SARS boss’ message to taxpayers in South Africa: We will only ask nicely the first time

South African Revenue Service (SARS) commissioner Edward Kieswetter says that most taxpayers are honest and just want to get their tax affairs out of the way – however, there are always those who refuse to play ball.

Kieswetter told 702 that SARS data shows increasing ‘tax morality’ in the country, with this slowly translating to increased tax compliance.

He pointed to the revenue collectors’ better than expected results for 2020, which he attributed to a better economy in combination with improved revenue from compliance activities of more than 30%.

The commissioner said that this is being done through a combination of SARS building greater confidence in the public but also a very active and focused compliance programme.

He said that if someone has not submitted a return then SARS will prompt them ‘gently’.

“Our engagement will always be friendly initially, and if you persist then we will obviously use the other instruments in law that is available to us.”

Kieswetter said that it was also important to have tools to move on taxpayers that simply refuse to play ball.

“There will always be those, that whatever we present to them or however easy you make it, are pathological criminals. In this area we need to increase and step up our game, here we still have a lot to work to do, and it is too early to declare victory.”

Kieswetter said more announcements would be made around SARS’ efforts to target these non-compliant taxpayers in the coming months.

Tax season opens

SARS  has announced the opening of the filing season for individual taxpayers which will run from 1 July – 23 November.

The revenue collector has encouraged taxpayers to file online but said that taxpayers who cannot file online can do so physically at a SARS branch by appointment only, as it has temporarily closed its physical branches due to concerns around the third wave of Covid-19 infections currently impacting the country.

It said that the temporary closure of the tax branches will not affect the start of the filing season for individuals who traditionally file via eFiling or the SARS MobiApp.

These taxpayers are encouraged to continue doing so digitally, starting from 1 July 2021, it said. However, branch filing will not commence on this date.

“At this stage, we plan to commence physical branch visits on 16 August 2021 but will review this continuously. Taxpayers are advised not to come to a SARS branch. The branches will be closed until an announcement is made confirming the reopening date.”

During the branch closures, taxpayers who require assistance to file online will be assisted telephonically with the support of dedicated SARS staff, it said.

The second rule of thermodynamics

In a universe full of orderly chaos, the second rule of thermodynamics applies which states:

 

In a system once full of control, full of measurable reliance on results, entropy and randomness always increase.

 

Think of a drop of food colouring in a glass of clear water.  One drop will decay the clarity of the water.  Up to the point where the colour cloud devoured all the clear space in the class.  In a random cloudy pattern. 

 

How does this apply to accounting and your business?

 

The ultimate reason for keeping accounting records is control.  Control of your assets like cash and inventory.  Control of liabilities like your supplier accounts.  And without these controls  the second rule of the universal thermodynamics will apply to your business.  The one drop of negative input will disburse all the way through your control system, the effect will cloud your judgement and decision making ability…

 

It is our jobs as accountants to not only assure the accuracy of your financial data.  But to ensure that your control methods in your business will remain stand fast against a multiple factors like business growth, economic changes and any other force presenting themselves.

 

The relationship that you have with your accountant is a relationship of too and throws, up and downs and in and outs.  We should be an integral part of your business operation. Many business owners are under the impression an accountant is only a person they need just in time to keep them out of hot water. But they forget the boiling frog principle. 

 

We are trained to keep your control procedures in line with your business’ needs and standards.  And most business owners does not utilized this trait and do not ask for advice.  They forget to ask the question: “Am I doing everything possible to protect my business against risk?”

 

Risks like “Audit Risk”, “Discovery Risk” and “Inherent Risks”.  The most common risk factors in any business.

 

In order to protect your business, no matter how big or how small, against the second law, of make use of your accountant!

Half of pandemic unemployment money may have been stolen: report

It is interesting to note that South Africa was not alone in having to contend with an army of fraudsters as soon as it became known that the usual tender checks and balances were to be dispensed with in handing out emergency Covid relief and funds for protective personal equipment (PPE). The Special Investigating Unit in the police last year was investigating R5 billion in dodgy PPE tenders, covering 658 contracts. That’s about half the total spending announced by the government last year for Covid-19.

This story from the US appears to prove the point that, huiman nature being what it is, wherever free or easy money is doled out, the fraudsters will pick up the lion’s share.

This story would be funny were it not have such tragic consequences: it seems a good portion of the money went to fraudsters in China, Nigeria, Russia and elsewhere. In SA, a long parade of chancers and tenderpreneurs made off like thieves with billions of rands that were intended to alleviate suffering and sickness. The local press reported on the story of Hamilton Ndlovu who made the fatal mistake of boasting on social media about his new, expanded luxury car fleet. SA Revenue Services decided to pay him a visit, and a more subdued Ndlovu then issued an apology.

The wheels of justice sometimes move slowly, but they do move eventually. All the more reason to get accountants involved in the process – especially when “emergency” funds are being dispensed – at an early stage. – Editor

From the New York Post: Fraudsters may have plundered as much as half of the unemployment benefits that the US pumped out in a hurry during the pandemic.

Blake Hall, CEO of ID.me, a fraud prevention service, told Axios that the US has lost more than $400 billion to crooked claims.

The US may have been robbed of as much as half of all money given out through unemployment benefits during the pandemic, Hall told the outlet.

Haywood Talcove, the CEO of LexisNexis Risk Solutions, estimated that most of the stolen money, at least 70 percent, probably ended up outside the US, according to Axios.

Much of the pilfered funds likely went to criminal syndicates in China, Nigeria, Russia and elsewhere, he said, according to the outlet.

“These groups are definitely backed by the state,” Talcove told Axios.

A lot of the money was also likely stolen by US street gangs, who have been taking a greater share of the stolen funds in recent months, Axios reported.

Criminals were likely able to defraud the government by stealing personal information and using it to impersonate would-be unemployment claimants, Axios reported.

Other groups, the report said, may have tricked legitimate claimants into handing over their personal information.

Low-level criminals, or so-called mules, would then be given debit cards and asked to withdraw money from ATMs, the report said. That money could then be transferred abroad, often via untraceable cryptocurrencies like bitcoin.

It’s long been assumed by many politicians and government watchdogs that criminals would make off with at least some of the emergency pandemic relief funds.

State unemployment systems were ill-prepared for the demands of the pandemic. It was widely assumed that some of the hundreds of billions doled out would slip through the cracks, but many politicians said it was critical to get the money out as quickly as possible.

Now, the latest estimates reveal the scope of the fraud that took place over the past year.

Why Choosing the Right Accountant Can Be the Best Investment You Make

Tax time is arguably the best and worst time for business owners. On the one hand, many entrepreneurs don’t want to deal with all the paperwork, and on the other, many realize how behind they got on keeping their accounting records up to date and know they need to make a change for the coming year.

Finding the right accountant may be one of the best investments you make. Besides the general tax filing and payroll preparation, many accountants can also serve as advisors in your business. Their suggestions and insight into your business operations can help you reduce your tax liability, highlight areas for growth opportunities, create short- and long-term strategies, and help you budget and manage your cash flow.

I have found through working with thousands of small business owners that spending money on accounting is not first on their list. However, my best advice is this: When the records get out of control, or an accounting issue comes to light, it is much more expensive to try to fix it, then do the right thing from the beginning and have an expert involved in your business.

So, whether you are looking for a new accountant, or revisiting your current relationship, here are six tips to help determine your business needs and make sure you find the right fit.

1. Decide if you want an internal or external accountant.

Many small businesses opt for outside accountants on a consulting basis, which typically costs less than a full-time or part-time employee. An in-house accountant is needed when transactions become too large and complicated that outsourcing these services becomes cost prohibitive.

When you have the right relationship with your accountant, their services can grow with you. For example, I had a client who outsourced their bookkeeping services and one of the owners did the majority of the accounting. Once they had more volume in transactions, they asked me to help in the interview process to ensure that they hired the right bookkeeper and then my company moved into controllership services.

2. Don’t feel confined to your back yard.

We tend to feel more comfortable hiring accountants in our back yard, but with today’s technology, your accountant doesn’t have to be in your city or state. Many accounting firms that I consult with utilize video conferencing to communicate with their clients. That way, whether you are near or far, you can maintain that personal relationship and have your accountant offer demonstrations or training remotely when you need it.

3. Ask around for suggestions.

A good place to begin your accountant search is with your friends and colleagues. Ask what they like or dislike about their accountant, and what they would do differently if they were hiring one today. Also, if you had an accountant before, or currently have one, create your own assessment of what you like and what you wish your accountant would do. Other resources you can consider are your local chamber of commerce, the Small Business Development Center, or the American Institute of Certified Public Accountants (AICPA), which maintains a directory of Certified Public Accountants (CPAs).

4. Prepare for the interview.

You need to create a process to hire a potential accountant like you would any other employee. Ensure you know what you want to get out of a future relationship. How involved do you want the accountant to be in your business? Do you care about the technology they use and what the process they have to collect documents and create financial statements? Do you want them to have experience in your industry? Also, make sure to ask for references prior to meeting with them, and check out their online presence, including website and social media postings on Facebook, Twitter, LinkedIn, and other sites.

5. Ask the right questions.

You’ll naturally focus on some of the basic things you’ve got to know, like pricing, services offered, what certifications they possess, and the software they (and you) will use. But also ask more probing questions, like what’s their philosophy on customer service? How do they feel about online collaboration? How would they design a financial success program just for you? What’s their idea of a good client relationship? These questions can help you determine their level of insight, how they think, and whether they fit your business goals and will be there when you need them.

6. Trust your gut.

During the process, always ask yourself if you could trust him or her with the intimate financial details of your business. If your gut is saying “no,” then continue your search. This relationship is personal as much as business. Your accountant knows details about your business that most people would never know, and because of that, you need to feel that they are someone to whom you can ask in-depth questions and who can be an integral part of your business.

Accountants can be a valuable asset to your company beyond financial statements. They can be the key to making the right decisions in your business at critical turning points. You may find that once you have the right accountant, the return on the money you spend with them is much greater that you expect, and you can’t imagine how you ever ran your business without them.

Accountants predict 2020 will be worst year for economy since World War II

From Accounting Today: This year is expected to be the worst for the global economy since World War II, according to a new survey by the Association of Chartered Certified Accountants and the Institute of Management Accountants.

The Q2 2020 Global Economic Conditions Survey polled ACCA and IMA members and found that while there are dire predictions for the economy for this year, accountants in North America were more optimistic about an imminent economic recovery from the COVID-19 pandemic than other parts of the globe. The survey also discovered that global confidence recovered slightly from a record low in the first quarter of the year, offering some optimism that recovery is on the horizon during the second half of the year. Nevertheless, many parts of the world still face challenging economic times.

“Confidence in Q2 was a mixed picture and globally there was a modest bounce from the record low in Q1,” said IMA vice president of research and policy Raef Lawson in a statement. “This unusual combination of very weak orders but slightly better confidence can be interpreted as expectations of a turning point — an unprecedented collapse in activity in the first half of the year, to be followed by some degree of recovery in the second half.”

Economic activity indicators on orders, capital spending and employment are at or close to record lows in most regions of the world and the global orders balance fell by 15 points, approximately two times its previous biggest quarterly drop, while other global measures of extreme weakness include plummeting employment index and the rise in concern about customers and suppliers going out of business.

The economic turmoil unleashed by the novel coronavirus pandemic is sending unemployment rates from close to record lows late last year to extreme highs in just a few months. In the U.S., the report noted, the unemployment rate rose to 13.3 percent in May from below 4 percent at the beginning of the year (but improved slightly to 11.1 percent in June, per the U.S Bureau of Labor Statistics last week).

The headwinds against a full economic recovery will probably remain for at least the rest of the year as social distancing dampens consumer spending. Earlier hopes for a sharp V-shaped recovery have given way to expectations of a fairly long period to climb back to the level of output before the pandemic, according to the report. For emerging markets, much will depend on commodity prices along with the strength of the recovery in advanced economies. For many economies, including the United States, it may take until the second half of 2022 at the earliest before the nation can reach the same level of output as at the end of last year.

But despite those worrisome findings, survey respondents in North America were optimistic about a recovery. More than one-third of respondents in North America anticipate a recovery during the current quarter spanning July to September.

The latest edition of the quarterly ACCA IMA GECS survey included special COVID-19-related questions, which generated an overall 50-50 split between those expecting economic recovery in the second half of this year and those not expecting this until 2021.

“The mixed picture on confidence contrasts with the universally gloomy readings on activity indicators such as orders and employment,” said Warner Johnston, head of ACCA USA, in a statement. “Recovery in confidence from Q1 lows can be interpreted as optimism about economic prospects over the second half of the year. In regions such as North America and Europe, the recovery in confidence was modest but in stark contrast with the large fall in orders in both regions.”

The report also notes that the plunge in the GECS employment index reflects a dramatic surge in unemployment, particularly in the U.S., and theorizes that this is a downside risk to sustained recovery. While overall confidence rose slightly from a record low in Q1, hinting at a slightly more optimistic outlook, the picture for 2021 depends on the trajectory of the coronavirus.