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I trust this finds you exceptionally well as the year winds down. It is pretty much all over bar the shouting. As has been mentioned, it is time to put the finishing touches to planning the year-end shut-down so please ensure that leave has been scheduled and cash-flow and logistics finalised to ensure a smooth Christmas and pick-up next year.

It has been a YEAR.

When all of us ushered in the new 2011 (only eleven short months ago), no-one could have predicted everything that would go down. Suffice to say that it was an exceptionally intense year, from a macro-perspective, and that we have emerged, punch-drunk, on the other side.

Rather than give my own commentary on the year, I read this about three weeks ago. It is from Cees Bruggemans (the chief economist of FNB). I’ll let him be the harbinger of doom and gloom, rather than stating the same facts myself. Don’t take it from me, take it from him but I think survival is a great achievement this year. Anything more than that and one is laughing.

Excerpt commences (Cees Bruggemans):

Looking back on 2011, it was much as expected in some ways (inflation rising to 6%, GDP growth of 3%). In other respects, though, 2011 turned out to be a huge surprise.

Domestically, the interest rate outlook was completely turned on its head. We started 2011 with the idea of rising inflation and rising interest rates in its wake from 2h2011, but by Easter that idea had died an unquiet death, and by midyear I was punting rate cuts.

Our domestic politics steadily hotted up all year even as state finances stayed more constrained than expected, by this week moving Moody’s to put South Africa’s rating outlook on negative watch, the most unwelcome of all signals this year.

The other great surprises were all global in nature.

The year started with an uprising which became known as the “Arab Spring” as popular revolt first shook Tunisia, toppling its head of state, followed within weeks by Egypt (toppling Mubarak), and thereafter spreading like a bushfire towards Yemen, Syria and even the Persian Gulf, by 3Q2011 after a short war and NATO intervention toppling Libya’s Ghadaffi.

That added $30 to the oil price, it rising towards $110/b, fuelling inflation, eroding consumer purchasing power worldwide, and partly responsible for the US growth disappointment of 1H2011 (for a while feeding double-dip recession fear).

Then followed the Fukushima tsunami, causing over 20 000 deaths and deeply disrupting Japanese industrial output for a few months, with its effects also felt widely, further suppressing 1H2011 global growth.

But if that was 1H2011, the 2H2011 had its fair share of surprises, too, globally.

There was the US debt ceiling drama of early August, with a Mexican standoff between Congressional Republicans and President Obama turning into Russian Roulette as 5 August approached and the US was in danger of running out of borrowing authority, which would have made it unable to service its $10 trillion national debt, potentially defaulting, and because of this brinkmanship losing its triple-A+ credit rating.

Even so, the US continued as a double-A+ country risk to be the premier debt anchor in the world from which others take their cue.

Meanwhile, the US economy initially didn’t want to lift in 2H2011, fuelling fears of double-dipping recession, causing heavy risk market selloffs. That WAS traumatic.

As the weeks rolled by, however, US data refused to deteriorate further, with income, retail and corporate earnings picking up or still doing well, maintaining employment growth (if at disappointing levels) and sustaining US growth in 2.5% territory.

No double-dip.

Over in Europe, the Greek sovereign debt saga kept deteriorating, giving rise to serious questions about EU banks. But also something far more

For ever since Germany had insisted on private debt holders also getting a haircut as part of the second Greek bailout package, markets had started to walk away from Italy (and Spain).

As 2H2011 rolled on, the Greek crisis was finally driven to a point where 50% private haircuts were agreed, together with EUR 30bn public EU support (for Greek banks), while EU banks were told to improve their capital ratios to 9% by mid-2012 (requiring EUR 106bn more bank capital).

This set in motion many things, not least the inclination of EU banks to rather improve their capital ratios by shrinking their balance sheets through asset sales and curtailing credit growth.

Together with severe government-imposed fiscal austerity (spending cuts and tax increases aimed at reducing budget deficits and arresting debt spirals), these credit crunches and reduced consumer and business confidence caused the EU economy to enter mild recession (according to the ECB, triggering it to cut rates last week).

Surprises all, but none so abrupt as the unexpected attempt by Greece to hold a referendum to ask its population about the arranged bailout (an idea that was reversed within a day, causing its Prime Minister to resign and an interim unity government led by technocrats to be formed to clean up the mess, yet its final shape still to show itself).

As 2011 stood towards its end, something similar looked possible in Italy as its 10-year bond yield surged through 7%, Spain will be changing governments this month, and all eyes are on 2012 to see who will be the next President of France (and the US), and to 2013 to see what may happen in Germany.

It all made 2011 a year full of surprises. And there are seven weeks left to still double up on what has happened so far.

Excerpt ends.

What a year!!!

With regards to the ongoing disaster/ national embarrassment that is the CIPC, it still is.  Anything remotely CIPC related, please expect a challenge.

As was mentioned for quite some time now, due to the change by SARS to self assessment, audits performed have 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. A taxpayer’s chances of an audit four years ago were (say) 1 in 60. They are now, down to about 1 in 15.

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. We had a client where the audit started in March 2011 and was SUCCESSFULLY concluded (i.e. SARS were wrong) on 25 October 2011. The amount in question was three hundred and fifty six Rand and seventy five cents (R356.75). The issue at hand is that one cannot “stop” the audit by saying – fine, don’t worry about it – keep the bloody money. In this case, SARS denied a deduction which was on the tax return and wanted to fine the client an exorbitant amount for falsification of her tax return. They also refused to pay her current refund out whilst the audit was in progress. So one has to grit (sic) and bear it. And, having proved that they were wrong, they simply say: “Here’s your money then.” Cold comfort for the taxpayer.

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