I trust this finds you exceptionally well now as we are firmly into the last quarter of the year.
I trust this finds you exceptionally well now as we are firmly into the last quarter of the year. I would not have believed it possible that we would be here already, some seventy shopping days from Christmas (which sounds like a long time but in this new time/ space/ reality continuum it is actually about two weeks away). I will also bet the farm that this time next year, in a state of bemusement, I will be commenting that after the shortest year in recorded history we are once again two months away from the Christmas shut-down. Please ensure that your year-end planning is in place for cash-flow commitments and ensuring that you are ready to pick up the baton in the New Year and continue.
As referred to last month, I am currently being dragged kicking and screaming into the 20th century and will soon be dragged kicking and screaming into the 21st century, if my colleagues have anything to do with this. We are going to be changing our communication and invoicing methods over the balance of the year. Strangely enough, given the doom/ gloom/ cautionary/ admonitory position that we at QFS are advocating about world affairs, I have had a large number of requests for more communications (particularly from folk who are in Australia/ America/ UK etc). To that end, we are going to be splitting the invoicing function from the monthly newsletter function and over the next few months, invoices will be sent separately from the newsletter. Newsletters will be sent to all clients to use/ lose/ abuse and invoices will be sent on a more ad-hoc basis as opposed to the huge monthly process that it currently is. Onwards and upwards….
What a month. The US government shuts down, The Fed (that would be the Federal Reserve and not a certain tennis player) sets the tone for a taper easing, the markets go ballistic positioning themselves and then the Fed does the greatest U-turn in history. The markets go ballistic again. There has been a severe damage to the prof-cred of the Fed with this little caper. In the back-ground, well, not the back-ground so much as trumpeted from every financial headline, new all-time highs are being regularly achieved in the world equity markets. Based on debt-issuance and debt fuelled consumption. As I have said ad nauseum before, I simply don’t get it, put more simply, it beggars belief. At some point the merry go round has to stop as one cannot continue on a debt-fuelled growth trajectory ad infinitum. And the longer this goes on for, the bigger the pop as the bubble deflates.
I have this excerpt from an article as to the continued efficacy of currently liquidity injection policy: “So, too, with QE. These policies saved the world in early 2009. Now they are a farce, a show put on by well-meaning scientists who have never worked a day outside government or academia, who have zero intuition for, knowledge of, or experience with the consequences of their experiments. Ben Hunt, Ph.D. Sep 2013.” [Feel free to google him, Dr Hunt is well-regarded]. It would seem that Dr Hunt shares my somewhat abyssal view of the policy mandarins and governments in general, where good common sense is sacrificed upon the alter of political expediency.
On the home front, I am told, and it is widely reported, that BMW (Germany) have taken South Africa off the list of potential investment destinations for the new models they are planning i.e. they are not going to risk investing hundreds of millions in fixed capital and equipment to produce a new range of vehicles due to the uncertain (would that be militant?) labour climate. That is a direct consequence of the strike action. Hundreds of millions in investment, thousands of jobs, billions in export earnings and a sizeable contribution to the Fiscus lost. Another chapter of the tragicomedy where the perception of South Africa as an investment destination is tarnished in the eyes of the world. And anyone who has scrubbed the silverware before knows that to remove the tarnish takes a lot more elbow grease than simply keeping it polished. There are a few other choice own-goals scored this past month which I will not go into here for the sake of my own sanity such as South Africa’s position as the powerhouse and productive capital of Africa being usurped by Mauritius. You will notice the complete absence and shock, horror and gasps from myself as our government is incompetent, obstructionist, interventionist and whilst inspired by noble ideals is completely and utterly incapable of delivery or governing (I’m quite delighted that I managed to complete that whole sentence without uttering an expletive).
With what should be really good news for the home front, South Africa maintained its number one ranking for the strength of the Auditing and Reporting Standards for the fourth year in a row according the World Economic Forum’s (WEF) Global Competitiveness Report for 2013-2014, released on 4 September.
However: Independent Regulatory Board for Auditors (IRBA) CEO Bernard Agulhas says the ranking brings confidence to foreign investors that they can trust and rely on our auditing strength despite the economic meltdown that the country is experiencing. Two things: (1) whilst the achievement is laudable, it does mean that in order to maintain these lofty standards, South Africa has one of the highest compliance costs in the world to the detriment of business in South Africa – and I have always maintained that money and effort could be better spent elsewhere. (2) the following (from the CEO of the Independent Regulatory Board for Auditors) has to be the worst marketing I have ever seen: “…………………foreign investors that they can trust and rely on our auditing strength despite the economic meltdown that the country is experiencing.” [Emphasis is mine].
On to other matters. CIPC. Still broken. Words fail me that such an important and integral part of the South African economy can be so completely, utterly and absolutely mismanaged.
SARS, ah SARS. Whew – this is a bad month. SARS have changed e-filing payments from taxpayers from a debit pull to a credit push methodology. In their time-honoured manner of ignoring the real world SARS announced on 3 September 2013 that, starting on 4 September 2013, debit pull transactions will be phased out by 30 September. This little announcement does not do justice to the absolute disaster that it is.
To explain what this all means: With debit pull a taxpayer or their approved representative may authorise SARS to collect the money owed directly from their bank on their behalf, which means that SARS is initiating the collection directly from their bank. SARS does so by instructing the bank to collect the amount from the taxpayer’s bank account.
SARS have decided that the taxpayer needs to “push” the money (this being the credit push) i.e. instruct their bank to pay the money to SARS as opposed to an instruction from SARS to their bank to collect the money.
The problems that have resulted have been huge – the banks are not prepared for this and are, in some cases, unaware of the difference or how to set up/ help clients set up their credit-pushes. It also means that for some banks the payment can be set up on e-filing, but the taxpayer has to go into their banking profile themselves to authorise the payment. Clearly this can only be done once the taxation amount has been quantified and the return submitted to SARS. Given the fundamental way in which this complete fiasco changes the way that business in South Africa works one would have most sincerely hoped that there might be one person in SARS who had an inkling of what happens in the real world e.g. taxpayers are abroad, at sea, incommunicado, South African telecoms and internet are terrible and there are a host of reasons why said taxpayers cannot necessarily be eagerly sitting at their computer or their bank, simply gagging to authorise their EMP or VAT or tax payments. In addition, in some instances (depending upon the bank), this means that the money needs to actually be in the account, so, to set up a payment, one has to transfer the money out of the money market/ other account to ensure there are funds in the account, set up the payment and then transfer the money back into the money market account until the day before payment when it has to be transferred back again (with concomitant transaction cost). Sadly, it appears that the team brain-cell was out of the office on the day this little brainwave passed into policy. There are a host of further issues and ill-considered consequences but in the interests of keeping this letter under ten pages, I will cease and desist, disgustedly, forthwith. Muppets!!!!
In addition, not content with wreaking havoc, SARS have made an absolute host of changes to tax returns – whereas for example they were content with the tax practitioner address as a contact address, they now want the taxpayer’s address. They want the taxpayer’s cell-phone details, and pretty much everything including a DNA sample and address of maternal grandmother in 1947. We have, as a practice, always kept this information well away from SARS’s clutching paws as due to (a) the sale of this data by SARS to direct marketers (yes, that is true), (b) the hazards of identity theft by SARS employees and (c) we have acted as the interface given our specialist knowledge. SARS really are becoming ever more invasive and the time investment for completing the returns is mounting significantly.
To add insult to injury, we are seeing about two in five tax returns go for audit. We have not been able to discern a pattern. It matters not whether there is an amount owing or an amount refundable or whether there is income of R100,000 or R50,000,000 and/ or an amount owing/ payable – there are about two in five returns that are going for audit. This is adding an extra layer of time and cost and is adding huge amounts of unhappiness for everyone as a result.
As has been previously mentioned, SARS added a truly vicious and malevolent beast to their arsenal known as an IT14SD. This is a reconciliation which requires reconciliation between the payroll numbers on the financial statements to the payroll reports (IRP5s and EMP501s) and a reconciliation of the VAT inputs and outputs (to cost of sales). This is an incredibly labour intensive reconciliation which easily takes 40 man hours. It is a VERY VERY expensive and time-consuming submission (and seeing as SARS developed this without informing the software providers, as of September 2013, there is only one software provider in South Africa that has set up their software to generate the inputs/ reports in the format required). I say this somewhat tongue in cheek, but if one of these IT14SD requests is received, due to the time and cost involved in completing it, it is cheaper and more fulfilling to emigrate to Lapland.
SARS are also focusing on Value-Added tax in the worst way possible. What they are doing is denying VAT claims where a valid VAT invoice has not been issued (which actually sounds quite reasonable, until the implications are noted). This means that if the VAT number is wrong/ missing, the addressee is wrong/ missing, the address and/ or contact details are wrong/ missing then the VAT claim is denied. This is very important and your urgent attention to this oft-overlooked clerical control should be reviewed for best practice, particularly in the case of items submitted to SARS.
According to a missive from Moonstone (FSB compliance), there is a new SARS requirement in that your home loan balance and interest charged will be submitted to SARS from Feb ’13. This means that if one is declaring income of say R2.0m per year but has a residence costing (say) R250m then if you aren’t a really important government official who has friends leaving on a jet plane, SARS will investigate the mismatch.
Whew, that was a lot about SARS. All true. None of it good. The facts, I only give you the facts and the facts are that SARS are completely divorced from business reality and completely unaware of the cost and obstructive implications that their policies are inflicting upon real people, working in a real world where delivery, client satisfaction and price matter.
Should you require any further information or wish to discuss any of the aforementioned, please do not hesitate to come back to me. Further, we welcome any and all feedback and/ or constructive criticism. If there is something that you feel that we can do better for you, please let me know soonest.
Best wishes
To end off on something a little lighter, Will Rogers, who died in 1935, was one of the greatest political sages the USA ever knew. Some of his sayings:
- Never slap a man who’s chewing tobacco.
- Never kick a cow chip on a hot day.
- There are two theories to arguing with a woman. Neither works.
- Never miss a good chance to shut up.
- Always drink upstream from the herd.
- If you find yourself in a hole, stop digging.
- The quickest way to double your money is to fold it and put it back into your pocket.
- There are three kinds of men: The ones that learn by reading, and the few who learn by observation. The rest of them have to pee on the electric fence and find out for themselves.
- Good judgment comes from experience, and a lot of that comes from bad judgment.
- If you’re riding’ ahead of the herd, take a look back every now and then to make sure it’s still there.
- Letting the cat out of the bag is a whole lot easier than putting it back.
- Never squat with your spurs on.
October 11, 2013 By No comments yet Economic Commentary
I trust this finds you exceptionally well now as we are firmly into the last quarter of the year.
I trust this finds you exceptionally well now as we are firmly into the last quarter of the year. I would not have believed it possible that we would be here already, some seventy shopping days from Christmas (which sounds like a long time but in this new time/ space/ reality continuum it is actually about two weeks away). I will also bet the farm that this time next year, in a state of bemusement, I will be commenting that after the shortest year in recorded history we are once again two months away from the Christmas shut-down. Please ensure that your year-end planning is in place for cash-flow commitments and ensuring that you are ready to pick up the baton in the New Year and continue.
As referred to last month, I am currently being dragged kicking and screaming into the 20th century and will soon be dragged kicking and screaming into the 21st century, if my colleagues have anything to do with this. We are going to be changing our communication and invoicing methods over the balance of the year. Strangely enough, given the doom/ gloom/ cautionary/ admonitory position that we at QFS are advocating about world affairs, I have had a large number of requests for more communications (particularly from folk who are in Australia/ America/ UK etc). To that end, we are going to be splitting the invoicing function from the monthly newsletter function and over the next few months, invoices will be sent separately from the newsletter. Newsletters will be sent to all clients to use/ lose/ abuse and invoices will be sent on a more ad-hoc basis as opposed to the huge monthly process that it currently is. Onwards and upwards….
What a month. The US government shuts down, The Fed (that would be the Federal Reserve and not a certain tennis player) sets the tone for a taper easing, the markets go ballistic positioning themselves and then the Fed does the greatest U-turn in history. The markets go ballistic again. There has been a severe damage to the prof-cred of the Fed with this little caper. In the back-ground, well, not the back-ground so much as trumpeted from every financial headline, new all-time highs are being regularly achieved in the world equity markets. Based on debt-issuance and debt fuelled consumption. As I have said ad nauseum before, I simply don’t get it, put more simply, it beggars belief. At some point the merry go round has to stop as one cannot continue on a debt-fuelled growth trajectory ad infinitum. And the longer this goes on for, the bigger the pop as the bubble deflates.
I have this excerpt from an article as to the continued efficacy of currently liquidity injection policy: “So, too, with QE. These policies saved the world in early 2009. Now they are a farce, a show put on by well-meaning scientists who have never worked a day outside government or academia, who have zero intuition for, knowledge of, or experience with the consequences of their experiments. Ben Hunt, Ph.D. Sep 2013.” [Feel free to google him, Dr Hunt is well-regarded]. It would seem that Dr Hunt shares my somewhat abyssal view of the policy mandarins and governments in general, where good common sense is sacrificed upon the alter of political expediency.
On the home front, I am told, and it is widely reported, that BMW (Germany) have taken South Africa off the list of potential investment destinations for the new models they are planning i.e. they are not going to risk investing hundreds of millions in fixed capital and equipment to produce a new range of vehicles due to the uncertain (would that be militant?) labour climate. That is a direct consequence of the strike action. Hundreds of millions in investment, thousands of jobs, billions in export earnings and a sizeable contribution to the Fiscus lost. Another chapter of the tragicomedy where the perception of South Africa as an investment destination is tarnished in the eyes of the world. And anyone who has scrubbed the silverware before knows that to remove the tarnish takes a lot more elbow grease than simply keeping it polished. There are a few other choice own-goals scored this past month which I will not go into here for the sake of my own sanity such as South Africa’s position as the powerhouse and productive capital of Africa being usurped by Mauritius. You will notice the complete absence and shock, horror and gasps from myself as our government is incompetent, obstructionist, interventionist and whilst inspired by noble ideals is completely and utterly incapable of delivery or governing (I’m quite delighted that I managed to complete that whole sentence without uttering an expletive).
With what should be really good news for the home front, South Africa maintained its number one ranking for the strength of the Auditing and Reporting Standards for the fourth year in a row according the World Economic Forum’s (WEF) Global Competitiveness Report for 2013-2014, released on 4 September.
However: Independent Regulatory Board for Auditors (IRBA) CEO Bernard Agulhas says the ranking brings confidence to foreign investors that they can trust and rely on our auditing strength despite the economic meltdown that the country is experiencing. Two things: (1) whilst the achievement is laudable, it does mean that in order to maintain these lofty standards, South Africa has one of the highest compliance costs in the world to the detriment of business in South Africa – and I have always maintained that money and effort could be better spent elsewhere. (2) the following (from the CEO of the Independent Regulatory Board for Auditors) has to be the worst marketing I have ever seen: “…………………foreign investors that they can trust and rely on our auditing strength despite the economic meltdown that the country is experiencing.” [Emphasis is mine].
On to other matters. CIPC. Still broken. Words fail me that such an important and integral part of the South African economy can be so completely, utterly and absolutely mismanaged.
SARS, ah SARS. Whew – this is a bad month. SARS have changed e-filing payments from taxpayers from a debit pull to a credit push methodology. In their time-honoured manner of ignoring the real world SARS announced on 3 September 2013 that, starting on 4 September 2013, debit pull transactions will be phased out by 30 September. This little announcement does not do justice to the absolute disaster that it is.
To explain what this all means: With debit pull a taxpayer or their approved representative may authorise SARS to collect the money owed directly from their bank on their behalf, which means that SARS is initiating the collection directly from their bank. SARS does so by instructing the bank to collect the amount from the taxpayer’s bank account.
SARS have decided that the taxpayer needs to “push” the money (this being the credit push) i.e. instruct their bank to pay the money to SARS as opposed to an instruction from SARS to their bank to collect the money.
The problems that have resulted have been huge – the banks are not prepared for this and are, in some cases, unaware of the difference or how to set up/ help clients set up their credit-pushes. It also means that for some banks the payment can be set up on e-filing, but the taxpayer has to go into their banking profile themselves to authorise the payment. Clearly this can only be done once the taxation amount has been quantified and the return submitted to SARS. Given the fundamental way in which this complete fiasco changes the way that business in South Africa works one would have most sincerely hoped that there might be one person in SARS who had an inkling of what happens in the real world e.g. taxpayers are abroad, at sea, incommunicado, South African telecoms and internet are terrible and there are a host of reasons why said taxpayers cannot necessarily be eagerly sitting at their computer or their bank, simply gagging to authorise their EMP or VAT or tax payments. In addition, in some instances (depending upon the bank), this means that the money needs to actually be in the account, so, to set up a payment, one has to transfer the money out of the money market/ other account to ensure there are funds in the account, set up the payment and then transfer the money back into the money market account until the day before payment when it has to be transferred back again (with concomitant transaction cost). Sadly, it appears that the team brain-cell was out of the office on the day this little brainwave passed into policy. There are a host of further issues and ill-considered consequences but in the interests of keeping this letter under ten pages, I will cease and desist, disgustedly, forthwith. Muppets!!!!
In addition, not content with wreaking havoc, SARS have made an absolute host of changes to tax returns – whereas for example they were content with the tax practitioner address as a contact address, they now want the taxpayer’s address. They want the taxpayer’s cell-phone details, and pretty much everything including a DNA sample and address of maternal grandmother in 1947. We have, as a practice, always kept this information well away from SARS’s clutching paws as due to (a) the sale of this data by SARS to direct marketers (yes, that is true), (b) the hazards of identity theft by SARS employees and (c) we have acted as the interface given our specialist knowledge. SARS really are becoming ever more invasive and the time investment for completing the returns is mounting significantly.
To add insult to injury, we are seeing about two in five tax returns go for audit. We have not been able to discern a pattern. It matters not whether there is an amount owing or an amount refundable or whether there is income of R100,000 or R50,000,000 and/ or an amount owing/ payable – there are about two in five returns that are going for audit. This is adding an extra layer of time and cost and is adding huge amounts of unhappiness for everyone as a result.
As has been previously mentioned, SARS added a truly vicious and malevolent beast to their arsenal known as an IT14SD. This is a reconciliation which requires reconciliation between the payroll numbers on the financial statements to the payroll reports (IRP5s and EMP501s) and a reconciliation of the VAT inputs and outputs (to cost of sales). This is an incredibly labour intensive reconciliation which easily takes 40 man hours. It is a VERY VERY expensive and time-consuming submission (and seeing as SARS developed this without informing the software providers, as of September 2013, there is only one software provider in South Africa that has set up their software to generate the inputs/ reports in the format required). I say this somewhat tongue in cheek, but if one of these IT14SD requests is received, due to the time and cost involved in completing it, it is cheaper and more fulfilling to emigrate to Lapland.
SARS are also focusing on Value-Added tax in the worst way possible. What they are doing is denying VAT claims where a valid VAT invoice has not been issued (which actually sounds quite reasonable, until the implications are noted). This means that if the VAT number is wrong/ missing, the addressee is wrong/ missing, the address and/ or contact details are wrong/ missing then the VAT claim is denied. This is very important and your urgent attention to this oft-overlooked clerical control should be reviewed for best practice, particularly in the case of items submitted to SARS.
According to a missive from Moonstone (FSB compliance), there is a new SARS requirement in that your home loan balance and interest charged will be submitted to SARS from Feb ’13. This means that if one is declaring income of say R2.0m per year but has a residence costing (say) R250m then if you aren’t a really important government official who has friends leaving on a jet plane, SARS will investigate the mismatch.
Whew, that was a lot about SARS. All true. None of it good. The facts, I only give you the facts and the facts are that SARS are completely divorced from business reality and completely unaware of the cost and obstructive implications that their policies are inflicting upon real people, working in a real world where delivery, client satisfaction and price matter.
Should you require any further information or wish to discuss any of the aforementioned, please do not hesitate to come back to me. Further, we welcome any and all feedback and/ or constructive criticism. If there is something that you feel that we can do better for you, please let me know soonest.
Best wishes
To end off on something a little lighter, Will Rogers, who died in 1935, was one of the greatest political sages the USA ever knew. Some of his sayings: