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Sars to get tough on wealthy South Africans and their trusts

Its compliance programme will focus on seven key areas including the construction industry.

JOHANNESBURG ? On Sunday the South African Revenue Service (Sars) revealed that it will focus more of its attention on the construction industry, transfer pricing by large business, abuse of trusts by wealthy South Africans, tax practitioners and trade intermediaries as part of its plans for the next five years to further grow the levels of compliance with tax and customs legislation.

?By focusing on these issues we believe we can make a significant impact on increasing the fairness of the tax system and on protecting our economy and society from unwanted, harmful or illegal goods?, said Sars Commissioner Oupa? Magashula.

In a statement, Sars said research it had conducted identified that:

?The construction industry has significantly lower levels of compliance than other sectors in the economy. The industry receives a significant portion of public infrastructure spending from the fiscus, which makes compliance in this industry even more critical. It intends to conduct extensive compliance checks and integrated audits in this industry with a particular focus on individuals and entities that are awarded government tenders. Filing, declaration and payment behaviour will be a focus for corporate income tax, VAT and PAYE. There will be particular focus on contractors and the various levels of sub-contractors involved in paving, decorating, plumbing, heating and ventilation, and ceilings and floors.

?26% of corporate income tax (CIT) returns are outstanding, VAT audits have shown up to 60% reporting inaccuracy, 38% of CIT payments are either late or outstanding, and audits on transfer pricing have yielded around R2.3 billion. Transfer pricing by large business will thus come under the spotlight with a comprehensive international review of the practice, up-skilling of Sars?s staff and greater cooperation with other revenue administrations. Apart from transfer pricing, it will also continue to focus on international tax compliance as well as follow-ups on under-declaration of provisional tax (paragraph 19(3))1 activities to ensure accurate and on time provisional tax payments.

?A potentially significant number of wealthy individuals are not registered taxpayers thus Sars will use third party data including information from financial institutions, credit bureaux and other sources of data (such as residential and holiday homes, aircraft, vehicle and boat sales) to identify such individuals for registration. Offshore accounts in tax havens that are used by individuals to avoid tax will be given priority attention using international cooperation agreements. Trusts by wealthy South Africans can expect substantially more compliance checks and integrated audits ? but also more opportunities for upfront engagement and pre-filing agreements.

?Noncompliant tax practitioners have 18 401 personal tax returns outstanding ? many of them long outstanding ? and have accumulated debt of R260m. Thus regulation of tax practitioners and trade intermediaries will be pursued to ensure that tax practitioners are all persons of good standing and members of a professional body. Sars will develop a rigorous risk profiling system to identify high risk practitioners. Tax practitioners represent around 3m taxpayers.

?The trade in and consumption of illicit cigarettes is detrimental to the fiscus and to the health of South Africans. Sars will continue to focus on clamping down on cigarettes smuggled via warehouses as well the diversion of cigarettes destined for export back into the local market. It also plans to modernise the warehousing management and acquittal system.

?Undervalued imports pose a significant risk not only to the fiscus but to local industry and job creation. Sars will continue to work together with other government agencies and industry stakeholders to clamp down on this practice including through the establishment and frequent revision of a reference pricing database to detect undervaluation, increasing inspections as well as supporting an integrated border management model.

?Small businesses registration is low. Sars will be conducting registration drives in conjunction with other government agencies in which businesses will be inspected and, where necessary, registered on site. Abuse of VAT (including withholding VAT but failing to pay it over and abuse of VAT refunds) will be a key focus area.

Details here

?Ratings agencies should reward SA? ? Gordhan

The ratings agencies should reward SA for its balanced approach which combined support for growth with fiscal consolidation over the medium term, Finance Minister Pravin Gordhan says.

Gordhan was speaking to BusinessLIVE after he unveiled better-than-expected government revenue growth of 10.2% in the tax year ended March 31 2012.

As government spending was R4 billion less than forecast at R968.5 billion, the estimated budget deficit to gross domestic product (GDP) ratio fell to 4.5% from a forecast 4.8% in the 2012 Budget and 5.5% forecast in the October 2011 Medium Term Budget Policy Statement (MTBPS).

The Treasury has forecast that the primary fiscal balance will be in surplus of 0.3% of gross domestic product (GDP) in 2014/15 from a deficit of 1.9% in 2012/13.

The primary balance is revenue minus non-interest spending. If it is in deficit, then debt will increase. As SA has had a primary deficit for several years, the government debt has grown by R1-trillion since 2008.

Prior to 2008, SA used to run a primary balance surplus, which reduced debt and the associated debt servicing costs, so SA was well-placed to weather the 2009 global Great Recession.

Earlier this week ratings agency Standard and Poor?s (S&P) changed its outlook on SA from stable to negative implying a one in three chance that SA?s rating would be downgraded over the next 18 months.

?Ratings agencies are focusing on factors extraneous to good economic management and our ability to repay debt. In our case they are also ignoring the historic legacy of large inequalities in housing, health, education and economic infrastructure. All these factors are being addressed in a fiscally sustainable manner,? he said.

On Friday the 13th January 2012 the importance of rating agencies was once again highlighted as mere rumours of probable downgrades of eurozone countries at 16:17 SA time sent the euro plummeting to a 16-month low against the US dollar.

After European equity markets closed, Standard and Poor?s (S&P) confirmed that the rumours were true as it lowered the long-term sovereign ratings on nine Eurozone countries and changed the outlook for 14 out of the 17 members to negative from stable.

S&P downgraded the ratings ofCyprus,Italy,Portugal, andSpainby two notches; lowered the long-term sovereign ratings onAustria,France,Malta,Slovakia, andSlovenia, by one notch; and affirmed the long-term sovereign ratings onBelgium,Estonia,Finland,Germany,Ireland,Luxembourg, and theNetherlands.

It changed the outlooks on the long-term ratings onAustria,Belgium,Cyprus,Estonia,Finland,France,Ireland,Italy,Luxembourg,Malta, theNetherlands,Portugal,Slovenia, andSpainto negative. The negative outlook reflects S&P?s belief that there is at least a one-in-three chance that these ratings will be lowered in 2012 or 2013. The outlooks on the long-term ratings onGermanyandSlovakiaremained at stable.

At 16:26 SA time Fitch Ratings issued a media release stating that it changed its outlook on SA from stable to negative, which sent the rand more than 1% weaker against the US dollar in thin Friday afternoon trade. Moody?s Investors Service had made a similar change in November 2011, but Moody?s rates SA one notch higher than S&P and Fitch, so its outlook change had less of an impact than Fitch.

The Treasury said a countercyclical fiscal stance remained a strategic intervention tool for SA to counter the adverse effects of structurally integrated global economy. Within the context of maintaining a good track record despite the underlying uncertain macroeconomic environment, SA remained committed to the prudent execution of growth and employment supportive economic policies.

On the youth employment subsidy, Gordhan said it was being held up in the tripartite NEDLAC forum where government, organised business and organised labour were represented.

?Organised labour has raised concerns about the substitution effect of a youth employment subsidy, but my hope is that it will be implemented sooner rather than later, as this will take unemployed youth off the streets,? he said.

Five steps to your personal monthly budget toolkit

Nigel Willmott says financial freedom starts with getting the basics right.

Getting started and getting organised can be daunting. Making a start to work towards personal financial discipline takes a bold step in the right direction. Getting your personal budget and spending plan in order is the first step in the right direction.

Financial freedom starts with getting the basics right ? getting your personal budget right.

It isn?t difficult or time consuming to get the basics together. Here is what you will need;

?budget planner

?notebook

?envelope

?your monthly bank statement

?30 minutes a month

1.????? Budget Planner

You can set up your own budget planner using Excel or you can sift through the internet for a format or system that works for you. There are many ?free to download? examples available.

Tip: When you set up your expenses think of Fixed, Variable and Discretionary. When you begin to ?shed? expenses to get your budget to balance you must work backwards to cut. Account for ALL expenses ? no matter how arbitrary or trivial ? it all adds up. Don?t park anything in the denial space.

2.????? Notebook ? ?money diary?

When you are starting out a handy way to get into the financial discipline rhythm is to create a ?money diary?. Keep a notebook of all your expenditure. Make a few simple columns;

?Date

?Expense description

?Amount

At the end of the month you are going to track each entry back to your initial budget to begin to compare accuracy and identify where there is wastage spend. This will ensure that you accurately account for each bit of expenditure during the course of the month. You will quickly identify negative trends and bad habits.

3.????? Envelope

Keep an envelope in your ?money diary?. During the month keep all your slips ? ATM withdrawals and till slips. Write a short description on each slip which will identify the spend type.

4.????? Monthly bank statement

On the last day of the month draw a bank statement for the month that has passed.

5.????? 30 minutes ? directions for use

?At the beginning of the month set up your budget

?During the month record all expenditure in your money diary

?Every week clear out your wallet or purse and deposit the slips into your envelope

?At the end of the month draw a bank statement for the month that was

?Reconcile the entries in your money diary and your slips to your budget that you set at the beginning of the month

?Reconcile your bank statement to your budget. Make sure that all transactions are accounted for

?Outcome ? did you achieve your budget? Reset for the coming month.

?Repeat the process

Financial education is the key to financial freedom. keep yourself financially capable and adopt a healthy attitude to your personal money management.

*Nigel Willmott is the managing director of motivate | today, an independent holistic financial life skills company focused on the financial education? needs of employer groups, universities and schools. For further details go to www.motivatetoday.co.za

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