SARS Potential changes to Tax Clearance Certificates

It was highlighted in the 2013 Budget that SARS was to implement an automated tax clearance certificate later this year as part of their continued improvement to tax administration.

Taxpayers generally require tax clearance certificates as evidence to third parties of their tax compliant status and are a requirement when applying for foreign investment allowances, emigration and tenders.

This process may potentially start as early as May 2013 as it is our understanding that SARS will introduce new procedures around this time with regard to the approval as well as the issue of tax clearance certificates.

Although SARS has not issued formal communication in this regard, we understand that the new procedures may include a mandatory audit of the applicant taxpayer before approval of the application. What level of audit will be conducted, which SARS office or division will be responsible for the audit and what the expected turn-around time will be if this requirement is implemented is not clear at this stage. Furthermore, taxpayers who have successfully tendered for work will be ear-marked for audit to ensure full-disclosure of the taxable income made from such tender.

Therefore, should you be considering applying for a tax clearance certificate we suggest that you do so now to potentially avoid the application of the new procedures.

PKF

American property market recovery being mirrored in South Africa

The USA’s National Association of Realtors (NAR) says that the country’s housing market is steadily moving towards once again becoming a sellers’ market.

Drawing attention to this, Tony Clarke, Managing Director of the Rawson Property Group, says that on the figures given by the NAR, there can be no doubt that this is happening.

“The market is increasingly less flooded with low price stock. The number of homes listed for sale in January 2013 (1.74 million) was 4.9% lower than December and was the lowest total since December 1999, when there were only 1.71 million homes for sale.

“Just how significant this drop is can be seen when it is compared to the January 2011 figure when there were 2.9 million homes on the market. The improvement is, by any standards, very significant – and to be welcomed.”

US economists, say Clarke, are now predicting that in 2013, a total of 5.2 million homes will be sold in the United States.

Another way of looking at the situation, he said, is to compare hypothetical stock elimination times: supposing no further homes were to come onto the market, the current stock, at today’s sales rate, would sell within 4.2 months. This, too, shows a big improvement on the same month last year, when it would have taken 6.2 months to sell the stock.

For the record, in ‘desirable’ areas, US homes are now selling in 65 days, on average, while those in remote or less popular areas are taking 300 days to sell. The average sales time is now around 155 days, which, says Clarke, is better than the South African figure.

“The latest upswing in the US has been partially attributed to the arrival of spring, when homes always sell faster.  However, that, I believe, can be over-emphasized – it certainly cannot account for so big an improvement on its own. The simple truth is that a growing number of buyers are now chasing a dwindling number of homes.”

This must impact on prices – and it is noteworthy that the latest NAR figures show that these are now rising year-on-year at a rate of 7.5% or 0.9% per month.  (This figure excludes foreclosures and short sales.)

Recovery in the home market, says Clarke, is, however, likely to be partially held back by the very large number of repossessed homes now owned by the USA’s banks. These, he says, have become the country’s largest owners of residential property in the last four years. They will, however, now be forced to release these properties onto the market and the temptation will be to discount prices so as to get rid of stock. This will inevitably affect the market as a whole.

Relating the US figures to those of the Rawson Property Group’s, Clarke says that the sales trends here are similar and, as in the USA, a steady improvement is now discernible. The big difference between the South African situation and that of the USA, is that our banks are fortunate to have already disposed of most of their repossessed stock.

“There is, therefore, no longer any danger of the banks flooding the market with low priced homes which have to be sold fast – and for this we can be grateful.”

How South Africa can enhance its attraction as investment destination

IN A tough and unpredictable global economic environment, countries such as South Africa are searching for trade and investment opportunities to drive economic growth. The triple challenge presented by poverty, inequality and unemployment are not isolated to South Africa.

In President Jacob Zuma’s state of the nation address earlier this year, and more recently Finance Minister Pravin Gordhan’s budget speech, the National Development Plan compiled by the National Planning Commission was highlighted as a priority for the government. Key to the success of the NDP will be the support of all companies — public and private — for the development of infrastructure and industry.

But this support goes beyond funding. It also speaks to skills transference, business incubation, training and development, social support and mentoring. And the support needs to come from both local businesses and from international companies operating in South Africa.

A recent survey conducted by Nielsen, on behalf of the American Chamber of Commerce in South Africa (Amcham), revealed important insights into US investment in South Africa.

There are more than 500 US companies doing business with South Africa. As an important economic frontier for many of these companies, South Africa is not only a compelling market in its own right — representing more than 25% of Africa’s gross domestic product — but is also a staging ground to enter the rest of the continent.

Many US businesses manage their sub-Saharan African operations from South Africa, and South African companies are major investors in the rest of the continent. According to the Amcham survey, 74% of the respondents indicated their South African offices were responsible for spearheading their expansion into Africa. Many of these companies use South Africa as a base to operate in more than 10 African countries.

South Africa’s position as a gateway to the rest of the continent was reinforced in Gordhan’s budget speech. His proposed relaxation of a number of cross-border financial regulations and tax requirements on companies will make it simpler for banks, financial institutions and foreign companies to invest in African countries.

US companies contribute significantly to the South African economy in terms of output and turnover, directly employing more than 70,000 people and indirectly another 75,000 — the vast majority being South Africans. Just more than half the companies surveyed created almost 7,000 jobs last year, and 76% of the respondents had invested in or expanded their business in the past two years.

Corporate social investment (CSI) uplifts communities, with 69 of the US companies surveyed contributing R445m overall towards CSI.

The large companies represented in the survey contributed a combined annual revenue of R233bn to the South African economy in 2012, with an additional R8.6bn invested in new initiatives and expansions.

Amcham believes that foreign investment into South Africa is a positive driver of economic growth and that it creates sustainable and decent jobs. While South Africa is an attractive destination for trade, investment and tourism, the country can enhance its global standing and competitiveness by building its infrastructure. It is planning to spend more than R845bn on its infrastructure over the next three years, presenting an important opportunity for US expertise and investment.

There is probably no other place in the world where a partnership for business engagement is more important. However, according to the survey, the most significant issue facing US companies in South Africa is a lack of sufficient skills.

During 2010-11, US businesses contributed almost R500m to skills and development and spent more than R320m on training — over and above the 1.5% of payroll paid as a skills development levy.

Investment in training is important for US companies that bring new and advanced skills to South Africa. US businesses also contribute significantly to supply-chain and small and medium-sized enterprise development. At a recent incubation exhibition, more than 16 US companies displayed roughly 40 initiatives in this area.

Broad-based black economic empowerment was rated in the Nielsen survey as the second-biggest issue facing US businesses in South Africa.

Proposed amendments to the empowerment codes of good practice are now under review. These amendments must accelerate the transformation of the economy but avoid unintended consequences that will weaken South Africa’s competitive positioning. The path to transformation is a journey, and the US has embarked on this journey in partnership with South Africans.

Other issues highlighted in the survey include labour, specific industry regulations and policy uncertainty.

The challenges of poverty, unemployment and inequality have fostered great debate in South Africa on the future of economic policy, the role of the state in the economy and the standards that should be applied to employment, procurement and inward investment. Amcham and the broader American business community remain committed to South Africa.

The chamber will keep engaging the governments of both countries to provide constructive input on policies and help South Africa position itself competitively to attract trade, investment and tourism, and to help the commercial relationships between the two countries flourish.

For the NDP to be successful, public and private institutions — both local and from abroad — must seek partnership opportunities to demonstrate their support. As the representative for US business in South Africa, Amcham has called on companies from other nations to do the same.

• Oosthuyse is president of Amcham SA and chief country officer of Citi South Africa.

Business Day

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Mortgage fees hiked 30% in just four months, RSA to follow?

Mortgage rates have continued to tumble since the start of the New Year driven down by cheap government and Bank of England money, research has found, but at the same time fees have risen drastically.

Across all mortgages fees have risen by 8 per cent in just four months, but on some of the most popular mortgages matters are far worse - the average fee on a five-year fix for those with a 25 per cent deposit is up an astonishing 30 per cent since January.

While headline mortgage interest rates slide lower and loans for those with smaller deposits are making a comeback, potential savings are being eaten away by the hefty fees charged upfront by providers.

The average mortgage fee has risen by £112 since the start of the year, or eight per cent, from £1,410 to £1,522. Financial data specialist Moneyfacts says this is the highest it has recorded in 25 years.

The rise in fees has been even steeper still in the hotly contested five-year fixed rate market at one of the key deposit benchmark levels.

Here, the average five-year fixed 75 per cent loan-to-value mortgage has fallen from 4.47 per cent in January 2013 to 3.54 per cent today. 

But the average charge to obtain these mortgages has shot up 30 per cent from £964 to £1,258.

The rise in fees is in direct correlation to the celebrated recent return of higher loan-to-value mortgages and the widely published fall in interest rates.

Source: dailymail.co.uk

Investment tips and lookout for this week

After markets pulled back last week, investors should be on the lookout for new reports on the broader U.S. economy to redirect stocks back to record-high territory.

The S&P 500 and Nasdaq closed out their weakest week of the year last week, following a disappointing jobs report on Friday. The S&P 500 dropped 1%, while Nasdaq lost 2%. TheDow Jones Industrial Average slipped 0.1% for the week, marking its second worst performance of the year.

Several potential market movers are slated to come out of Washington on Wednesday, including President Obama's budget proposal, the U.S. Treasury budget, and minutes from last month's Federal Open Market Committee meeting.

Related: Fear & Greed Index

Investors will be mining the minutes from the Federal Reserve's meeting for clues on how central bankers view the economy and its progress. At the meeting, the Fed had trimmed its forecast for economic growth in 2013, but was optimistic that the unemployment rate would decline to between 7.3% and 7.5% by the end of the year. The unemployment rate was 7.6% as of March.

The U.S. manufacturing sector will also be in play, with PPI and wholesale and business inventories on tap.

Last week, the Institute of Supply Management reported that U.S. manufacturing activity continued to expand in March, but the rate of growth had slowed.

Investors will also be paying attention to Michigan sentiment and retail sales to gauge the confidence level that Americans currently have on the economy and whether that's translated to spending. These numbers have been closely watched since the start of the year, as investors are trying to get a handle on whether the payroll tax and delayed income tax refunds have burdened consumers.

Last week's job report showed that hiring at the nation's retail stores took a sharp drop, driven by colder-than-normal temperatures for much of the country in March, as well as possible fallout from the tax hikes and layoffs from the government's ongoing fiscal woes.

CNN Money

Lending to small businesses sees highest rise since June, Mortgage approvals drop to five-month low

Lending to British consumers rose slightly in February, data from the Bank of England showed today but a fall in mortgage approvals for a second consecutive month revealed bank lending was still in a precarious state.

More positive news came in the form of loans to small businesses, which posted their strongest rise since June last year, climbing by £114million, according to the Bank. But this followed an average monthly decrease of £700million in lending to small businesses over the last six months.

Consumer credit rose by a net £0.6billion in February, higher than the £0.5billion increase in January.

The figures showed credit card lending increased by £223million in February, on a par with the rise seen in December during the Christmas shopping period suggesting people may be turning in greater numbers to their plastic to help deal with monthly essentials.

Personal loan and overdraft lending also increased by £416million, which is also the biggest rise seen since December.

Mortgage lending grew by £0.9billion in February, to £7.7billion, stronger than January's growth of £0.3billion, the data showed.

But the mortgage approvals fell to 51,653 in February, the lowest since September last year and down from 54,187 in January.

The number of approvals was slightly better than the monthly average of around 51,000 seen last year, but still just over half the typical level seen before the 2008 financial crisis.

A rise in the flow of credit in recent months, particularly in home loans, has fed hopes that the Government’s flagship ‘Funding for Lending Scheme’ is working.

Similar data published by the British Bankers' Association last month showed a 6.3 per cent fall in mortgage approvals in February compared with a year earlier, as well as a drop compared with January.

Elsewhere, data showed manufacturing continued to decline last month. The Markit/CIPS manufacturing purchasing managers' index gave a reading of 48.3 for March, only slightly above February's shock reading of 47.9, and lower than City analysts had hoped. A reading below 50 points to a contraction in economic output.

Peter Dixon economist at Commerzbank said the manufacturing figures were slightly below expectations but ‘in the grand scheme of things not too far away'.

‘The more important thing is that they are struggling to get back above the 50 level ... this is largely a consequence of problems in external markets, rather than what's happening at home,’ he added.

‘But unless we see some signs of improvements in continental Europe in particular over the next few months, I think that index is going to struggle to get above 50 any time soon’.

Meanwhile, Howard Archer, chief UK and European economist at IHS Global Insight, said the continued parlous state of the economy is likely to weigh down on house prices in the coming months.

He said: 'Despite the dip in mortgage approvals at the start of 2013, the majority of recent data and survey evidence suggest that housing market activity has firmed modestly overall in recent months, but remains far from racing ahead.

'House prices may very well eke out a small gain over 2013 supported by modestly increased activity. However, it remains hard to see house prices making a decisive move upward in 2013 given the still difficult and uncertain economic environment.'

Chris Love, a director at independent mortgage broker, Mortgage Simplicity, said the data showed how dysfunctional the mortgage market still was.

‘The sharp fall in loan approvals for house purchase during February is a stark reminder of how the mortgage and property markets remain volatile, constrained by both strict lender criteria and low consumer confidence.

‘You can't do anything about weak demand but there is certainly room for improvement in lender criteria, which in many cases remain excessively harsh.’

He added the £25billion hole in bank finances discovered by the Bank of England last week could see mortgage approvals fall further if banks were forced to shore up their capital positions.

Elsewhere, Howard Sears, managing director of venture capital firm Astuta, said the figures ‘lay bare the gulf between the banks' rhetoric and the reality’.

Mr Sears added: ‘The banks claim they are ready and willing to lend. But the fact remains the conventional credit pipeline for businesses is badly blocked. This cannot just be explained away by falling demand for credit from businesses'.
Daily Mail