JUNE 2010

INTRODUCTION

With the 2010 World Cup approaching its conclusion, we wonder how the average South African has benefited economically and what the long-term impact will be. Once it is over will unemployment increase markedly and will the stadia and related infrastructure become white elephants? Certainly, to some extent the spirit of unity between all sectors of our population has increased. Hopefully, this will continue and we can work together for the benefit of the country as a whole.

TECHNOLOGY

In Word, if you need a header or footer on the first page of your document that is different to that on subsequent pages, click File, Page Set-up and Layout. Place a tick in the box next to “Different first page”. When creating the header or footer via the View Menu for page one, you will notice that a heading stating “First Page Header” appears above the header box. Thereafter, the description changes to “Header”.

In Excel, you may wish to copy the formula contained in, say, cell B1 of Sheet 1 to the same position in Sheets 2 to 4. With the cursor on cell B1 of Sheet 1, move the cursor to the Sheet 2 tab, hold down the CRTL key and click Sheets 3 and 4. Then, press the F2 key and Enter. The formula will be copied to Cell B1 in Sheets 2 to 4.

TAXATION

Taxpayers’ Movement of South Africa

The TPM is a Non-Profit Organisation that advocates the expenditure of taxpayers’ funds in a manner that best benefits the country’s citizens. It aims to expose and prevent wasteful expenditure and to promote sound fiscal policies. For further information visit the movements website at www.tpmsa.org.

Provisional Tax

Changes in the provisional tax system that are to come into effect at the end of August 2010 make it imperative that the returns are prepared well in advance of the deadline. Therefore, it is imperative that clients report to us, any substantial change in levels of income for the 2011 year over those of the preceding year, by 21 August 2010.

Interest Exemption

The Taxation Laws Amendment Bill seeks to modify the provisions of this exemption retrospectively to years of assessment ending on or after 1 January 2010. As can be seen from the following objection that we have submitted, to the Minister via our professional institutes, this will have far reaching consequences for small businesses, in particular:

The intent of the interest exemption is to motivate savings amongst the middle to lower income groups.

This is the very group that is experiencing the highest levels of retrenchments. Many retrenchees start their own businesses. To do this, they withdraw savings that would otherwise be attracting interest that would be subjected to the interest exemption and injecting that capital into their new business.

The usual medium used for the new business is a close corporation that will be indebted to its founder for the loan capital injected. The founder would prefer to earn interest on his/her investment. The proposed amendment will result in the interest being fully taxable. Had he left his funds in a preservation fund or some other investment he would have enjoyed the benefit of the exemption.

There are number of consequences to this proposal:

• Less people will inject capital into the small business sector

• Less jobs will be created in the very sector where most economically active persons are employed and which it is the government’s intention to encourage

• Start-up businesses will rely upon financial institutions for their capital requirements. This may result in more business failures and job losses. This source may not be available in consequence of the provisions of the National Credit Act. Therefore, an injection of capital by the founder is the most likely source.

• Sometimes, owners are taxed on their full salaries but, because of cash flow constraints, only withdraw a portion thereof. These entrepreneurs will be penalized to the extent that the interest earned on the amount retained in the company will now be taxed in full.

• Some owners have already taken the exemption into account when planning their tax affairs for the 2010 tax year. These taxpayers will be prejudiced by the retrospective introduction of the amendment.

One wonders what degree of research and thought went into this amendment given that it seeks to negate the stated intention of the exemption.

Commerce and, in particular, small business organizations and representatives should vigorously oppose this proposed amendment that it is intended be introduced retrospectively for years of assessment ending after 1 January 2010.

Filing Season 2010 – Individuals and Trusts

Tax returns for these taxpayers are now available on the SARS Efiling site. Order forms for manual returns for those taxpayers who have not registered for Efiling are already in the post. Persons who earn less than R 120000 a year from a single employer and whose IRP5 reflects their total income and deductions need not submit a return. Enhancements to the Efiling system make it imperative that the latest version of Adobe Flash Player is downloaded and selected as the preferred option for downloading tax returns. This is available free of charge via the Efiling web site.

 DEADLINES

Promotion of Access to Information Act- 31 December 2011

When the Act was originally promulgated in 2005, we assisted existing clients in the preparation of the manual that the Act requires to be submitted by all entities to the Human Rights Commission. Since that time, the composition of our client base has changed and it is possible that some clients have not complied with this requirement. Should you be in doubt as to your compliance, you are urged to contact one of our consultants.

Annual Duty – end of the month following incorporation date

Consumer Protection Act – October 2010

New Companies Act – no new CC registrations – approx. last quarter of 2010

Income Tax Returns – all taxpayers: Postal submissions, i.e., hardcopy tax returns – 30 September 2010

Income Tax Returns –  non-provisional taxpayers: Electronic submissions – 26 November 2010

Income Tax Returns -  provisional taxpayers: Electronic submissions – 31 January 2011

NB: The term “taxpayer” includes individuals, companies, close corporations, individuals and all taxable entities

ECONOMY

Both the Consumer and Producer Price Indices (CPI and PPI) continue to fall. However, the current account deficit continues to widen due to a slump in exports resulting from the strengthening of the rand. Unemployment continues to rise, albeit at a slower rate. The number of jobless persons is likely to rise after the furore over the World Cup has subsided. The need for the government to take steps to stimulate the economy and thereby job creation is paramount. To some extent, this can be achieved by lowering of interest rates. The reduction in the inflation rate and the fact that it continues to remain well within the SARB target range has resulted in many commentators agreeing that this could occur as early at the next Monetary Policy Committee meeting. However, the current account deficit and the slow rate of recovery of western economies remains a concern.

BUSINESS

Cash Flow

Healthy cash flow management is essential for the growth of any business. Business owners who ignore this do so at their peril. It is advisable to use the services of a professional advisor to assist in the monitoring of this important aspect of financial management. Cash flow needs to be monitored on a daily basis and compared with forecasts in order to highlight trends that indicate the possibility of an upcoming crisis. Good cash flow management will indicate when a need exists for a capital injection or when there are surplus funds that can be invested.

TAILPIECE

“As long as you’re going to think anyway, think big.” (Donald Trump)