: It’s Getting Worse In the first quarter of 2015, the number of cyber-attacks doubled over 2014. The message is clear – cyber criminals are getting more sophisticated (for example, one of their new weapons resides in your hardware which makes traditional anti-virus techniques ineffective) and are stepping up their activities. Research has also shown how seldom people change passwords and how many people use the same password for their applications. Worse still, 43% of us don’t place much value in passwords. We are making it easier for cyber criminals to access our data. Remember that everyone – from banks to businesses to individuals – is considered to be fair game by the hackers. © DotNews, 2005-2015. This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.