SA Budget 2015: Taxes up, up and away

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Though government says an increase in personal taxation will not amount to “too much pain”, the bad news is that income tax rates will be raised by one percentage point for all taxpayers earning more than R181,900 a year. The very bad news is that the total fuel levy will increase by 80.5 cents a litre from April. The exceptionally bad news is that it will be more costly to drown your financial woes as sin taxes are up again. Then there’s a proposed increase in the electricity levy. Despite the tough economic outlook, the 2015 Budget has less austerity talk but tighter fiscal discipline matched with some relief for the poor. By RANJENI MUNUSAMY and REBECCA DAVIS.

Finance Minister Nhlanhla Nene has announced an increase in taxes amounting to R17 billion in the 2015/16 budget year and revised spending across the whole of government. Presenting his maiden budget speech in Parliament on Wednesday, Nene said the 2015 tax proposals aimed to increase revenues, limit the erosion of the corporate tax base, increase incentives for small business and promote a greener economy. This is in light of a consolidated deficit of 3.9% of GDP for 2015/16.

Higher taxes had been flagged in the Medium Term Budget Policy Statement last year, and the recommendations of the Judge Dennis Davis tax committee had been fed into this year’s tax proposals. A welcome relief will be that VAT remains unchanged at 14%, but Nene said in a media briefing ahead of the Budget speech that further consultation on VAT was needed.

“We need to take into account what the impact on raising VAT will be,” Nene said.

In the Treasury’s Budget Review, this decision to leave VAT untouched is explained as not to compromise long-term economic growth. While there are large-scale changes to the tax regime, an increase in VAT would have the heaviest impact on poorer consumers, and severe political implications and pressure on the ANC government, particularly from labour ally, Cosatu.

“It is now clear that we can longer postpone consideration of additional revenue measures,” Nene said in the speech. In the Budget Review, it is explained that personal income tax will rise by 1% for all tax brackets, except the lowest, which remains at 18%.

Nene explained at the media briefing that the increase in personal tax was a small percentage which government could implement “without inflicting too much pain”.

If you are below 65 years old and have an annual income of R200,000, for instance, your tax rises is rising by R21 per month. Earn R500,000 per year? You’re looking at R271 more per month. Earners of R1.5 million per year, will be taxed an extra R1,105 per month.

Nene said tax brackets, rebates and medical scheme contribution credits would be adjusted for inflation, as in previous years. “The net effect is that there will be tax relief below about R450,000 a year, while those in higher incomes will pay more in tax.”

The Ministry of Finance had previously stated an objective not to raise corporate income tax, which is realised in this year’s Budget. Small business and middle-income households are getting a boost. Businesses that see less than R335,000 a year in turnover will pay no tax. The maximum tax rate for businesses with a turnover below R1 million is going down from 6% to 3%.

Middle-income households will benefit from the elimination of transfer duties on properties below R750,000. It’s bad news however for luxury homeowners: the transfer duties on properties valued above R2,250,001 is rising to R85,000 plus 11% of property value.

There will not be many laughs on April Fools Day this year for motorists, with the general fuel levy rising by 30.5 cents per litre. There is an additional 50 cents a litre increase in the Road Accident Fund levy, bringing the total fuel levy increases to 80.5 cents a litre.

However one potential silver lining for Gauteng motorists is a possible revision of monthly ceilings to e-toll tariffs. Nene said concerns regarding the socio-economic impact of e-tolls “have been heard”, likely from the inquiry set up by Gauteng Premier David Makhura, and that government would be making a contribution to meeting the road costs in the Adjustments Appropriations later this year.

At the media conference, Nene denied that this contribution would undermine the government policy of the user-pay principle. “The longer it takes to resolve the matter of the e-tolls, the more the situation… becomes a burden on both the company, Sanral (South African National Roads Agency Limited), and the government”. He said Sanral had to remain “credible” and “ready to be able to raise funds”.

While Eskom remains in financial dire straits, the increase in the electricity levies is framed as being driven by the need to reduce demand. Government is considering a temporary increase from the current 3.5c/kWh to 5.5c/kWh – but only for as long as the shortage lasts. Nene said such a levy would both “promote energy efficiency and encourage lower green house gas emissions”. He said the levy would likely be replaced by a carbon tax slated for introduction in 2016.

Government’s support for Eskom, meanwhile, includes a medium-term funding allocation of R23 billion, which will be paid in instalments, with the first transfer to be made in June 2015. It has allocated R18 billion to “electrification funding” to allow 875,000 new households to be connected to the grid.

The 2015 Budget allocates 48% of non-interest expenditure to national government, 43% to the provinces and 9% to municipalities. Nene said allocations to basic services provided by municipalities have been prioritised, “despite the constraints of the budget framework”.

The public service wage bill remains bloated, at about 40% non-interest spending. Nene told journalists this was “concerning”, adding that when more is budgeted for wages than services, it is a “sad situation”. He appealed to government departments to moderate employment growth, particularly in non-core areas.

Nene said the 2015 Budget was “constrained by the need to consolidate our public finances, in the context of slower growth and rising debt”. But one aspect that government is not skimping on is welfare spending. The minister said social grants “play an important role in protecting the poorest households against poverty”.

As a result, old age, war veteran, disability and care dependency grants will increase by R60 to R1,410 per month. Child support grants will increase to R330, while foster care grants by R30 to R860.

As usual, Treasury has increased the excise duties on alcohol and tobacco products. Those with a fondness for spirits will be particularly hard hit with an increase of R3.77 a bottle. A packet of cigarettes will set you back 82 cents more.

Asked whether he was worried about the performance of the Rand, Nene said “it is the volatility more than anything that concerns us”. He said that government did not have any particular level that they wish the Rand to attain, only that the currency should be stable.

With debt growing and revenue shrinking, Nene and the Treasury had little space to manoeuvre in this year’s Budget. But the aim of the Budget, he said, was to “build fiscal space we will require when the economy returns to normal”.

Source: Daily Maverick

Who Gets a Raise?

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Is it time to ask for a raise? Neil Irwin at The Upshot writes that this could (finally) be a good year for wages, with small businesses, and a big health insurer, planning to increase pay. And The Billfold titled a recent post “The Year America Gets a Raise” (though its author, Mike Dang, also cautioned that “we can only watch and wait” to see if wages really rise).

But even a large-scale increase in wages might not benefit everyone equally — asking for a raise, some say, works better for some employees than for others.

At The Atlantic, Bourree Lam reports on a study by the salary information firm Payscale, which found that of those who asked for raises, 44 percent actually got the amount they were looking for. Twenty-five percent got no raise at all. And at least among workers with M.B.A.s, women had worse luck than men: Their requests for raises were turned down 21 percent of the time, while men’s were denied just ten percent of the time.

In the wake of Linda Babcock’s popular 2003 book “Women Don’t Ask,” said Joan C. Williams, a law professor and co-author of the book “What Works for Women at Work,” many blamed wage inequality on women’s failure to speak up and request raises. But, Dr. Williams argued, research has found “that women who do ask for raises tend to be disliked, and often end up making lower starting salaries.”

“Stereotypes are that women are supposed to be modest and self-effacing,” she said — and asking for a raise flies in the face of those. And, she added, “when men ask for raises they’re also often seen as negotiating for their families” — women aren’t seen as family breadwinners, even when they are. “So it may seem selfless for a man to negotiate for a raise because after all he has to support his family, whereas a woman, she’s just a prima donna on an ego trip.”

Those asking for raises may face discrimination on the basis of race as well as gender, she notes. “To the extent that white men kind of get a pass on swagger,” she said, “that’s denied to other people.”

For black women, says Robert Livingston, a professor of organizational behavior who studies race and gender in the workplace, bias can work in multiple ways. “The stereotypes are quite different for African-American women compared to white women,” he said, “and it’s not perceived as being as much of a violation of stereotype expectations for African-American women to be a bit more direct.” However, black women are “held to a different level or expectation of performance” than white women. “If a white woman and a black woman both make a mistake on the job,” he said, “then the black woman is the first to go, before white women or black men, because they’re two degrees removed from the prototypical stereotype of a leader, which is a white male.”

When Dr. Williams, Katherine W. Phillips, and Erika V. Hall surveyed sixty female scientists of color, they also found that black women were “allowed more leeway than other groups of women to behave in dominant ways” — but that they also reported having to “provide more evidence of competence than others to prove themselves to colleagues.” Asian-American women, they found, faced greater censure for behaving assertively than women of other races, and Latina women reported that they were sometimes called angry or “too emotional” if they asserted themselves.

As for black men, Dr. Livingston said, “I think they would definitely face backlash when asking for raises or asking for promotion.” Some of his research shows that “black males benefit from having features that make them look more childlike,” he said — “and conversely, things that make black males look more cocky or arrogant or hyper-masculine or threatening really hurt black men.”

The opposite is true for white men — some research has even shown “that white men are punished for being too modest,” Dr. Livingston said. “If you’re a white male the world is pretty much your oyster. You can ask for what you want.” But for women of any race and for black men, “that doesn’t seem to be the case.”

Kym Harris, the president and C.E.O. of a coaching company that works with female and minority professionals, said she’s never worked with a woman who got pushback for asking for a raise. However, she said, some companies don’t give women of color what they need to succeed: “We’re not getting feedback in organizations,” she explained, often because “people are afraid of how we’re going to respond to the feedback, and so rather than giving us feedback that will allow us to improve our performance, we don’t get anything until we begin to derail or it’s just too late.”

One reason for this fear, she said: the “stereotype of the angry black woman.” For some women of color, she said, “there’s an intensity that we bring sometimes that people misinterpret. And if you combine that intensity with the stereotypes and biases that some people hold there is an apprehension to give feedback, particularly constructive feedback.”

To combat this problem, she said, companies can “give consistent feedback,” not only “at performance appraisal time, but maybe quarterly, or every other month.”

And those in leadership roles can “be more open to mentoring and initiating relationships.” “When they see someone in the organization who happens to be a woman of color doing well, who has the potential to advance in the organization,” she advised, “reach out and invite that person to lunch, have coffee with that person, get to know that person more, open the door.”

“When you have authentic relationships,” she said, “you have trust. When you have trust, there’s feedback. When there’s feedback, you have confidence about where you stand as it relates to your performance and how you’re viewed in the organization.”

And, said Dr. Livingston, companies need to recognize that “there are different propensities for certain groups to put forth requests for raises or for promotions, and that there’s also different consequences when the groups do” — and that this contributes to pay inequality. Companies also need to be “taking proactive steps to change the organizational structure and the procedure” around raises and promotions — he mentioned the idea of “standardizing the promotion process” so that people don’t always have to ask.

If two people are doing equally well at their jobs, “but one person asks and the other person doesn’t for social reasons, then that’s unfair,” he said. “One is reaping the reward for something that he or she hasn’t really earned.”

Source: http://op-talk.blogs.nytimes.com/2015/01/26/who-gets-a-raise/?_r=0

In the Shoes of a Tax-compliant Expatriate

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VISITORS to the Philippines come for the beautiful islands, tropical weather, and exotic cuisine. It therefore comes as no surprise to find foreigners all over the Philippines. But they’re not all lounging by hotel pools — many of them are prowling the central business districts wearing suits, supervising projects in the red-hot business process outsourcing sector, among other industries currently attracting investment. Only a few startling statistics are necessary to demonstrate that quite a number of them are here for business. One is the fact that the tiny British Virgin Islands — a favored address for registering investment vehicles — topped all sources of foreign investment in the 2013-2014 fiscal year. Another is that only 528, or 20%, of all companies registered with the Philippine Economic Zone Authority (PEZA) are wholly Filipino-owned, indicating that the remainder have at least some foreign ownership.

Foreign investors seeking direct participation in the management of their projects in the Philippines usually send a representative or live here themselves. For such investors, here is a useful checklist of responsibilities of expatriates working in the Philippines:

PRE-WORKING REQUIREMENTS
To be legally employed in the Philippines, expatriates are required to obtain a work visa. An employment contract and benefits package are some of the key requirements before a visa is approved. The latter should be structured efficiently for tax purposes before it is submitted to the Philippines’ immigration department.

TAX FILING OBLIGATION
Aliens residing in the Philippines or deriving income in the Philippines are generally required to file an income tax return in the Philippines except expatriates covered by substituted filing.

Under substituted filing, a resident expatriate earning purely compensation income from a single employer on which withholding tax on compensation had been properly withheld shall no longer be required to file an income tax return. The Certificate of Withholding Taxes on Compensation (BIR Form 2316), issued by the local employer would suffice for the purpose. If expatriates plan to claim tax credits in their home country, they may use the BIR Form 2316 or alternatively, they may file income tax returns at their option or as required by their home country.

Applying the above, resident expatriates and non-resident expatriates engaged in trade or business in the Philippines are required to file an income tax return.

CHARGE TO TAX
In general, aliens are taxable in the Philippines only on Philippine-sourced income. The income from employment, such as salaries, allowances, benefits and other forms of compensation for labor or personal services performed in the Philippines are treated as Philippine-sourced income, regardless of where the payment is made. The salaries and benefits must be subjected to withholding tax by the employer.

In certain cases, however, an expatriate receives compensation from a foreign affiliate of the local employer, in addition to the salaries received from the local employer. This set-up, where two companies are paying the expatriate, is referred to as a split-pay arrangement. If the foreign-paid salary is given in account for the assignment or work in the Philippines, such income paid by the foreign company is also taxable in the Philippines.

In most cases, the foreign-paid salary above is not subject to withholding tax since the salaries are not shouldered by the local employer and not paid through them. This is because the salaries are directly deposited to the account of the expatriate without the details being known to the local employer. If this is not subject to withholding tax, the expatriate employee loses his qualification for substituted filing.

In addition to salaries, these are some of the benefits and allowances granted by employers and some income earned by the employee from other sources:

• Fringe benefits

The employer may grant or pay the employee housing, car, or personal household expenses. The expatriate need not worry since these benefits are subject to fringe benefit tax which is borne by the employer.

• De minimis benefits

These are small benefits, such as laundry allowance and clothing allowance. Although these are non-taxable, they must be reported as part of the non-taxable amount in the income tax return.

• Passive income

This includes income exempt from tax and income subject to final tax, such as interest, royalties, dividends, and winnings, sale or exchange of stock, etc. For 2014, unless it is further deferred in the succeeding year, these must be disclosed in the individual income tax return. It is therefore imperative that the expatriate all his income earned in the Philippines that is subject to final tax or exempted from income tax.

Speaking of stocks, it is very common for multinational companies to grant stock options to its employees for services rendered in the Philippines. Under Revenue Memorandum Circular No. 79-2014 issued by the Bureau of Internal Revenue, it seems the stock option is taxed upon grant and exercise. Expatriates are advised to seek special advice on the taxation of stock options.

Other taxes that expatriates are responsible to pay include: (1) annual community tax, (2) real property tax if owning a condominium, and (3) social security. Social security is compulsory for all individuals working in the Philippines. However, for citizens of countries with which the Philippines has existing social security agreements — such as Austria, Belgium, Canada, France, Korea, Netherlands, Quebec, Spain, Switzerland and the United Kingdom — a request for exemption may be filed with the Philippine social security authorities.

POSSIBLE TAX SAVINGS
Lastly, expatriates may be entitled to income tax relief in accordance with the international tax treaties entered into by the Philippine government. Under most tax treaties, an expatriate who is a resident of a treaty country shall not be liable to pay income tax on employment exercised in the Philippines if the employee is present in the Philippines for an aggregate period of less than 180 or 90 days for the taxable year, depending on the alien’s country of origin. However, to avail of the exemption under the tax treaties, a tax treaty relief application must be filed with the tax bureau before the first taxable transaction/payment is made.

An expatriate earning income in the Philippines should know his tax responsibilities. Whether the income is exempt or not from tax, there is always the responsibility of filing a return or securing an exemption.

Marie Fe L. Fawagan is a manager with the Tax Advisory and Compliance division of Punongbayan & Araullo.

Source: http://www.bworldonline.com/content.php?section=Economy&title=in-the-shoes-of-a-tax-compliant-expatriate&id=101570

Shareholders of Tata Motors Ltd Approved Salary Proposals for Top Executives

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Mumbai: Shareholders of Tata Motors Ltd have approved salary proposals for top executives at the company, after these proposals were put to vote for a second time. According the results of a postal ballot released by the company on the BSE on Wednesday, more than 75% of the company’s shareholders voted in favour of the proposals which sought a certain minimum remuneration to three top executives in case of inadequacy of profits for the fiscal years 2013-14, 2014-15 and 2015-16. The executives include late managing director Karl Slym (remuneration for 2013-14), Ravindra Pisharody, executive director (commercial vehicles), and Satish Borwankar, executive director (quality). “We are happy to note the strong positive voting from the shareholders in favour of our resolutions,” said Tata Motors. “These positive results are an endorsement of the company’s disclosure and governance policies and indicate the shareholders’ faith in the company’s management especially as it works towards a turnaround in a challenging market situation,” the company added. The pay proposals, which had been rejected by minority shareholders in July after certain proxy advisory firms raised concerns, were put forward to shareholders again in December. This time the company sought to explain the proposals in greater detail to shareholders and highlighted that the remuneration being sought was in line with the average salary increase of about 10%, citing a survey by consultant Aon Hewitt. “Remuneration paid/payable to the two EDs (executive directors) and late MD (managing director) for FY2013-14 is commensurate with industry standards and board-level positions held in similar-sized companies, taking into consideration the individual responsibilities shouldered,” said Tata Motors. In response, domestic proxy advisory firms such as Institutional Investor Advisory Services (IiAS) and InGovern Research Services had recommended that shareholders vote in favour of the proposals. Boston-based Institutional Shareholder Services (ISS) had recommended approving the remuneration proposals for fiscal 2014, but had recommended a vote against the salary proposals for fiscal 2015 and fiscal 2016. A number of foreign investors tend to vote based on ISS ratings via automatic voting systems. Foreign institutional shareholders held 26% in Tata Motors as of 30 September, according to publicly available data. In the case of the pay proposals for fiscal 2015 and fiscal 2016, 69.3% of public institutional shareholders who voted, did so in favour of the proposals, while 66.7% of other public shareholders voted in favour of these proposals. However, since 100% of the promoter group voted in favour, the overall vote in favour of the proposals stood at 80.96%—enough to get the proposals through. A company that seeks to pay a whole-time director more than 5% of its net profit must secure approval from 75% of its minority shareholders. J.N. Gupta, founder of proxy advisory firm SES, said his firm had earlier advised the shareholders against it purely on technical grounds, which had more to do with transparency and disclosure than the remuneration itself. “The remuneration wasn’t high and well within the norms. We were successful in convincing the company into giving all details and we were satisfied with information they shared,” said Gupta. The first time the resolutions were defeated was primarily on account of a large number of ADR holders taking a narrow interpretation of the rules governing the remuneration and consequently not supporting the resolution, said IiAS, a domestic proxy advisory firm. “The investors seem to have realized that the two executive directors, are professionals, with significant experience in the automobile industry. Further that their proposed remuneration is in line with industry peers, and commensurate with the size and nature of a large and complex company like Tata Motors,” said IiAS in a note released after results of the postal ballot were released.

Read more at: http://www.livemint.com/Companies/5fEvOZQ62mL9zPciAwBAbJ/Tata-Motors-shareholders-approve-remuneration-proposals.html?utm_source=copy