I trust this finds you exceptionally well as the year seems to have picked up speed (Easter having come and gone and we are already only two short months away from the winter solstice at which point the winter bus turns around and starts heading into summer). The pace is truly electrifying and April isn’t helped at all by the plethora of holidays.
There is so much to say, I don’t know where to start and I would like to (and I’m sure you would too) keep this missive to less than ten pages.
Europe. Ah, where to start’ I think that we are all in agreement that Europe is in serious trouble and that political measures, par excellence, have been invoked to paper over the cracks. The cracks, however, are actually deep canyons and, albeit there are many happy posings for the camera and the presentation of a united front, there are serious issues that are not going to go away.
To recap, the peripheral countries borrowed and then spent too much money and now they cannot afford to pay it back. They are being sternly encouraged to get their houses in order, reduce budget deficits, cut down on rampant waste & corruption and reduce the bloated public sector wage bills. All of that means that it is increasingly unlikely that they will be able to pay their funding bills and, as it looks ever likely (a la Greece), that they will not pay their debts in full, their risk profile sharpens and investors start looking for a higher return which means it is increasingly likely that they will not pay their debts in full, their risk profile sharpens and investors start looking for a higher return which means ………… (repeat ad nauseum until default).
The problem is that all the banks have lent money to the European sovereign countries and if the banks have defaults of this magnitude on their hands, then the banks will go bankrupt and the economies will stall/ freeze and implode. Clearly that would not be good.
The ECB thus stepped into the breach and (what was inconceivable three years ago) provided unlimited three-year money at only 1% (borrow at 1% lend at anywhere from 3% to 8% – what incredible margins!). Banks could thus fund comfortably for the duration, taking away the fear of immediate failure, but also the pressing need for asset fire sales in order to rapidly deleverage balance sheets as deposits were withdrawn and capital buffers needed to be strengthened in terms of tougher rules.
Banks in the greatest trouble saw the possibility of buying sovereign debt of the most stressed peripherals, thereby assisting both greatly as stressed bond prices started recovering meteorically and yields falling steeply.
The first EUR 0.5 trillion (yes half a trillion Euros/ five hundred billion Euros) of ECB easy term money of last December was followed by another EUR 0.5 trillion last week. These actions have took Italian and Spanish 10-yr bond yields back to 4.9% albeit Spanish yields have subsequently reversed and are back in the “spotlight” and verging on 6%. That, to my mind means that there is trouble brewing. Big trouble – if one trillion Euros had a positive effect for a negligible period and we are right back to where we started (and worse) then that is a rather expensive waste of One trillion Euros. Expect this to start unfolding earlier rather than later.
This buying time (giving everyone a chance to pull themselves towards themselves and recover in an orderly fashion) is politics and realpolitiek at its best (but the problem of too much debt cannot be cured by more debt – even at favourable rates) and makes the current decade, at best, a volatile and challenging one as we are nowhere near a satisfactory conclusion.
I’ll leave the USA for the moment and cover that in some more detail next month as there are too many things closer to home that warrant discussion.
Another beautiful display of government incompetence has evidenced itself in terms of the COIDA/ Workmens Compensation (Department of Labour) submissions. The deadline for the Return of Earnings form (W.As.8 submission) to be prepared under the Compensation for Occupational Injuries and Diseases Act (COIDA) is 31 March 2012. Due to numerous queries from SAICA members, SAICA engaged with the Department of Labour on the fact that the forms were not issued. The Department of Labour (finally) informed SAICA that they are experiencing delays in the issuing of the Return of Earnings (ROE) forms. The deadline submission for the ROE has been extended to 31 May 2012 for all registered COIDA employers. The Department of Labour will be issuing annual returns from 30 March 2012. The Department of Labour has stated that employers will not be penalised for the submission deadline of 31 March 2012.
So what this means is that they cannot/ have not printed or posted the forms. They cannot (or could not) print the forms. How does one have trouble “issuing” a form’ One presses “print”. The form prints. For industrial printing sessions, one sends to a printer. It is not rocket science, but sadly printing a form is beyond the ken and expertise of these good people (with their jobs-for-life and huge guaranteed annual increases). These people issue penalties at the drop of a hat and it is their current practice to not issue assessments and then fine the person who didn’t receive the assessment for not paying it.
We then move on to the ongoing disaster/ national embarrassment that is the Companies and Intellectual Property Commission (CIPC) – they who found it necessary to send their spokesperson to Davos (fiddling while Rome burns). We (and all counterparties of CIPC) have had major problems (as noted in the national popular and business press) in all and every single facet of engagement. There is not one redeeming feature – not one.
The CIPC issued a notice dated 26/3/2012 acknowledging that there are problems – network traffic, accessibility and limited capacity. They are thus waiving all penalties that are going to be due for all annual returns which will become due during the period from 1 April 2012 to 31 March 2013.
If one translates this into English then it becomes apparent that they are awful and they are promising to continue being so awful and so inaccessible that the South African public cannot be penalised for their awfulness. They therefore cannot penalise the South African public for the next year because their systems are going to continue giving problems for at least the next year.
Every time I think that SARS have hit rock bottom, they start digging. They have now started mining. I received a letter from SARS on 29 March. In a display of ignorance that was absolutely breathtaking, the author of the letter (retard is such an ugly word):
(a) told me that a tax payment was overdue,
(b) thanked me for having made the payment,
(c) threatened legal proceedings if I don’t make the payment and
(d) advised that I have a right object to the assessment.
This person does not even have the intelligence to qualify for the post of village idiot – it is hard to believe that this unfortunate cretin can breathe in and out unaided.
I took an hour of my life to draw big pictures, type really slowly so they could understand, and play connect the dots with the person to advise them that:
(a) the tax payment is not due when the return is submitted e.g. if your VAT return is submitted on 8 March on e-filing, one has until 31 March (subject to week-ends to make the payment),
(b) I have not made the payment but I attached the payment instruction proof, showing that payment on the SARS e-filing system is due and will be made before the SARS deadline,
(c) most lawyers will only commence legal proceedings when a breach or default has taken place (and that only should I NOT pay by the required date, then a breach or default will have taken place), making the threat of legal proceedings at this point, rather foolish (it makes the person making the threat look completely stupid, incompetent, offensive and a few other epithets), and
(d) that I completed and submitted the information – the numbers are from my accounting records, for which I have supporting documentation and records and that I put the numbers onto the SARS system and that it is not, as such, an assessment and no objection is necessary, because (a) I agree with the numbers, having put them on and (b) the payment instruction has been made (see point (b)) above.
It beggars belief that the tax money we pay results in complete, utter, incompetent fools being given the authority and allowed to wreak havoc (I would say clearly, but I am no longer certain, one would hope) unsupervised on the South African taxpaying public.
If any of us had idiots like this working in private practice/ running a business, we would be bankrupt.
As has been previously mentioned, SARS have added a truly vicious and malevolent beast to their arsenal known as an IT14 SD. 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). That means that all items such as insurance, rent, telephone and all “normal business overheads” are reconciling items. This is not necessarily rocket science but the tolerance level is R100 (yes that is one hundred Rand). Further thereto, it necessitates splitting all purchases made into VATable and non-vatable suppliers.
Be aware, this is an incredibly time-intensive exercise as accounting systems are not set up to extract the data in the format in which SARS want it. Our worst experience of this so far has been almost 50 man hours spent in performing the reconciliation. That is more than one week of one of the Team members life, which was not budgeted for or planned for and, from a client perspective, that was an eye-watering amount of money (which was on a par with their annual charge for the year). Effectively what has happened is that under the new dispensation, SARS no longer want the source documentation and then when they have a query, instead of them doing the work, they send an instruction to the taxpayer that they want this pernicious beast performed. The taxpayer has no option but to engage an accountant (and effectively do SARS’s job for them – while paying for the privilege). Given that some of the persons in SARS’ employ are capable of writing a letter as referred to above, that people like that can cost taxpayers that kind of money is too ghastly to contemplate.
Comments are closed.