Since 2004, when it became mandatory for anyone rendering tax services to register with SARS as a tax practitioner, approximately 34 000 individuals have done so. However, media reports and public speeches have alluded to the fact that almost 50% of the tax practitioners on register are not tax compliant themselves.
Based on SARS publications, tax practitioners represent an estimated 3 million taxpayers of the approximately 12 million on the tax register. However, a number of the 12 million are employees required to be registered only due to payroll legislation despite their taxable incomes being very low.
”It can be safely assumed that a tax practitioner of some sort represents about 25% to 30% of the South African tax base,” says Dirk Kotze, tax partner at Mazars.
Compliancy rolls downhill
”If approximately 50% of the tax practitioners on the register are non-compliant with their taxes, then 10% to 15% of taxpayers are entrusting their tax affairs to non-compliant practitioners. If that is the case, just how compliant can those taxpayers expect their own tax affairs to be?”
Initially there was no formal regulation by SARS of tax practitioners. In fact, many tax practitioners were not even required to belong to independent organisations to facilitate communication, training or even discipline. As such, it may be said that while tax practitioners were registered, this was mainly in order for them to offer services to their clients rather than be properly regulated.
Tax practitioners must be registered
A requirement of the latest legislative amendments was that any tax practitioner must belong to a controlling body and the deadline date for registration with a controlling body was 30 June 2013.
At this stage the reason for the requirement for an independent registration appears to be so that SARS may reduce the number of unregulated tax practitioners and to lay complaints about the tax practitioner to a controlling body. Whether this will be extended in the future to include training requirements, setting different levels of competency and standards depending on the area of tax work conducted by the tax practitioner or channelling communication to tax practitioners through these bodies remains to be seen, but seems highly likely taking into account the contents of various discussion documents of the past.
“While the intentions of SARS, professional bodies and compliant tax practitioners are all good and well, delinquent tax practitioners will continue to practice as long as they attract business,” adds Kotze. This may lead to serious potential tax risk for the taxpayer.
Check up on your practitioner
”To avoid these risks and costs and to ensure that they are themselves compliant it may be time for taxpayers to confirm that their tax practitioner is compliant, and thus able to help them stay on the straight and narrow. A first step would be to request the tax practitioner to provide proof of the updated registration with a controlling body and that this information was provided to SARS by the deadline date.
#Budget2019: But What About Small Businesses?
Where is the focus on growing South Africa’s small business sector?
That is the overriding question we are left with at the end of Finance Minister Tito Mboweni’s maiden budget speech. The few mentions the Minister made about Small & Medium Businesses were short on detail at a time when we desperately need to supercharge the growth of this segment.
A highlight of the speech from Sage’s perspective was the Minister’s acknowledgement that we must free small businesses from stifling regulations and complicated taxes because we desperately need them to boost employment and drive competition. This aligns with President Ramaphosa’s pledge to improve the ease of doing business in his State of the Nation Address this year.
However, these pronouncements need to be followed rapidly by concrete policies and regulation. We believe that there are many steps government could take to streamline red-tape for small businesses -from streamlining some SARS processes such as VAT refunds and issuing of tax clearance certificates to increasing the maximum thresholds for turnover tax and VAT registration.
We hope to hear more about such steps after the May general election and in the October Medium Term Budget Policy Statement.
One welcome announcement in the speech was the allocation of R481.6 million to the Small Enterprise Development Agency to expand the small business incubation programme. Such programmes can play an invaluable role in helping small businesses to survive the difficult start-up phase and then scale up into larger businesses.
As a software company, we were also pleased that the Minister spoke about using the budget to get our country ready for technology. His focus on the importance of technology in education, his commitment to working with the Minister of Communications to resolve the issue of spectrum licensing in order to drive down data costs, and his mention of FinTech innovation programmes at the Reserve Bank all point to a focus on creating a competitive, digital country that ready for the future.
However, I would have liked to have seen more of a specific focus on innovation as a vehicle for driving economic growth. The fourth industrial revolution and the rise of a digital economy has been a theme of recent government speeches and addresses, and it would be good to see the words matched with investments and policies.
On the whole, Minister Mboweni and the National Treasury have done a good job of negotiating a challenging economic climate. They are to be commended for balancing the books, keeping a lid on government spending, taking steps to put Eskom and other state-owned entities on a more sustainable footing, and committing towards investing in infrastructure.
Such steps could help boost business confidence and create an enabling environment for businesses of all sizes. As the Minister notes, the private sector is the key engine for job creation. Taking policy actions that offer more certainty to the business community will help to reinvigorate investment in the economy and unlock entrepreneurial activity.
Budget2019: Commentary by Rob Cooper
As expected, this was a conservative budget with no sweeping changes to most forms of taxation. The Finance Minister took advantage of some new revenue sources such as carbon taxes, but, for the most part, continued to stick to the script of limiting bracket creep adjustment, sin taxes and fuel levies to raise more money.
We can but hope that the decision for the government not to take on Eskom’s debt and a reduction of public expenditure by around R50 billion since the October mini-budget will be enough to convince Moody’s not to downgrade South Africa’s sovereign credit rating.
Personal income tax
The Minister and his team have raised income taxes by stealth by choosing not to adjust tax brackets to allow for inflation this year. Unlike previous years, even low- and middle-income earners are not getting much respite. Rebates and the tax threshold are being increased by small amounts to allow a bit of relief from inflation, but most people earning above the tax threshold (raised from R78,150 to R79,000) will feel some pain. This measure will raise around R12.8 billion in revenue for the tax year.
National Health Insurance
The Finance Minister decided not to apply an inflationary increase to the Medical Tax Credit, which will allow him to raise an extra R1 billion in revenue for the year. This is not surprising since government is phasing out this credit and gearing up for a wider rollout of the National Health Insurance (NHI) scheme.
What is surprising is that the funds will be allocated to general revenue rather than NHI, as was the case in previous years when below-inflation increase on medical scheme credits were used to fund NHI pilot projects. I am glad that the tax credit is still with us because it helps to make private medical cover affordable for millions of low-income South Africans. We heard no news about how the NHI will be funded and will need to wait for the government to table the bill that includes funding to find out more.
Employment tax incentive
It was heartening to hear that about 1.1 million young people have been employed under the Employment Tax Incentive scheme. The incentive of up to R1 000 can now be claimed for employees earning up to R4,500 per month, up from R4,000, and the remuneration threshold has been increased by R500 to R6,500. This is a necessary and welcome adjustment for inflation.
Bearing in mind that the ETI has been extend for 10 years, I was hoping for an indication in the budget that the policy-makers will be considering changes to simplify the ETI requirements, thereby increasing the take-up by employers.
We can expect to see tax reforms in the years to come, with Minister Mboweni recommitting to improving administration at SARS. Judge Dennis Davis will be assessing the tax gap — the difference between revenue SARS collects and what it should collect. Restoring SARS to a world-class administration machine and improving compliance could go a long way to cushioning compliant taxpayers from tax increases and new taxes in the year to come.
2019 National Budget Speech: Five Positive, Key Take Outs For Local SMEs
Finance Minister Tito Mboweni today referenced the private sector as the key engine for job creation in his National Budget speech.
Ben Bierman, MD of Business Partners Limited, fully supports this statement, and says that there are five key take outs that local small and medium enterprises (SMEs) will benefit from:
1. Falling data costs
Minister Mboweni was adamant that the cost of data must fall, and committed to work relentlessly with the necessary parties to ensure this happens. As data gets cheaper, there will be more opportunities for SMEs and entrepreneurs to build their business and for new technology businesses to emerge. Making data more affordable and accessible can go a long way in driving economic and SME growth.
2. The R30 billion allocated to build new schools and maintain school infrastructure spend
National infrastructure spend is likely to be a big contributor to SME growth, and will create positive knock-on effects for job creation in the sector. Not only will SMEs be included in the supply stream, but as infrastructure projects are rolled out, economic growth will be positively impacted, having a downstream effect on small business.
3. Relaxed visa requirements
Relaxed visa requirements provide an enhanced opportunity for SMEs operating in the tourism industry, driving growth and the creation of new jobs. As tourism is a substantial contributor to the country’s GDP, the increasing the number of visitors to South Africa is extremely beneficial to the macro environment as well as for businesses operating both directly and indirectly in the tourism sector.
4. Allocation of R3.2 billion to operationalise the small business and innovation fund over the MTEF
The R3.2 billion budget allocation for the small business and innovation fund is a definite positive development for the country’s entrepreneurial eco-system and is anticipated to contribute to the creation of more innovative businesses that can respond to the opportunities presented by the 4th Industrial Revolution.
Also noteworthy is the R481.6 million allocated to the Small Enterprise Development Agency’s incubation programme expected to bolster the creation of new businesses and survival rate of existing businesses.
5. Industrial business incentives
The R19.8 billion allocated to industrial business incentives will not only benefit the national economy as a whole, but it will yield opportunities for local industrial SMEs and create job opportunities.
The R600 million assigned to the clothing and textile competitiveness programme is also a much needed boost to revitalise this struggling sector of our economy that has historically been a driver of economic growth.
What Franchises Need To Lookout For From Budget Speech
Franchise business owners are waiting with bated breath for the outcome of the 2019 National Budget Speech to be delivered by Minister of Finance, Tito Mboweni, as they seek more opportunities to increase their contribution to GDP.
Morne Cronje, FNB Head of Franchising, says the Budget Speech is an important economic indicator that franchises can use to gain insight on the government’s plans on spending and economic growth for the year ahead.
He highlights potential National Budget Speech outcomes that could boost confidence of franchises:
Any form of relief that is likely to bring positive change, rebuild confidence and address some of the key challenges impacting consumers will be welcome by franchises.
Cronje says consumer spending contributes a significant portion to the profit margins of franchises especially in the food sector.
Rating agencies are keeping a close watch on South Africa’s performance and prospects for growth, which will impact our Sovereign ratings for the rest of the year.
Measures that the government puts in place to promote economic growth this year will be of interest to franchises.
Franchise owners will be looking to benefit from regulatory changes that aim to improve growth, operating environment and enhance participation in all facets of the formal economy.
Based on the Mid-Term Budget Review in October 2018, there’s likely to be no major shake up from a business tax perspective. The anticipated relief in tax will go a long way to boost the profit margins of franchisees.
Spending on infrastructure creates vast opportunities for franchise business owners, as well as job creation in the country. The government has signalled an intention to partner with the private sector to develop an infrastructure fund to increase investment in public infrastructure.
“Franchises that operate in South Africa should prioritise the National Budget Speech as key decisions announced by the minister have a direct impact on their growth,” concludes Cronje.
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