I trust this finds you exceptionally well as winter is purportedly heading to a close (after possibly the warmest July ever!). Hopefully some more rain will make itself felt – we need more to avert water shortages later in the year (the positively balmy winter of 2003 springs to mind – followed by the water shortage of 2004).
Well, all kinds of exciting developments. Greece has said that they can’t meet the austerity plans and that they have done enough. It is now your (i.e. the EU, i.e. Germany’s problem). A bit like the catch-phrase of the seventies – “It is Our Dollar, and Your Problem”. The dynamic has changed now i.e. the balance of power has shifted – from it being a Greek affordability problem to an EU continuity problem. So……….. the stage is set for an interesting change of power dynamics. A “solution” has been formulated whereby the profligate periphery capitulate sovereign power to Germany’s chequebook. German influence and power is now set to become the dominant force throughout Europe. This has major implications on the way in which Europe is going to operate – the French are being sidelined and British influence is on the wane. Russia is now also looking to consolidate links with Germany given the demographics. Once again, the Baltic states/ Poland et al are the filling in a rather incendiary sandwich. Fascinating real-politik, albeit it is going to play out over years.
I repeat my mantra – one cannot cure a problem of too much debt with more debt. Something the Americans don’t seem to have understood.
The Republicans and the Democrats took it down to the wire and raised the debt ceiling after spooking the markets. The problem hasn’t gone away, it has just had another band-aid put on it while the debt mountain continues its inexorable expansion putting huge pressure on the US economy and the Dollar. As can be seen over the last few days, something has given – the US has been downgraded for the first time in its history, from a AAA credit risk. The markets have fallen out of bed and it may be that we are in for a very wild ride as fear and greed fight with each other. Of course, once the tipping point has been reached, the lemming mentality kicks in and the mad sell-off becomes a self-fulfilling prophesy. We, at the lowermost tip of Africa, are going to be affected by this. As I have been dooming and glooming for quite some time now, it may be that we have arrived at the “showdown at the Last Chance Saloon”. If not, as events unfold, the show-down will been postponed, not avoided. Caution in all matters financial remains the watch-word.
With regards to the ongoing disaster/ national embarrassment that is the CIPC (replacement body to the truly awful CIPRO), you’ll be delighted to know that annual return submission has been suspended due to system issues (read incompetence/ lack of knowledge of business reality/ lack of skills/ lack of understanding and, in fact, an inability to breath unsupervised). This, unfortunately is going to continue playing out over years whilst the beleaguered South African economy pays the price in terms of global competitiveness and local job creation.
Another interesting little change coming forth from SARS is that, based on the change by SARS to self assessment, a goodly number of their hitherto processing staff have been promoted to auditors (some would say that this is not a good idea given the skill differential) and the number of investigations/ audits performed has increased from some forty five thousand (45,000) per annum in 2007 to one hundred and fifty thousand per annum (150,000) in 2010/11. Effectively the focus is on bigger numbers but we are finding that persons/ entities all across the spectrum are being audited – PAYE, VAT and Income tax. This has meant that in the “good old days” taxpayers chances of an audit were approximately 1 in 125.
They are now, down to about 1 in 40. It has also meant that your tax return/ financial statements would be done, submitted, SEEN BY SARS and then forgotten if no audit/ further information was required. We are now seeing ever-increasing instances where said financial statements/ tax return supporting documents are being called for various reasons, as SARS has not seen them – all SARS have seen are the numbers on the tax return. SARS instigated a HUGE amount of audits on the 2007/ 2008 tax years at the end of last year. All of this means extra time and cost for the taxpayer. There is now insurance available from QDos Consulting to cover costs relating to SARS audits. SARS audits, in our experience, often have no relation to the amount of the tax amount involved and SARS can decide to audit without supplying a reason.
Internationally, insurance against tax investigations is increasingly becoming the norm (due to ever-increasing costs and ever-increasing complexity) and given the way the world is moving in SA, I would suspect that this trend will be followed here as well.
August 1, 2011 By No comments yet Economic Commentary
I trust this finds you exceptionally well as winter is purportedly heading to a close (after possibly the warmest July ever!). Hopefully some more rain will make itself felt – we need more to avert water shortages later in the year (the positively balmy winter of 2003 springs to mind – followed by the water shortage of 2004).
Well, all kinds of exciting developments. Greece has said that they can’t meet the austerity plans and that they have done enough. It is now your (i.e. the EU, i.e. Germany’s problem). A bit like the catch-phrase of the seventies – “It is Our Dollar, and Your Problem”. The dynamic has changed now i.e. the balance of power has shifted – from it being a Greek affordability problem to an EU continuity problem. So……….. the stage is set for an interesting change of power dynamics. A “solution” has been formulated whereby the profligate periphery capitulate sovereign power to Germany’s chequebook. German influence and power is now set to become the dominant force throughout Europe. This has major implications on the way in which Europe is going to operate – the French are being sidelined and British influence is on the wane. Russia is now also looking to consolidate links with Germany given the demographics. Once again, the Baltic states/ Poland et al are the filling in a rather incendiary sandwich. Fascinating real-politik, albeit it is going to play out over years.
I repeat my mantra – one cannot cure a problem of too much debt with more debt. Something the Americans don’t seem to have understood.
The Republicans and the Democrats took it down to the wire and raised the debt ceiling after spooking the markets. The problem hasn’t gone away, it has just had another band-aid put on it while the debt mountain continues its inexorable expansion putting huge pressure on the US economy and the Dollar. As can be seen over the last few days, something has given – the US has been downgraded for the first time in its history, from a AAA credit risk. The markets have fallen out of bed and it may be that we are in for a very wild ride as fear and greed fight with each other. Of course, once the tipping point has been reached, the lemming mentality kicks in and the mad sell-off becomes a self-fulfilling prophesy. We, at the lowermost tip of Africa, are going to be affected by this. As I have been dooming and glooming for quite some time now, it may be that we have arrived at the “showdown at the Last Chance Saloon”. If not, as events unfold, the show-down will been postponed, not avoided. Caution in all matters financial remains the watch-word.
With regards to the ongoing disaster/ national embarrassment that is the CIPC (replacement body to the truly awful CIPRO), you’ll be delighted to know that annual return submission has been suspended due to system issues (read incompetence/ lack of knowledge of business reality/ lack of skills/ lack of understanding and, in fact, an inability to breath unsupervised). This, unfortunately is going to continue playing out over years whilst the beleaguered South African economy pays the price in terms of global competitiveness and local job creation.
Another interesting little change coming forth from SARS is that, based on the change by SARS to self assessment, a goodly number of their hitherto processing staff have been promoted to auditors (some would say that this is not a good idea given the skill differential) and the number of investigations/ audits performed has increased from some forty five thousand (45,000) per annum in 2007 to one hundred and fifty thousand per annum (150,000) in 2010/11. Effectively the focus is on bigger numbers but we are finding that persons/ entities all across the spectrum are being audited – PAYE, VAT and Income tax. This has meant that in the “good old days” taxpayers chances of an audit were approximately 1 in 125.
They are now, down to about 1 in 40. It has also meant that your tax return/ financial statements would be done, submitted, SEEN BY SARS and then forgotten if no audit/ further information was required. We are now seeing ever-increasing instances where said financial statements/ tax return supporting documents are being called for various reasons, as SARS has not seen them – all SARS have seen are the numbers on the tax return. SARS instigated a HUGE amount of audits on the 2007/ 2008 tax years at the end of last year. All of this means extra time and cost for the taxpayer. There is now insurance available from QDos Consulting to cover costs relating to SARS audits. SARS audits, in our experience, often have no relation to the amount of the tax amount involved and SARS can decide to audit without supplying a reason.
Internationally, insurance against tax investigations is increasingly becoming the norm (due to ever-increasing costs and ever-increasing complexity) and given the way the world is moving in SA, I would suspect that this trend will be followed here as well.