Tag Archives: SARS

SA is not projecting the right image, affects business, says Western Cape Tourism Minister Alan Winde!

On the day that Finance Minister Pravin Gordhan presented South Africa’s mid-term budget in Parliament, and announced that SARS revenue collected is R5 billion less, and is unlikely to grow next year, Minister Alan Winde closed the Wesgro AGM with refreshing honesty, and said that the Finance Minister’s speech meant that provinces would receive the same allocation as the current financial year, meaning a lower buying power next year due to cost increases.  He also said that currently South Africa is lacking leadership, and is not projecting the right image to the outside world, given the strike of the SA Transport and Allied Worker’s Union, the Marikana massacre, and the capsizing of the Miroshga off Hout Bay.

Minister Winde’s sombre closure of the AGM reflecting the tough trading conditions which the Western Cape businesses can expect for the next two years, and which have already affected Wesgro’s performance in not meeting its top targets of Investment.  The Trade, Investment and (new) Tourism promotion body celebrated its 30th anniversary this year, and probably presented negative figures for the first time in many years.  It has an interesting method of setting targets, at a high and a low band.  In most measurements presented, Wesgro exceeded the ‘low road’, but did not meet the ‘high road’ budgets in its Investment and Trade Promotion divisions.  Wesgro Chairman Benjamin Kodisang started off the proceedings by also adding his negative view of the world, expressing that he is ‘a concerned man, who has never found the world in the situation it is in now, economically, socially, and politically’.  He challenged business persons in the Cape to ‘stand up, and be counted’, and to show leadership, as contained in Wesgro’s Vision of leading ‘the creation and promotion of a compelling global destination for investment, trade and destination marketing for the benefit of all people in the Western Cape’. Good news is that the Western Cape economic growth has outshone that of the national economy for the eleventh year running, with a growth rate of 3,1 % currently, driven largely by a 7% growth in exports, mainly of fruit.  Over a third of exports go to Asia, and one-quarter to Europe (of which one-fifth is wine).  R1,24 billion in Investment was attracted to the province in the past year, it was reported.  More than 1000 jobs were created in the same period.  The dominant export markets for the Western Cape remain the UK, France and Germany, but the West Africa Trade Corridor is gaining importance, in particular Nigeria, Angola, Cameroon, and Côte d’Ivoire.  Angola has taken over from Mozambique as the province’s largest trade partner in Africa, said Nils Flaatten, Wesgro CEO.  Brazil, India and China, all BRICS countries, are important for partnerships to promote the economy of the Western Cape.  The United Nations Procurement Programme, incorporating our province as one of only three developing areas, is a bonus for the Western Cape.

In April Wesgro incorporated Cape Town Routes Unlimited, which no longer operates by that name, but which still has a Board in place until the Western Cape Tourism Act of 2004 has been repealed, likely to be in April 2013. The Wesgro Act is being amended too, to allow the organisation to adopt the role of tourism promotion too.  Deon Cloete, Chairman of the Cape Town Routes Unlimited Board, also painted a picture of a tough economy and the effect of the incorporation of the organisation into Wesgro, the contribution of conferences to the Western Cape economy having been R254 million instead of the projected R360 million, even though the number of conferences grew.  The 1,4 million tourist arrivals means an 8% decline, while spend by foreign tourists had declined by 16% to R18 billion, he said.  The province sold 26% of the national bednights, and the average spend per day on a trip was R1420.   Cloete warned of a ‘tough year’ ahead, despite the country’s most popular tourism destination, the V&A Waterfront, being in the Cape and having achieved 22 million visitors.  Minister Winde highlighted that 600 conferences and events had been held in the Western Cape in the past year.

Flaatten said that the vision going forward is to cross-sell the Western Cape in a three-prong Trade, Investment and Destination Marketing approach.

Embarrassing is the glowing write up in the Wesgro 2011-2012 Annual Report of Cape Town Tourism CEO and Wesgro Board member Mariette du Toit-Helmbold: ‘Under her  leadership Cape Town Tourism has won critical acclaim as a Visitor Services and Destination Marketing Organisation doing sterling work at the coal face of one of the country’s fastest growing industries’. The City of Cape Town clearly does not agree, having taken the responsibility of Destination Marketing away from Cape Town Tourism, announced at the Cape Town Tourism AGM just a week ago!

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com Twitter: WhaleCottage

Tourism Service Excellence standard an excellent initiative to enhance SA tourism competitiveness!

The national Department of Tourism has embarked on a welcome Tourism Service Excellence drive, and has released a draft document for comment from the industry until the end of February in developing a tourism service excellence standard and code, to enhance the tourist experience in South Africa.

The development of a ‘National Standard’ for Tourism Service Excellence by the South African Bureau of Standards (SABS) results from a 2008 National Tourism Skills Audit Report recommendation that customer care training in the tourism sector should be improved, when South Africa ranked 61st of 133 countries in The World Travel and Tourism Competitiveness Report of 2009, coupled with inconsistent service delivery in tourism, ranging from very poor to very good.  The reason for this was stated as being the lack of ‘integrated standards and norms that can be used as a guiding tool in terms of customer service’. To improve customer service, it was deemed necessary to develop a set of policies, guidelines and programmes, to ‘ensure a holistic approach and collective ownership’ for customer service, thereby improving service excellence throughout the tourism ‘value chain’.  Such a standard would be developed for all businesses which come into contact with tourists, including the Immigration officials (criticised in the past for their unfriendliness), transport services, accommodation establishments, financial institutions, shops, and any other businesses and authorities which deal with tourists when they make bookings for their trip, when they arrive, and interact with them during their stay.

‘South Africa should be seen as the country that offers the best service, diverse experience and value for money.  The overall purpose of this document is to emphasize the importance of the spirit of “Ubuntu” in ultimately achieving the vision of tourism growth and development in South Africa’, states the draft Service Standard document.

According to the Service Standard draft, tourism businesses would be required to support the principles of accessibility, accountability, accuracy, capacity building, commitment, consistency, continual improvement, courtesy, responsiveness, safety and security, value for money, and visible marketing in displaying the logo for the new Service Standard, in running their tourism businesses and operations.  It is not only written for South Africa, but incorporates neighbouring countries such as Botswana, Mozambique, and Zimbabwe, as if they are service extensions of our country’s tourism product.

The Service Standard document identifies government departments, as well as associations and groupings of tourism businesses which should adopt the service standard, and encourages its usage amongst its staff and members, including the Department of Home Affairs serving tourists on arrival and departure at airports; SA Tourism and the International Marketing Council in marketing the country; provincial tourism authorities; municipalities in providing visitor information services, signage, and infrastructure; telecommunication companies providing cellphone services; SARS for customs clearance; airports; the Banking Association; the Tourism Grading Council of South Africa, the industry quality assessment body, not mentioning FEDHASA, the industry hotel association, and the guest house association; the Banking Association; the Restaurant Association of South Africa (although not all restaurants belong to it); the Tourism Business Council of South Africa; and shopping centres.

Tourism businesses are expected to introduce a quality policy, to make service their focal point, to train new staff in service, to offer friendly and professional service, and to review their quality and services regularly.  In running their tourism businesses, they are encouraged to focus on the following:

*   Product: it should offer quality, choices and alternatives, ensure that there is enough staff to assist the tourists (this is the biggest challenge to the tourism industry, and would require a complete work ethic culture change amongst staff), offer value for money (a very relative term), universal accessibility for the disabled, ensure the safety and security of their clients, ensure guest information confidentiality, be environmentally friendly in its operation, and not discriminate against any types of clients.

*   Service: should be friendly, professional, guest focused and driven, and offer an effective service recovery.

*   Marketing: should have a consistent message, be accurate, be updated regularly to create realistic expectations for tourists, be truthful and honest, and not be offensive.

Although written in an academic form, the draft National Service Excellence standard is an excellent step forward for tourism service excellence.  One is surprised that it has taken the Department of Tourism so long to work on the standard, and that it was not prepared in time for the 2010 World Cup.  Most (commercial) tourism businesses would argue that they already apply the principles of service excellence in running their businesses, our country receiving praise for its friendliness and for walking the extra mile, and that it should be the government departments and bigger corporates who have a secondary tourism involvement that should be adopting the new service standard.  The document contains a Tourism Service Excellence code for companies to use as a framework to design their own service excellence codes.  As with most such documents, it has not been widely exposed to the tourism industry in terms of the input and feedback the SABS is seeking.

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com Twitter: @WhaleCottage

Restaurant Tip Tax: SARS declares tips tax free

Last week, taxing tips of waiters and other employees, who receive gratuities from customers for good service, was a hot topic on Twitter and other social media platforms, following the publishing of a clarification of the payment of tax on tips by SARS.  Legal views confirm that employers cannot deduct PAYE, the Skills Development Levy (SDL), and UIF from employee income generated from tips, but it also means that the tip income of employees cannot be used as a basis for pension and medical aid benefits.

Business Report wrote that “Waitrons can keep their hard earned tips for themselves and don’t have to worry about the tax man…  According to the last week’s ruling, the transfer of tips handed over to an employer by an employee for ‘safekeeping’ did not constitute a payment of remuneration”.  This view is based on the Group Tips Policy, by which staff pass on their tips to their employers for safe-keeping whilst they are working.  Legal firm Cliffe Dekker Hofmeyr is quoted as saying that the Group Tips Policy sees tips “…as gratuitous payments to which the employees have no entitlement or an expectation of receipt as part of the performance of their duties”, and therefore should not be taxed.

Far more complex is an article by lawyer Stephan Spamer at ENS and candidate attorney Jonathan Sacks, writing on Moneyweb.co.za.    They write that the increased usage of credit cards by customers for safety reasons has led to a large percentage of tips being added to credit card payments, going to the employer instead of the employee.  The employer then has to transfer the tips to the employees.  According to the Fourth Schedule to the Income Tax Act, 58 of 1962, ‘gross income’ includes ‘any amount received or accrued in respect of services rendered or to be rendered, including a voluntary award, as well as any amount received or accrued in respect of or by virtue of any employment’.  The lawyers argue that a ‘causal relationship’between payment received and the service provided must exist for that income to be defined as ‘gross income’.  On the basis of this relationship, the writers argue that the tip payment is part of gross income, and is therefore taxable, especially if the expectation at the time of appointment of the employee was to receive tips.  The article becomes confusing when the writers argue that the definition of ‘remuneration’, including ‘all payments and amounts payable, in cash or otherwise, whether or not for services rendered and includes salary and wages, leave pay, bonuses, gratuities, commissions, over time pay and other amounts paid for services rendered as well as allowances and advances’, is similar to that of ‘gross income, but that it does not mean that the employer must deduct the valid taxes and deductions.  They argue that it is not the employer paying the tip – in essence it is the customer paying it via the employer, who just holds the tip on the employees’ behalf, and therefore as this cannot be viewed as remuneration, no taxes and fees have to be deducted from the monies paid to employees.  Employees can, however, request in writing that the employer deduct PAYE to reduced their tax liability.  Given their conclusion that no tax is payable on tips by employees, the writers argue that no SDL and UIF is deductible either. 

Given the complexity and legality of this SARS Tip Tax ruling, we quote an extract of an article on Moneyweb, written by Cliffe Dekker Hofmeyr Employment Law Director Gillian Lumb and associate Pranisha Maharaj: :“The Binding Class Ruling: BCR 027 recently issued by Sars, declared that the transfer of tips (that were handed over to the employer by the employees for safekeeping in terms of the employer’s proposed Group Tips Policy) from the employer’s bank accounts into the employees’ bank accounts does not constitute a payment of remuneration by the employer as contemplated in paragraph 2(1) of the Fourth Schedule of the Income Tax Act. Essentially, this paragraph of the Act provides that an employer who pays or becomes liable to pay any remuneration to any employee must deduct or withhold employee’s tax from such payment. Binding Class Rulings are intended to promote clarity on the interpretation and application of the tax laws to a class of persons who apply for a ruling in respect of a proposed transaction to which it is a party. Accordingly, tips will not form part of the calculation of any benefit calculations for the employees’ remuneration packages, for example pension or medical aid.  The ruling is in line with the Sectoral Determination 14: Hospitality Sector, South Africa  which defines “remuneration” as ‘any payment in money or in kind, or both in money and in kind excluding any gratuity or gift received from a customer for service rendered”.

The new Tip Tax directive by SARS has been back-dated to August 2010, and covers the five year period from that date.  This raises the following questions:

*   Can employees that had PAYE, SDL and UIF deducted between August 2010 and July 2011 receive their tax and other deductions back, from the employer and/or SARS?

*   Can employers deduct the tip income that went through their credit card machines, and was therefore deposited into the business bank account, from their taxable income for the calculation of VAT and income tax?

Interestingly, yet not surprising, the hotel association FEDHASA has not officially published a guideline about this Tip Tax amendment for their hotel and restaurant members!   On Twitter, the FEDHASA Cape Director for the Restaurant sector, Rey Franco, wrote that tips received via credit card are taxable, and that only cash tips received by waiters directly are not taxable.  We believe that, in the light of the above, he is incorrect.

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com Twitter: @WhaleCottage

Tourism Minister Alan Winde Sweet Service and SARS Sour Service Awards

The Sweet Service Award  goes to the Western Cape provincial Minister of Tourism Alan Winde, for his responsiveness and willingness to be contacted.  On Twitter two days ago a tour operator requested the name of our provincial tourism minister.  I Tweeted his name and Twitter handle.  Minister Winde immediately wrote back, asking how he could be of assistance, and provided his e-mail address and cellphone number!  There are not many politicians that are so ‘customer friendly’. Minister Winde and our Western Cape Premier Helen Zille have both embraced Twitter.

The Sour Service Award  goes to SARS in Paarl, which is so understaffed that a queue of 50 had to stand and sit for 90 minutes outside on the pavement to get a number to wait inside the building to speak to one of only three staff on duty two weeks ago!   When I got to see one of the staff, I had two bank account changes and two VAT payments to make. Initially the lady told me that she may only handle three queries, and that I would have to go back to get another number for the fourth query, even if I had waited for 90 minutes to get to speak to her!  When I asked to see her manager, she agreed to deal with the fourth query.  Whilst two hours is an unproductive waste of time for working persons, it would have probably taken four hours at the Cape Town city centre branch.  SARS does not allow one’s accountants to do bank account changes anymore (one has to come in personally), and does not allow VAT to be paid via the printed form anymore, sent to companies for years, causing the queues. 

The WhaleTales Sweet & Sour Service Awards are presented every Friday on the WhaleTales blog.  Nominations for the Sweet and Sour Service Awards can be sent to Chris von Ulmenstein at info@whalecottage.com.   Past winners of the Sweet and Sour Service Awards can be read on the Friday posts of this blog, and in the WhaleTales newsletters on the www.whalecottage.com website.