Little LogBook | Illegal Racing And Alternatives In South Africa

 

It has been two years since South African Hip-Hop artist ‘Jub Jub’ was convicted of murder and sentenced to 25 years in prison for killing four school children, during an illegal drag race in Soweto, Johannesburg.

The high-profile trial shed light on the prevalence of Illegal Street racing happening all over South Africa.The un-sanctioned racing scene, whether it’s worldwide or local, has become frustrated over the years, as it claims that their events are only classified illegal because they do not have proper licensing required to hold such events. 

Many have said that their events are no more dangerous than races and exhibitions held at sanctioned motorways and during sanctioned street racing events. 

However, investigations into the legitimacy of these events have uncovered conditions that make them explicitly dangerous for a number of reasons, including a lack of barriers or sufficient space between where the races take place and where the crowds are allowed to gather; a lack of or no systematic regulation of vehicle safety and in most cases, a complete lack of rules outside of the ‘first to cross the line wins’.

If one were to look at the other side of the spectrum, in Gauteng alone, there are a number of legal racetracks that are available for public entry, such as Tarlton Racetrack; Swartkops and other private courses, which drivers wanting to try their hand at racing can go with their car’s and race under the watchful eye of trained professionals. 

The driver’s will also race without worrying about interference from the authorities. Many race tracks have even set up courses suited to the more ‘street’ oriented events, such as drifting, spinning and the like; so there is really no legitimate difference between the levels of events happening legally versus those in the unsanctioned circles.

 

Little LogBook | Understanding Taxes

Every time there is a budget speech, some sort of tax code reform, or even just talk of taxes in the media, there tends to be a wave of articles written by newspapers, magazine and online media highlighting what has been happening.

The problem is though, that any talk of taxes, reforms, budgets and the like tend to be written and explained by industry professionals, aimed at industry professionals, and occasionally simplified enough that students and junior members of the tax industry can understand.

 

This article will at least attempt to make the seemingly foreign language that is taxation a bit more understandable to the general public, as we are ultimately affected by the decisions made in that regard.

 

As much as Tax is an economic phenomenon, in that it allows for stable growth of a country’s infrastructure, budget and overall wealth, it is also a highly political field, due to the nature of the tax system. Tax is meant to take money from individuals and businesses in society in order or spend that money for the common good, and ultimately to benefit the poorer members of society by providing them with services and basic goods that they cannot afford.

 

As a result of this system, tax is seen as ‘progressive’, which means that the more money you earn, the more of your income is taken as tax. Because of this, especially in South Africa, which has a relatively poor tax turnover rate (the number of active taxpayers versus overall population), the top 5% of taxpayers (those earning over R250 000 per annum) are responsible for over 40% of the total tax income of the country. 

 

 

 

Over the years, the South African government have gradually made provisions in the tax laws to stop taxpayers from doing what is known as ‘tax avoidance’, which is perfectly legal, and is done by dedicating a percentage of your salary to non-taxable items. As a result the tax payers needing to pay less tax at the end of the fiscal year.

An interesting effect of the progressive nature of tax is the fact that anyone earning over a certain amount will fall into the top tax bracket of 40% (earning over R638 601 per annum), effectively only pay around 28-30% tax on average, because of how any money above that number is taxed as a percentage on its own. For example, if you earn R700 000 per annum, you will be taxed 38% (or R185 205) on the R638 600, then another 40% (or R24560) on the extra R61 400 over and above that, giving you a lower total tax payment of R209 765 (only 29.9% of the total)  than R280 000 you would have paid if taxed at 40% on the whole amount.

Another significant part of the tax laws is what is known as ‘fiscal drag’, which happens when tax rates are not adjusted to fit with inflation, causing many people to be bumped up into higher tax brackets even though they are not earning enough to comfortably afford it.

 

Value Added Tax (VAT) is a system of taxation that is, at face value much simpler and easier to implement than Income Tax, as it is a uniform percentage added on to products nationwide. The problem, however, is that it is known as ‘regressive’ instead of progressive, because the richer classes (or tax brackets) pay exactly the same amount of VAT as those in lower brackets. Once the VAT is increased, it affects the poorer members of society much more than it does the rich. This is mainly why there has been vehement opposition to the idea of raising the VAT rate (which is 14% in South Africa).

One should also be careful when it comes to the way that the government talks about tax. It may be that there is a cut in taxes on the horizon, but at what price? Most commonly, Income Tax reductions are accompanied by increases in other types of tax such as Petrol Tax, the newly instated CO2 emissions tax and taxes on items such as alcohol, cigarettes, tobacco and at times even import tax.

Tax Invoice Special Cases

 

1.    Second-hand goods

 

 

The general rule is that a vendor must hand in tax invoices before being allowed to claim any tax, but there are a few exceptions.  If a vendor purchases second-hand goods from a non-vendor, the vendor needs to record the following transaction details:

 

•    Name, address and ID number of the supplier (verify ID number with ID book)



•    Transaction date



•    Quantity or volume of goods



•    Description of goods



•    Supplier’s declaration that the supply is not taxable



•    If the value of the goods amount to R1000 or more, the vendor must keep a copy of the supplier’s ID.



 

2.    Repossession of Goods



 

When goods are repossessed that are still under an instalment credit agreement, the following applies:

 

•    If the goods are repossessed from a vendor, the person responsible for the repossession must create a tax invoice for the debtor



•    If the goods are repossessed from a non-vendor, the person responsible for the repossession must keep all details as per point 1 (Second-hand goods)

 



3.    Other cases



 

•    For purchase prices less than R50, no tax invoice is required



•    If the Commissioner is satisfied with the records, permission may be granted for tax invoices to not be issued should it appear impractical



•    Supporting documentation to claim VAT on goods imported is a bill of entry accompanied by a proof of payment.



•    IF an agent holds the tax invoices, the schedule from the agent must be held.



 

4.    Electronic Tax Invoices

 

 

The requirements for electronic tax invoices are as follows:

 

•    The arrangement applies to tax invoices and debit or credit notes



•    Recipients must confirm in writing that they wish to receive electronic invoices



•    These invoices must be encrypted with atleast 128 bit encryption.



•    All electronic invoices must be kept for a period of 5 years, also when a service provider is used



•    If the electronic copy is printed, it must bear the words “Computer generated copy tax invoice”



 

5.    Lost or Misplaced Tax Invoices



 

If a tax invoice is lost, you may not request another from the supplier, unless it is clearly marked as a copy.

If faxed, the tax invoice must be printed by a plain paper facsimile machine.



 

6.    Alternatives to Tax Invoices



 

When applying for an alternative to a tax invoice the following requirements must be met:



•    Sufficient records must be available to establish the particulars of the supply



•    It must be proven that it is impractical to provide a tax invoice

If the following criteria are met, it will not be necessary to obtain a ruling regarding the issuing of tax invoices:



•    The transaction must include a number of taxable supplies by a registered vendor with a written contract in place, stating the supplier’s name, address and VAT registration



•    The recipient must have a copy of such contract



•    The recipient must retain proof of payment i.e paid cheques or bank statements



 

7.    Tax Invoices for mixed supplies



 

A full tax invoice must be issued if the supply is zero-rated. If the supply is exempted from VAT, no tax invoice is to be issued. If various supplies are made by the same supplier and the supply is treated individually for VAT purposes, the tax invoice must clearly distinguish between the differences plus the tax charged on each supply.



 

8.    Tax Invoices prepared by the recipient



 

In the case where a supplier takes produce to the vendor that will only be sold at a later stage and the price obtained for the goods depends on factors outside the control of the supplier, SARS may permit the recipient to issue a tax invoice for the supply.  The vendor must have written authorization from SARS before applying this, providing the following details:

 

•    Description of the nature of the businesses of both the supplier and the recipient



•    Full description of transactions



•    Existing invoicing procedures currently being followed



•    An undertaking by the recipient to comply with all administrative requirements.



 

9.    Agents and Auctioneers



 

The VAT on transactions concerned must be accounted for by the principal, seeing as an agent merely acts on behalf of the principal.  However, should an agent make a supply on behalf of another vendor, the agent may issue a tax invoice reflection its details.

 

If an agent receives a supply on behalf of a principal, the agent’s details are to reflect on the tax invoice and the principal may claim input tax only if he/she is in possession of the tax invoice.

 

An agent may ask for a tax invoice if a vendor makes a supply to the agent.  The agent must in all above-mentioned cases maintain sufficient records and notify its principal in writing of the following:

 

•    Description of goods supplied and



•    Quantity or volume of goods supplied and



•    Value of the supply, tax charged and consideration for the supply OR



•    Statement including a charge in respect of tax and the rate of the tax charged.

 

Bike Week in South Africa

In various parts of the world, many countries actively participate in a social experiment that has been recognized, in some form or another, as Bike Week (usually falling within Bike Month). The idea behind it is to emphasize the importance and utility of the bicycle as a legitimate form of transport, as a way to cut down on harmful emissions, avoid congestion on the roads and promote a healthy and convenient form of exercise for everyone involved.

 

The idea of Bike Week has become popular in many cities around the world, throughout mainland Europe, the UK, the United States and Canada (with cities such as Boston, Pasadena, Vancouver and Toronto being some of the largest annual participants). However, the practicality of Bike Week is bound to still fall short of the mark in South Africa, even in the larger cities.

 

In South Africa, it is not uncommon to find that many people live 20, 30 or even 40km away from their place of work, which makes the thought of manually pedaling a bicycle all that way on a round trip a daunting (not to mention time consuming) task.

 

Apart from the distance that faces South Africans during their every day commute, there is also a significant danger factor involved for a number of reasons, such as high crime rates, hazardous road conditions, and an overall tendency of motorists to not take cyclists into account when using the roads.

 

Maybe, over time, South Africans will realize the importance of cutting down on emissions and giving themselves an easier commute, but until conditions improve in many ways, Bike Week may just be a novel idea that only a handful of people participate in.

What does the Tax Administration Act mean for you?

In the last quarter of 2012, a new act was added to the already heavily loaded tax laws in South Africa. The Tax Administration Act, implemented in October 2012 (after being proglumated in July 2011, and later amended in December 2012) gives more control to SARS in terms of effecting penalties, not only for late submission, which has been the norm for many years, but for a variety of other issues that might arise with any one individual tax return.

 

In the past, that is, the days before the Tax Administration Act, SARS had the ability to impose fines of up to 200% on taxpayers due to under-paying, major mistakes or outright failure to submit. In most cases, however, these fees were waived if the mistakes could be proven to have been committed unintentionally. Mostly, the only fines that would be dealt out by SARS were late fees, expect of course in serious cases of fraud and/or negligence.

 

Under the TAA, however, the increments of payment fines has been set out according to a fixed system based on two major factors: taxpayer behavior and severity of the act (the act being failure to comply with SARS policies in any number of ways.

 

For instance, in a standard case (a case involving a first time offender) who has ‘ substantially understated’ the values on their tax returns will be charged a 25% fine. A repeat offender of the same offence will pay 50%. Also, if the taxpayer in question fully and voluntarily discloses all information after being called for an audit, the fine will be reduced to 5%, and if they disclose fully before being called for an audit, the fine will be reduced to 100%.

 

This example is of a simple case of under calculating values on the tax forms, and there are various other offences that are affected by the TAA changes, many of which are more serious, but in most cases, the reduction in fines for voluntary disclosure before and after the audit process will stand (at least partially).

 

The point is this: simply do everything in your power to ensure that your SARS tax forms are filled out correctly and promptly. After all, since there is no fixed method of selecting targets for the SARS audits, you will always run the risk of incurring penalties if you do not comply fully.

 

While the TAA has tightened SARS’ grip on the South African tax industry, if for some reason you do happen to make a mistake or involuntarily slip up, the Act does allow for disclosure and grace periods that will stop you from being fined too harshly.

 

Written By: Wesley Geyer

Creative Writer for ATKA SA