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elcome to the first edition of TaxTalk Student - dedicated to you - the NEXT generation of tax professionals. The role of the tax professional is rapidly growing, changing almost as frequently as tax laws. Ask anyone from yesteryear to sketch you a picture of a tax professional, and you will find a grim picture of a man in a grey suit, sitting in a corner who can advise on technical matters only. Yes, that may be true for YESTERYEAR, but this one dimensional role has changed! With the global financial crisis and the corporate scandals of the late 20th century that rocked economies, profits of corporates came plummeting down, resulting in immense pressure on sustaining tax revenue collection. In turn revenue authorities across the globe shifted their focus on morality and taxpayers' duty to pay their fair share of tax. No wonder Jean Baptiste Colbert once said, the art of taxation consists in so plucking the goose as to get the most feathers with the least hissing. Google recently made headlines after it became known that the company managed to halve its global tax bill by funnelling $9.8bn of revenues from its international subsidiaries through Bermuda, and pressure groups demanding a public hearing on Googles global tax avoidance strategies. In South Africa, business tycoon Christo Wiese of Pepcor made headlines when he was accused of owing SARS R2bn in tax. Negative publicity and social media attention for tax offences have the potential of causing irreparable harm to a taxpayer both financially and to its reputation. That is why a tax director today is more of a real-time commentator and advisor to management than a historical custodian of tax matters. This means that in addition to their technical knowledge, they need to have a range of other skills and tools such as being a strong leader, influencer, communicator, team builder, and must have a mindset of managing tax risk, and equally be able to manage relationships with different tax administrations around the globe. It is therefore understandable that tax directors are now stepping into the limelight and no longer sit in a corner of the finance department. Companies that do not understand the implications of these trends will quickly find themselves facing greater scrutiny from tax administrations, resulting in a higher financial and reputational risk. This first issue of TaxTalk Student is dedicated to the evolving role of tax professionals in the global context. Special thanks to E&Y for assisting us with this first edition by supplying local and international professional profiles and news. This publication has been developed with you in mind, to give you a glimpse of the exciting new world of tax.
EDITOR Yanic Smit editor@taxtalk.co.za TECHNICAL SUB-EDITOR Stiaan Klue sklue@thesait.org.za LAYOUT AND DESIGN Natalia Carvalho natalia@taxtalk.co.za PUBLISHER Ronel de Kock SA Institute of Tax Practitioners POSTAL ADDRESS P O Box 51632 V & A Waterfornt Cape Town 8002 EDITORIAL HEAD OFFICE Convention Tower Mezzanine Level 2 Cnr Heerengracht & Coen Steytler St Cape Town 8002 ADVERTISING AGENTS Collette Evers 4Evers Marketing Solutions Tel: 011 704 0371 Cell: 082 349 9914 E-mail: collette@4evers.co.za ANNUAL SUBSCRIPTION R220
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CONTENTS
07
TAX PROFESSIONALS
NEWS
SARS can recover taxes from offshore assets The reputation risk The tax role today: Assessing and managing risk Tax professionals migrate to the sharp end The unintended consequences of doing good 11 12 14 16 18
Talented managers are not the only ones to benefit from time spent overseas. Tax professionals and the companies they work for also stand to gain
PROFILES
Perspectives from an international tax professional A seasoned tax professional explains how her role has evolved Profile: Bianca Fourie The people in tax
LIFESTYLE ADVICE
22 23 24 25 How to excel at work What is personal branding Top 10 study tips 52 53 54
CAREER TALK
Tax as a foundation of operations Learnerships in the fasset sector Tax offers diverse career opportunities Tax as a career Tax directors stepping into the limelight A changing tax landscape opens new career doors 37 38 40 43 45 47
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PAGE
NEWS
NEWS
LATESt DEVElOPMENtS IN taX
TAXTALK STUDENT FEBRUARY 2013 ISSUE 1
NEWS BRIEFING
IS THERE AN OBLIGATION
ON A SPORTS AGENT
sports agent by nature is a mediator or go-between between the player, and in most instances, a sports club. In general, the agent provides a service, for example, the recruitment of a player, who will enter into a legal relationship with a club. Often a club will pay a sports agent a recruitment fee, which will normally include a signing-on fee that has to be paid over by the sports agent to the player. In this scenario, the question arises whether such signing-on fee is subject to employees tax (PAYE) and if so, where the obligation to withhold PAYE lies? The correct withholding of PAYE is an important consideration in any business. One of the challenges in ensuring that ones PAYE obligations are met, is the wide application of the definition of remuneration in the Fourth Schedule to the Income Tax Act. Remuneration is defined as follows: means any amount of income which is paid or is payable to any person by way of any salary, leave pay, wage, overtime, bonus, gratuity, commission, fee, emolument, pension, retiring allowance or stipend, whether in cash or otherwise and whether or not in respect of services rendered. Signing-on fees by their nature are usually paid as an enticement to a player to contract with a club. We are of the opinion that the signing-on fee will be regarded as remuneration as defined above and will be taxable at the players marginal rate of tax. Since remuneration as defined in the Fourth Schedule to the Act will then be paid over by the sports agent to the player, could it be said that the agent is liable to withhold PAYE? It seems that this is not the case when one considers the definition of an employer as set out in the Fourth Schedule to the Act, which reads as follows: means any person (excluding any person not acting as a principal), ... who pays or is liable to pay to any person any amount by
TO WITHHOLD PAYE?
BY HANNEKE FARRAND AND ESTHER GELDENHUYS
way of remuneration ... (own underlining) The Oxford English Dictionary defines a principal as a person who is the chief actor in ... some action or a person for whom another acts as agent or deputy. In our view, in the scenario set out above the sports agent is not acting as a principal in relation to the payment of the signing-on fee and is therefore explicitly excluded from the definition of an employer as defined in the Fourth Schedule to the Act. The sports club will, however, fall within the ambit of the definition, and as an employer, will therefore be liable to deduct or withhold employees tax in accordance with paragraph 2(1) of the Fourth Schedule to the Act, from the signing-on fee and any other subsequent remuneration paid to the player. It is therefore important that this signing on fee is separated from the agents commission. The agents commission should not be subject to PAYE because an agent is typically carrying on a trade independently from the sports club and, as such, the commission paid to the agent is excluded from remuneration as defined. There are also other liabilities flowing from being regarded as an employer as defined in the Act, such as the obligation to make contributions to the Unemployment Insurance Fund and to pay a Skills Development Levy. Therefore, the sports club, as employer, remains liable to withhold employees tax from the signing-on fee. Should the club fail to do so, the clubs only defence would be available in terms of paragraph 5(2) of the Fourth Schedule to the Act. This paragraph provides that where an employer has failed to deduct or withhold PAYE and the Commissioner is satisfied that the failure was not due to an intent to postpone payment of the tax or to evade the employers obligations, the Commissioner may, if he is satisfied that there is a reasonable prospect of ultimately recovering the tax from the employee, absolve the employer from his liability. It is therefore important that when clubs sign on new players, the signing-on fee is contractually separated from the agents fee and that the obligation to withhold PAYE is understood.
UNITED STATES
The US Treasury Department and the US Internal Revenue Service (IRS) issued Notice 2012-45 with guidance on the treatment of income from certain government bonds for purposes of determining whether a foreign corporation is a passive foreign investment company (PFIC) under section 1297 of the US Internal Revenue Code (IRC). The IRS noted current economic conditions have resulted in foreign financial institutions holding government bonds in higher levels compared to historical norms, and that this has raised issues regarding the treatment of these institutions under PFIC rules.
INDIA
An expert committee in India has been finalizing guidelines for the application of a general anti-avoidance rule (GAAR), for implementation in September 2012. Its mandate has been expanded to look into the taxation of portfolio investment, focusing on recent amendments to Indian income tax law, relating to the taxation of non-resident transfer of assets.
EUROPEAN UNION
The European Commission set up an EU VAT Forum intended to improve the relationship between business and tax authorities. The Forum aims to create conditions for a smoother-functioning VAT system in the EU, while reducing the costs and administrative burden on both sides.
UNITED KINGDOM
The UK Government has published its definition of environmental taxes which
SOURCE: T MAGAZINE
SOUTH EQUATORIAL
PERU BRAZIL
SOUTH PACIFIC
axpayers need to be aware that the South African Revenue Service (SARS) can recover South African taxes from assets located in another country where SA has concluded a double taxation agreement which contains an article dealing with mutual assistance in the recovery of tax debts. Similarly, SARS would be obliged to assist foreign revenue authorities in the collection of tax debts due to those countries where the double taxation agreement with the country concerned allows for that. Where the taxpayer does not have assets located within SA the question arises as to how SARS may seek to recover South African tax out of assets owned by the taxpayer, but which are located in another country. There is a principle of international law that the judicial authority of one country will not enforce the revenue laws of another country. This rule has become known as The Revenue Rule and in COT v McFarland, 27 SATC 15, it was decided that the courts in SA will not enforce any claim by a foreign state for taxes due and payable in another country. The Revenue Rule is founded on the principle that the imposition of taxation constitutes the exercise of sovereignty by a state and the enforcement thereof in another state would constitute an infringement of the sovereignty rights of that state. Thus, in the absence of a custom or convention agreeing to reciprocal assistance in the recovery of taxation, SARS cannot recover taxes due by a taxpayer from assets located in a foreign country. In terms of section 108 of the Act, parliament may enter into any agreement with the government of any other country whereby, arrangements are made with such government to prevent or mitigate the levying of taxes both in SA and the foreign state or to render reciprocal assistance in the administration of and the collection of taxes under the laws of SA or such other foreign country. Section 93 of the Act sets out the procedure that SARS must follow where a foreign government requires assistance from SARS to assist with the collection of taxes due to a foreign revenue authority in respect of assets located in SA. From a review of the double taxation agreements concluded by SA with foreign countries, it appears that African countries lead the way in concluding agreements containing provisions allowing for the assistance in the collection of taxes. The double taxation agreements concluded with our neighbouring states, namely, Botswana, Namibia, Swaziland, Lesotho and
Mozambique, all contain articles providing for assistance in the collection of taxes. Similar provisions are found in the double taxation agreements concluded with Uganda, Tanzania, Ghana and Nigeria. Agreements concluded with Australia, the Netherlands and more recently the UK allow for the reciprocal assistance in the collection of taxes. Article 25A was inserted into the double taxation agreement concluded between SA and the UK by way of Government Notice 52 on February 2 2012. Article 25A of the agreement concluded between SA and the UK requires that the two states assist each other in the collection of revenue claims and that the competent authorities of the respective states will settle the manner in which the article will be applied. In the case of SA the competent authority is the SARS and in the UK it is Her Majestys Revenue and Customs (HMRC).
ThErE IS a PrINCIPlE OF INtErNatIONal law that thE JuDICIal authOrItY OF ONE COuNtrY wIll NOt ENFOrCE thE rEVENuE lawS OF aNOthEr COuNtrY.
The article provides that any revenue claim of the one state which is enforceable in accordance with the laws of that country and is owed by a person who cannot under the laws of that country prevent its collection, that revenue claim shall, at the request of the competent authority of that country be accepted for purposes of collection by the competent authority of the other state. It is furthermore provided that the revenue claim shall be collected by the other country in accordance with the provisions of its own laws applicable to the enforcement and collection of its own taxes as if the tax debt were a debt of that state. The agreement also provides that where a tax claim of one of the countrys in respect of which that country, under domestic law, may take measures of conservancy to ensure the collection of the tax in issue, that country shall on the request of the competent authority of that state, be accepted for purposes of taking measures of
conservancy by the competent authority of the other country. In addition, the agreement provides that legal proceedings in respect of the existence and validity of the amount of the revenue claim of one country shall not be brought before the courts or administrative bodies of the other country. Thus, a taxpayer who is indebted to SARS cannot challenge the validity thereof in the English courts. Article 25A of the double taxation agreement concluded by SA and the UK was considered by the High Court of Justice, Chancery Division in the UK in the case of Commissioners for Her Majestys Revenue and Customs and Another v Ben Nevis (Holdings) Ltd and others [2012] EWHC 1807 (Ch). SARS requested assistance from HMRC to assist in collecting taxes due by Ben Nevis to SARS in the amount of R2.6bn. Ben Nevis is a company associated with Mr David King who has featured in the press over a number of years regarding taxes payable in SA. Article 25A was inserted into the 2002 agreement concluded by SA and the UK which originally came into force on December 17 2002. Ben Nevis argued that the provisions of Article 25A can only apply to South African taxes for tax years ending on or after January 1 2003. It was therefore argued by Ben Nevis that Article 25A could not be utilised by SARS in seeking to recover taxes from assets owned by it in the UK and thus the attempt to recover the taxes due by Ben Nevis to SARS violates the Revenue Rule. Pelling J referred to Article 27 of the OECD Model Tax Convention on Income and Capital and the Commentary thereon which provides that: Nothing in the convention prevents the application of the provision to revenue claims that arise before the convention enters into force, as long as assistance with respect to these claims is provided after the treaty has entered into force and the provisions of the article have become effective. The court therefore reached the conclusion that even though the agreement came into force on December 17 2002, the provisions dealing with assistance in the recovery of tax debts applied in respect of taxes which may have arisen prior to that date. An important factor was that the mutual assistance was only provided after article 25A took effect. Pelling J reached the conclusion that there was no objectionable retrospective element that arises regarding Article 25A and thus decided that HMRC was authorised to assist SARS in recovering taxes due to SARS in respect of assets owned by Ben Nevis in the UK. The fact that the UK double taxation agreement was only amended recently does not preclude the tax authorities from seeking assistance in respect of tax debts which may have arisen prior to the insertion of Article 25A into the agreement in question.
11
REPUTATION
Companies are facing increased scrutiny in how they handle their tax affairs, as part of a wider push for greater tax transparency and fairness. Getting it wrong can put an otherwise excellent brand at risk and associate its management and products with tax evasion
THe
RISK.
By Gerry Chanel
E? G A 1 . I M i L it Y ? B i S i 2.V
that all five deals were reasonable under the circumstances, and at least one may have been better than reasonable, for the UK.
Tax audit resolution should also take reputational risk into account. Audit settlement discussions and resolutions used to be relatively private matters between the tax authorities and the taxpayer, says Kealy. Today, it is essential to consider the possible reputational impact if audit settlement details were to end up in the news media, and to keep in mind that there is interest in financial statement disclosures about years under audit and material issues. Such considerations go beyond the tax director alone. Managing tax reputational risk is a C-suite and board level concern, since it is here that the business policies for tax risk and tax controversies should be established. Tax planning should be aligned with those policies and with the corporate message to the community at large.
105
The number of the worlds biggest listed firms who were recently surveyed by Transparency International and measured, among other things, on whether they publish detailed financial information and how much tax they pay in every country
C
ANOthEr rISk OF taX rEPutatIONal DaMagE arISES FrOM a laCk OF VISIbIlItY OVEr a COMPaNYS lOCal SubSIDIarIES
12
TAXTALK STUDENT NEWS
ompanies today face unprecedented disclosure requirements by tax authorities, while audits are more frequent and aggressive. All this is creating the ripest environment for tax controversy in years. The intense scrutiny, even when unwarranted or inaccurate, can hurt brand reputation and shareholder value. Even after the international push for taxrelated transparency, triggered by the 2002 Sarbanes- Oxley Act, there was little public interest in tax disclosures. The austere economic environment and sweeping public sector cuts in many countries have generated new interest. Journalists and activist groups, angered over reductions in government services, demand that companies pay their fair share. They are aided by technology such as Twitter and other social media platforms, which give anyone a platform for promoting a new cause. These parties are scrutinizing corporate reports and other information sources for news of tax controversies and are spotlighting low effective tax rates, or overly aggressive tax
planning activities. Media claims often reach inaccurate or misleading conclusions that ignore permissible, straightforward activities, such as deliberately enacted tax incentives or government approved transactions. The facts cited in these stories are often incorrect, explains Monique van Herksen, Ernst & Youngs Tax Controversy leader. The problem with handling the issue is often that the charge that challenges your reputation is merely a one-liner, but the explanation or correction takes far longer to express. In Vodafones case, a media report claimed the company paid just 1.25b to settle a UK tax bill in 2010 that was allegedly as much as 8b, triggering nationwide protests by a watchdog group calling the company a tax dodger. The UK authorities called the 8b figure an urban myth and said the settlement of the long- standing audit, in a complicated case involving transfer pricing and controlled foreign company rules, was a good result for the UK. Under ongoing public pressure, the UKs National Audit Office (NAO) conducted an investigation. Earlier last year long after the protests that shut down Vodafones stores for several weekends and caused a flood of negative media coverage the NAO found
Out OF SIght
Another risk of tax reputational damage arises from a lack of visibility over a companys local subsidiaries, says Steve Schultz, Global Director for Global Compliance & Reporting Services at Ernst & Young. As companies revisit their finance operating models, standardize these, and move to shared service centers and business process outsourcers, there tends to be less local tax competency. So how can companies respond to all this? Van Herksen argues that compliance is the first place to gain ground over reputational risk, and then managing that compliance in such a way that you have effective processes and controls and an effective dashboard of information on where your potential exposures lie. In those places, it is important to know what potential dispute resolution mechanisms exist.
13
Getting relevant information flowing both ways across this shadow tax team is critical, as Whiting explains. Its not just about asking your person in Ruritania to let you know whats happening there, its also making sure that they are aware of head office developments that might have a knock-on effect out there. Tax usually doesnt drive business decisions, but if the tax people and the rest of the business dont collaborate appropriately, the firm can be exposed to major risks, including missed opportunities and expensive mistakes. For example, as Michael Nelson, Senior Director for Global Tax Audits and Controversies at Pfizer, explains, it is vital to make the right decisions about where to locate his firms critical business activities. Those decisions involve allocations of capital: physical, intangible and human capital.I view tax as one of those thoughtpoints that go into making a particular decision. Its very difficult to do your tax planning after a certain set of decisions has been made, after a certain set of activities has begun, after a certain physical location has been stablished. Youre often a little late at the table from that point of view.
NEW YORK
SOUTH AFRICA
Businesses run serious non-compliance tax risks unless theyve clearly identified their process owners, excellent communication coexists with the rest of the organization and gaps are addressed
omplete the tax returns and pay the tax on time. Getting those two things right probably feels like 80% of the risk has been taken out of tax, but it is rarely
Aside from the penalties, which can be up to 100% or more of the unpaid tax, Parsons notes that getting indirect taxes and, in particular, customs wrong isnt always just a misdemeanour in the eyes of the authorities: It can be a criminal offense. Potentially, somebody goes to jail. Today, a global set of requirements has been put in place for all Caterpillar facilities to follow:
HONG KONG
TIME IS MONEY
that simple. Its one thing to say, yes, Im filing the return on time, says Giles Parsons, Caterpillars UKbased Director for European Tax and Global Indirect Tax and Customs. Its a much more significant thing to say, Ive got confidence that the right information is being collected for that return and the right process is being followed to put all the right numbers in the returns. Several years ago, Parsons identified a significant risk with regard to Caterpillars indirect taxes and customs: no one actually had ownership of the processes. This was a dangerous position for the company to find itself in. As they are transactional taxes, if you get it wrong, you get it wrong multiple times. The costs can be enormous, says Parsons who, having identified the process ownership gap, was promptly given responsibility for it by his CFO.
A very clear framework of what the local Identify the global process owner for each Set up guidelines for what the processes Require the local process owner to certify
actually have to deliver annually that they understand what theyre supposed to do and that they have actually done it major area, and the local process owner processes need to deliver
Most of the people who now have responsibility for some of the companys tax affairs arent tax people. They are often finance staff, but, in the case of customs, they may even be traffic, or logistics people. The controls over customs tend to take place when goods arrives at a location or leaves a location. That process is managed by traffic, so the customs process is typically
AS thEY arE traNSaCtIONal taXES, IF YOu gEt It wrONg, YOu gEt It wrONg MultIPlE tIMES. ThE COStS CaN bE ENOrMOuS
TAXTALK STUDENT NEWS
14
15
sharp end
BY Nigel Gibson
Talented managers are not the only ones to benefit from time spent overseas. Tax professionals and the companies they work for also stand to gain
s globalization gathers pace, it is not just business managers who must become mobile as their firms embrace new markets. The professionals who manage a firms tax affairs should do so too. This does not mean spending a few months in a haven by the sea. Often, it involves tax professionals joining their colleagues on the front line as companies expand their businesses around the globe. More complex global corporate structures have been an important driver of this trend. At one time, tax professionals remained close to the Chief Financial Officer, says Kevin Cornelius, the leader of the Ernst & Young global Human Capital cost advisory offering in Switzerland. Now, because of globalization and the risks associated with it, they need to be closer to the business itself. Procter & Gamble (P&G), the consumer products company, provides one illustration of this change. At the last count, the company had operations in 80 countries. These days, says Tadd Fowler, one of P&Gs VicePresidents for Global Tax, the companys tax professionals no longer spend their time pondering complex rules at head office. Instead, many now work alongside their colleagues managing businesses. This more frontline role for tax professionals demands strong communication skills, along with the expected technical and business knowledge. Tax professionals increasingly need to interact with a range of different stakeholders, and that means that we need to train our people accordingly, says Fowler. This is particularly important as our business continues to grow its global footprint and we become significant taxpayers in more and more countries.
16
17
conseQuences
of doing good...
BY DORIA CUCCIOLILLO by the person (usually a shareholder) who instructed the company to make the donation. For example, when a company manufactures a statue of an icon like Nelson Mandela with the intention to donate the statue to the authorities, section 57 deems the donation to be made by the person who instructed the donation and not the company. This section is an anti-avoidance section that levies donations tax if value is extracted from a company at the instance of a person as a donation to a third party. If the donation is made by the company with the instruction of the shareholder, two transactions have effectively occurred: Firstly, the distribution of the asset by the company represents a dividend from the company to that person at whose instance the donation was made (usually a shareholder or connected person to a shareholder), followed secondly by a donation (for donations tax purposes) by that shareholder to the third party. For example: A company is instructed by a shareholder to donate a cash amount of R50 000 to his son. The distribution will constitute a dividend as defined in section 1 because the payment was made as a result of shareholding in the company. The company have to withheld dividend tax at a rate of 15% from the amount paid over to the shareholders son. Since the donation was made at the instance of the shareholder, he will also be liable for donations tax in terms of section 57. He may however qualify for an exemption under section 56(2)(c) if he can prove to the Commissioner that the amount will be applied for the maintenance of his son. Any unutilised portion of the annual general exemption of R100 000 for natural persons may also apply. Let us look at the situation where a shareholder instructs a company to donate an asset to a non-profit organisation. First of all, we have to consider the dividend tax consequences of the anti-avoidance section. The distribution of the asset by the company will constitute a dividend as defined in section 1 of the Income Tax Act. Since its a donation of property in kind, the distribution to the shareholder constitutes a dividend in specie. Therefore the company will be liable for Dividends Tax at a rate of 15%. The calculation is based on the market value of the asset on the payment date of the dividend. In terms of section 64E(2) the dividend is deemed to be paid on the earlier of the date on which the dividend is paid or becomes due and payable. Secondly, the shareholder will be liable for donations tax in his own capacity. In the case of donations to an entity listed in section 56(1) (h) of the act (as listed above), the person will qualify for a specific exemption. Another issue that must be considered is the deductibility of the acquisition cost relating to the donated asset. Such expenditure wont qualify for a deduction in terms of section 11(a) since it wont be closely related to the companys activities to produce income. One can argue that the donation was made for marketing purposes with the intention to increase the companys market share, but this will constitute expenses to enlarge the companys income generating structure (capital of nature) and will therefore not be deductable. If the asset formed part of the companys trading stock, the withdrawal thereof will automatically result in a reduction of taxable income. The reason for this is the inclusion required by section 22(1) for the value of closing stock that will be exceeded by the
The unintended
here a company (which includes a CC) decides to donate an asset to a non-profit organisation, the potential adverse tax implications of the companys good intention first need to be considered, as there are many. For Capital Gains Tax-purposes, the transfer of ownership of the asset constitutes a disposal where the proceeds will equal the market value of the asset on the date of transfer. Fortunately, any capital gain vvor loss arising from the transaction will be disregarded if the donation is made to an entity exempt in terms of paragraph 62. Next, the issue of donations tax needs to be considered. We automatically accept that any donation made to a non-profit organisation exempts us from paying donations tax. In most cases, it is true: Section 56(1)(h) of the Income Tax Act provides exemptions where the donation is made to the Government of the Republic, any political party, a public benefit organisation or recreational club approved by the Commissioner, any fund as defined in section 10(1)(d) of the act (for example pension funds), a share block institution as well as persons thats providing necessary or useful services to the State or general public, is involved in scientific, technical or industrial research or promotes commerce, industry or agriculture. Section 57 deals with donations made by companies (which include CCs) at the instance of another person. It stipulates that such donations are deemed to be made
allowable deduction offered by section 22(2) (for opening stock) or section 11(a) (if stock was acquired during the year). To even out the mentioned decline in taxable income, a company is required to recognise a recoupment in terms of section 22(8) equal to the amount of the above deduction obtained. Section 18A of the Income Tax Act entitles the taxpayer to a deduction from his taxable income if the donation is made to a qualifying beneficiary in terms of this section. Donations to the following entities will therefore be considered for the section 18A-deduction: a public benefit organisation (PBO) approved by the Commissioner, entities listed in section 10(1)(cA)(i) of the Income Tax Act that carries on certain activities (welfare and humanitarian; health care; education and development; conservation, environment and animal welfare; land and housing or any other activity determined by the Minister of Finance), any department or government of the Republic as well as specialised agencies as set out in Schedule 4 to the Diplomatic Immunities and Privileges Act of 2001. This section furthermore requires that the asset is used for public benefit activities as defined in Part II of the Ninth Schedule. Examples include the provision of education by a school, health related initiatives to prevent HIV infection, provision of housing to the poor, programs promoting leadership and development of the youth, amongst other. Once its confirmed that the donation complies with the requirements of section 18A, the entity should determine the value of the section 18A-deduction. This will be the cash value of the donation if an amount of money is donated. For donations in kind, the value will be determined according to the provisions of section 18A(3). In terms of this section the value is determined by the type of property donated. For example, if the asset is specially manufactured by the taxpayer for purposes of the donation, the deduction will be valued at the manufacturing cost of the asset or its fair market value on the date of donation, whichever is the lowest.
ANOthEr ISSuE that MuSt bE CONSIDErED IS thE DEDuCtIbIlItY OF thE aCQuISItION COSt rElatINg tO thE DONatED aSSEtS
The extend of the tax benefit resulting from the donation, will depend on the profitability of the donor during the year of assessment in which the donation is made. This is because the section 18A-deduction is subject to a limitation. An entity is allowed a section 18A-deduction limited to a maximum value of 10% of its taxable income. This calculation is based on the taxable income before any section 18-deduction is taken into account. It is important to note that any balance exceeding the 10%-limit, will not be allowed as a deduction in the future as the amount is only deductable during the year of assessment it is actually incurred. This will be the year in which all the legal formalities for a valid donation has been completed. A final requirement, that the deduction in terms of section 18A may not increase or result into an assessed loss, also applies. A taxpayer claiming the section 18A-deduction, must ensure that he has obtained a receipt from the qualifying entity (beneficiary) that contains the following:
issued by the Commissioner for the purposes of section 18A The date of the receipt of the donation The name of the qualifying entity that received the donation, together with an address where enquiries can be directed The name and address of the donor The nature of the donation, and A certificate which states that the receipt was issued for section 18A purposes and indicates that the entity will be using the asset exclusively for the qualifying purposes. Considering the limitations of the section 18A-deduction, it is advisable that, whenever a donation is made in a group of companies, the company with the highest taxable income makes the donation to ensure the maximum
section 18-deduction. This brings us to the interaction between section 18A and section 57 of the Income Tax Act. The Income Tax Act does not provide clarity regarding the entity (company or shareholder) that will be entitled to claim the section 18A-deduction in the case where section 57 is applicable. The question arises whether the section 18A-deduction will then be awarded to the donor? For Donations Tax purposes it will be regarded that the shareholder made the donation and therefore the shareholder will be indicated as the donor. At this moment, the scope of section 57 is not clear. Since this is an anti-avoidance section, applying to Donations Tax and since it is only applicable when a donation is made by a company as a result of an instruction imposed by a shareholder it seems that it has no effect on section 18A. It seems as though the legislature only intend for section 57 to apply when a shareholder, or his connected person, receives a benefit out of the donation (although the latter is not clear from the wording of this provision). If this is true, section 57 will not apply if a shareholder initiate a donation as a part of the companys contribution to charity. In such instance the donation will not be regarded as `n distribution of a dividend to the shareholder and the company would be regarded as the donor for purposes of section 18A. If a company considers an act of generosity, it should carefully consider the related tax implications. The company should be financially prepared for any additional liabilities it might accrue as a result of the donation. Where its intended for a company to gain a tax benefit from the transaction, the companys directors should familiarise themselves with the requirements of section 18A and section 57. If the shareholder is deemed to be the donor in terms of section 57, the donation might be reconsidered.
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TAX
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PROFILE
TrAX is a programme whereby we offer learnership to graduates. The first six months of the programme are focused on giving the candidates a broad perspective on various tax disciplines. The TrAX programme consists of the following components: An induction programme, providing you with the necessary knowledge and skills you will need to perform your role as a Junior Tax Consultant. During this time you will be exposed to the Deloitte culture, and gain a better understanding of Deloitte as a whole. 3 day, monthly classroom sessions, giving you deeper tax knowledge and understanding of the major tax divisions you will be seconded to.A monthly secondment to one of the following tax divisions at Deloitte which include: Corporate Tax R&D and Government Incentives International Tax Transfer Pricing Customs & Global Trade VAT Global Employer Services TrAX provides you with the unique opportunity to gain some exposure to the broad tax disciplines. Why choose Deloitte as your Employer? Top employer - Deloitte has been identified as one of South Africas top employers by the Corporate Research Foundation. According to
the CRF publication, the biggest plus in working for Deloitte is the almost limitless range of professional career opportunities.
Fairness above all Commitment to your development A distinctive talent experience. Its all about People One of many initiatives at Deloitte is the Deloitte Way, where people are recognized by their colleagues. The initiative is driven by the principle that we are the Firms greatest assets and that we work with people of exceptional talent and skill. Our leaders trust, respect and listen to us. We are given the opportunity to develop and excel in our work, and are encouraged to have fun. We are motivated to perform at our best. And Society - We are increasingly realising that the business of business is not only for the sake of business but should also be for the benefit of society. We thus have an initiative, called Impact Day, where employees actively participate in events and interventions, positively contributing to society. Question is, why NOT choose Deloitte? One Deloitte Vac School Do you want to experience Deloitte culture and vibe? Come and attend one of our One Deloitte Vac School programmes. Hosted in January and June/July vacations. Log onto www.deloitte.com\za to apply today. Your future is now!
For More information: Nicki-Lee Koller 011 806-6170 083-783-1558 Email: nkoller@deloitte.co.za
PROFILE
TAXTALK STUDENT FEBRUARY 2013 ISSUE 1
21
PERSPECTIVES FROM
D E N O S A E S A R O T C E R I D X TA
HOw haS thE rOlE OF thE taX DIrECtOr ChaNgED OVEr tIME?
When I started, tax was an add-on to the finance function. It wasnt integrated into the business, or in business decision-making. Over the past 20 years or so, with the various ups and downs of the economy and with the changes that technology has made, I think that everything is more integrated and that tax is emerging as a place where smart corporate executives and boards now find value.
HOw haS thE rOlE OF taX DIrECtOr ChaNgED DurINg YOur CarEEr?
I think that the role of the tax director has evolved over the last 20 years. Previously, they would aim to optimize the tax burden, but now they have to anticipate everything and to be more and more proactive in the business. So the skills required have changed. When I started we just had to know the tax law and know it perfectly. Now we have to have a global view, to understand how the business runs, how a business unit works, and we have to propose new ideas as the tax regulations become more and more complex. So I think the role of the tax director has moved from reducing the tax burden to becoming a business partner.
With regard to the business, I try and push my team to be connected with the company on a permanent basis to review the principal projects being undertaken by each business unit during the budget processes Some people continue to think that tax issues come at the end, meaning that they are consequences of a business decision already taken but, gradually, others are becoming convinced that if we are involved at the beginning, the business is more effective.
CLAIRE GOUDET
Tax Corporate Law and Customs Director at Yves Rocher, a global cosmetics firm, shares her first-hand experience of how the skill set required to be a tax director has changed over the last two decades.
What arE SOME EXaMPlES OF thE NEw arEaS taX DIrECtOrS arE INVOlVED IN?
While these areas are not new, I would say there is renewed focus on things like the corporate growth strategy, acquisitions, investments all these things have tremendous tax implications and those implications often present opportunities that corporate executives maybe havent thought about: from the growth aspects all the way through to costs, outsourcing, back-office activities and so on. So people who aspire to be tax directors now need to embrace and understand not just what happens in their
HOw ShOulD taX DIrECtOrS NOw INtEraCt wIth thE rESt OF thE buSINESS?
I think that the tax director has two main areas of interaction with the business in which they work. The first is a strong relationship with the CFO and the financial organization in general, and the second is with the rest of the business, for example, operations.
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23
PROFILE
Bianca
Fourie
choice and my intention was to work at a bank. A friend told me about the EY tax programme (completing CA articles through tax) and thats the reason Im here today. I was drawn in by the nature of the tax environment (the continuous learning) and the fact that every person, every entity, has to pay some form of tax. Its a very valuable skill to have. Why did you choose Ernst & Young as an employer? I considered the other big 4 firms and decided that the culture at Ernst & Young was a better fit for me. I would never say to someone You must go to EY because of this, You must go to PwC because of that the best advice I was given is to just go to the firm, see it for yourself, see how people interact there, and make the choice based on what the best fit is for you. Ernst & Young was the best fit for me . What is your career path (i.e. position and daily responsibilities)? My responsibilities vary but generally Im responsible drafting the reports and doing the groundwork necessary in the mergers and acquisitions department. I attend meetings with the partner, we develop a transaction plan for the client and at the end of the day its great to be able to see (in a tangible way) how much money you have saved a client on taxes, just by tweaking the structure of the client. What is the most important character trait needed to be a tax professional and why? You have to be able to handle change. The legislation evolves all the time so there should be some element of being able to cope with a changing environment. If tax is an insect, what would it be? And why? A dung beetle. As strange as it sounds, we deal with things no one else wants to deal with (SARS), but we love our jobs despite the strange looks from everyone else. What factors caused you to enter Ernst & Youngs Young Tax Professional of the Year 2012? I wasnt going to enter but a friend at work convinced me after telling me I had nothing to lose. If you could describe the whole experience in three short sentences, what would it be? Entering the competition has been the best way to brand myself at EY. The competition was the best networking experience of my life. I met some of the most influential people in the tax industry. Do you have any recommendations for aspiring young tax professionals to help them achieve their goals? Attend all training sessions youre invited too. Our training is fun and interactive and we regularly have heated debates. Be proactive, know the act, read up on the amendments, your managers will remember you if you show such a keen interest. Brand yourself. In a big organisation, its easy to go unnoticed. Enter the YTPY competition. Even if you dont win, people will remember you for having the courage to do it. What is your motto in life? If you think youre too small to make a difference, try sleeping in a room with a mosquito.
Name Bianca Fourie Hometown Cape Town High school Westerford High School (Cape Town) University University of Cape Town Interests (other than tax): Running, baking Favourite movie Bridesmaids, Forgetting Sarah Marshall Favourite music Coldplay Favourite food Pasta Subjects from high school English, Afrikaans, Maths, Science, Biology, Accounting Personal achievements 2nd runner up Young Tax Professional of the year (Boston), completing a marathon Qualifications Business Science (Accounting and Finance honours), CA(SA) What are your personal strengths and how do you use them to the advantage of yourself and others? I enjoy learning. This helps in an environment which changes often. On the other hand I also enjoy passing on what Ive learned and this helps when it comes to the junior trainees. You learn just as much from teaching people as they learn from being taught. Why did you choose tax as a career? When I finished university, I had actually chosen to complete my articles at an auditing firm. After 2 weeks, I resigned because I knew I had made the wrong
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SUMMARY
If the role of an organizations tax department is changing, so too must the standards by which it is judged. Developing new performance measurement processes is a key challenge for tax directors
peOple
THe
in tax
is actually attractive to some tax professionals. The subject is moving, says Viviane Boissard, a fifth-year tax law student at Dauphine University in Paris; Its never the same each year and I like that. Its more challenging because you need to be updated each day. Ms. Paranjpe shares this same attraction to the unpredictable nature of her job, as does Ms. Goudet, who enjoys the fact that nothing is defined to be fixed, everything is moving each year. This constant flux is one thing that many no doubt lacking in the right kind of passion for the job would most dislike about a tax career, particularly in todays environment. In fact, such demands also prepare tax professionals for a wider range of careers. Meanwhile, what is often underreported, is that these same forces of change are having a dramatic impact on working life for people on the other side of the fence. Jean-Pierre Lieb, Inspector General of Finance at Frances Department of Taxation, says that companies are now more open with tax authorities about their impending transactions. They know that the fiscal landscape or the tax landscape is more complex, he explains. Its more difficult for them to choose the right path to reach their objective. What this means for Mr. Liebs department is much more work. People are coming to see us to ask for rulings before doing things, so in five years we increased the number of our rulings from around 3,000 to over 22,000 rulings each year. Its very demanding on our resources, because on each transaction we will spend quite a lot of time and companies have a very short period of time. We have to be quick. To meet the challenge, Mr. Lieb shares the same enthusiasm for, and interest in, his work that both seasoned tax professionals and bright young students identify as a new hallmark of todays best tax directors.
By Stephen Edwards
T
26
TAXTALK STUDENT PROFILE
he working lives of tax professionals have changed significantly in the past 20 years. As a result, a new set of character traits and attitudes has become as important to success as the technical skills that defined the roles in the past. What does it take to be a top tax director today? Some 20 years ago, common answers may have included technical knowledge, attention to detail and a head for numbers. And while those attributes are still fundamental, contemporary responses are markedly different.
Claire Goudet, Tax Corporate Law and Customs Director at Yves Rocher, a global cosmetics firm, for example, explains that it is difficult to become, and more difficult again to stay, a tax professional without passion. While Asmita Paranjpe, an intern in Tax and Regulatory Services at Ernst & Young in Pune, India, believes curiosity is key: The thing about tax is that the more curious you are, and the more you decide to learn, the more you end up liking what you do, and the better you get at it. And with tax directors now more involved in business strategy, Carolyn Libretti, Tax Partner at Ernst & Young in Rio de Janeiro, Brazil, says that confidence is now a vital characteristic for an effective tax director: They must approach their colleagues as business peers. Even though they have a technical
role, they need to have the confidence to put forward their ideas on an equal footing. Passion, curiosity, confidence perhaps hardly the markers of tax directors of yesteryear, but these traits are now needed to deal with a fast-evolving mandate. Ms. Goudet, who has been with Yves Rocher for 16 years, has seen firsthand how the skill-set required to be a tax director has changed over the last two decades. When I started, we just had to know and perfectly know the tax law, she explains. Now we have to have a global view; we must perfectly understand how the business runs, propose new ideas and be a true business partner and strategist.
TaX talENt
The annual Young Tax Professional of the Year (YTPY) award, hosted by Ernst & Young and judged by an expert panel from organizations, regulators and academic institutions across the globe, seeks to profile tax as a career in an increasingly competitive global marketplace. This competition allows successful students from more than 20 countries to participate and demonstrate their tax technical and professional skills.
ChaNgINg rulES
And, of course, its not only the roles of tax professionals that are changing faster than ever, so are the rules. Recent years have seen a bewildering volume of amendments to national and international tax regulations. Its fortunate then that a fast-changing landscape
27
Viviane BoissarD
Tax Student Paris, France
WHAt DO YOu ENJOY abOut YOur StuDIES? I enjoy having a challenging problem to solve or when having a point of law to research.
Asmita ParanJpe
Tax GRADUATE Intern Pune, India
What DO YOu ENJOY abOut YOur JOb? The unpredictability of the job the permutations are so vast, its so big, that you never know what youre going to do the next day.
JEAB-PIERRE LIEB
Inspector General of Finance Legal Department of Taxation Paris, France
What wIll bE a bIg ChallENgE FOr taX PrOFESSIONalS IN thE FuturE? It will be a challenge to implement innovative tax planning while improving trust and confidence with tax authorities.
CLAIRE GOUDET
Tax Corporate Law and Customs Director Paris, France
What IS thE MOSt IMPOrtaNt CharaCtEr traIt tO haVE aS a taX DIrECtOr? To have a love of discovery because you have to be aware about whats happening in business; to be curious.
CAREERS
CAREER TALK
TAXTALK STUDENT FEBRUARY 2013 ISSUE 1
33
ACCOUTING STUDIES
ACCOUNTING TAXATION
Course in Value-aDDeD taX Principles of Value-Added Tax. It covers the field of VAT in a practical way. DURATION: 1 year COMMENCES: February 2013
Course in PraCtiCal muniCiPal aCCountinG DURATION: 1 year (2 modules) COMMENCES: February 2013 and July 2013 FinanCial & aCCountinG PrinCiPles For PuBliC entities Will provide competencies to board members, officials and prospective employees of public entities in respect of legislative requirement. DURATION: 6 months COMMENCES: February 2013 and July
AUDITING
introDuCtion to risK-BaseD internal auDitinG DURATION: 3 months COMMENCES: January and June 2013
short Course in the ProFessional PraCtiCe FrameWorK For internal auDitors DURATION: 3 months COMMENCES: January and June 2013
aDVanCeD Course in Value-aDDeD taX Designed to provide knowledge of the acts with which to provide professional advice and tax planning (honours level). DURATION: 1 year COMMENCES: February 2013
Further Details: stephanie Gobe tel: (012) 429 4737 Fax: 086 645 3748 email: gobes@unisa.ac.za
PraCtiCal BooKKeePinG To equip students with a practical knowledge of bookkeeping which will enable them to do bookkeeping. DURATION: 12 months COMMENCES: February 2013
Further Details: ILse Morgan Tel: 012 429 4530 Fax: 0866 32 90 90 Email: morgai@unisa.ac.za
IntroDuCtion to the internal auDit ProCess DURATION: 3 months COMMENCES: January and June 2013
Course in aDministration oF estates Covers the field of administration of deceased and insolvent estates. DURATION: 1 year COMMENCES: February 2013 Course in taXation For persons who wish to acquire a sound background in taxation. DURATION: 1 year COMMENCES: February 2013
FURTher Details: Werner Kriel tel: (012) 429 2175 email: vdmerlj1@unisa.ac.za
BasiC PrinCiPles oF FinanCial statement analYsis anD interPretation DURATION: 12 months COMMENCES: February 2013
Further Details: lindie Grebe tel: (012) 429 4994 email: grebel@unisa.ac.za
short Course: introDuCtion to PerFormanCe auDitinG DURATION: 3 months COMMENCES: January and June 2013
Further Details: Priscilla seretloe tel: (012) 429 4404 Fax: 086 544 7184 email: seretmp@unisa.ac.za
Course in mininG taXation DURATION: 6months COMMENCES: April 2013
ICB/BOOKKEEPERs workshops
Bookkeeping To Trial Balance Payroll and Monthly SARS Returns Computerised Bookkeeping Business Literacy Financial Statements Cost and Management Accounting Income Tax Returns Business Law and Accounting Control
Developed for school administrative staff, principles and governing body members. DURATION: 12 months COMMENCES: February 2013
Further Details: madeleine la Grange tel: (012) 429 4010 email: lgranm@unisa.ac.za
ProGramme in ForensiC anD inVestiGatiVe auDitinG Aimed at persons whose prime interest is in the prevention, detection or investigation of commercial crime. DURATION: 9 months COMMENCES: December 2012 and June 2013
FunDamental aCCountinG Basic accounting knowledge to prepare a full set of books and financial statements. DURATION: 12 months COMMENCES: February 2013
Further Details: eunice ramanyimi tel: (012) 429 4465 Fax: (012) 429 3424 email: ramanne@unisa.ac.za
ProGramme in taXation: a strateGiC aPProaCh Provides students with a solid foundation and an in-depth knowledge of taxation principles. DURATION: 2 semester 12 months in total COMMENCES: July 2013
aDVanCeD ProGramme in taXation (for graduates) Provides a solid knowledge of taxation principles to enable the student to perform advanced tax planning on behalf of clients. DURATION: 3 semester 18 months in total COMMENCES: July 2013
Further Details: mariska edwards tel: (012) 429 6442 email: edwarm@unisa.ac.za
Further Details: eunice ramanyimi tel: (012) 429 4465 Fax: (012) 429 3424 email: ramanne@unisa.ac.za
ComPuteriseD BooKKeePinG Basic accounting knowledge to prepare a full set of books and financial statements DURATION: 6 months COMMENCES: April each year
Further Details: Joeline rosa tel: (012) 429 4305 Fax: (012) 429 4051 email: rosaj@unisa.ac.za
aDVanCeD Course in taXPaYers riGhts Provide the student with an advanced knowledge of the Constitutional principles as applied to tax payers. DURATION: 6 months in total COMMENCES: July 2013
Further Details: Patricia mhlanga tel: (012) 429 4918 Fax: (012) 429 4902 email: combook@unisa.ac.za
FURTher Details: elZette van Deventer tel: (012) 429 4702 Fax: (012) 429 4395 email: vdevee@unisa.ac.za
FOR MORE INFORMATION: visit our website: www. unisa.ac.za/cas or call: 012 429 3918
Further Details: Paulinah matidZa tel: (012) 429 8644 Fax: 086 236 1695 email: matidmp@unisa.ac.za
FOundatiOn
of operations
Hans van Hout, Corporate Tax Director at FrieslandCampina, discusses the increasing importance of the tax function.
By James Watson
Tax as the
ans van Hout has been corporate tax director at FrieslandCampina since the formation of the company, the worlds biggest cooperative dairy business, following a merger of two smaller cooperatives in 2008. FrieslandCampina has operations across Europe and the Middle East, as well as growing business in the US. Van Hout says his role today is far broader than the equivalent job would have been, say, a decade ago. Internal tax professionals used to be technical advisers on technical issues, he says. The only instruction from the CFO was that he didnt want any surprises. The contrast with today could not be more marked, he says, with the increasing importance of the tax function having been driven by developments such as, the introduction of corporate governance codes and the Sarbanes-Oxley legislation in the US. Internal stakeholders have become much more aware that tax is more than just a technical issue, says van Hout. What we see now is that tax structures are an integral part
of the business, at the very foundation of how we operate. Getting to that stage has required persistence and determination. At FrieslandCampina, van Houts team, while remaining ultimately accountable for tax policy, has sought to devolve responsibilities to business units, working to instill sensible risk management practices in each area. Sometimes this requires assertiveness, van Hout adds, although that should not automatically mean confrontation. The skill is to be able to communicate effectively with people who do not have a background in tax, he says. What I stress to my team is that we must explain the consequences of a particular scenario and seek to provide an alternative, rather than prohibit the business from operating. If tax directors can get this right, the outcome is a much more fulfilling professional role. People who join my team from advisory backgrounds often say they have had their eyes opened, explains van Hout. Our integration and alignment with the business is now so developed that they are really at the center of our commercial activity.
What wE SEE NOw IS that taX StruCturES arE aN INtEgral Part OF thE buSINESS, at thE VErY FOuNDatION OF hOw wE OPEratE
TAXTALK STUDENT CAREERS
37
LEarNErShIPS
A LEaRNERSHIP is a
WORK BASED approach TO LEARNING AND
obTAINING
QUAlIFICATIoN.
learnership is a work-based education and training programme geared towards a qualification. Based on the history of education and training in the sector, when established, Fasset, together with the professional bodies, converted many of the available qualifications into learnerships. That trend continues with the development of the tax professional qualification, in association with the SAIT. A learnership is a work-based approach to learning and obtaining a qualification. It includes both structured work experience (practical) and structured institutional learning. Criteria, as set out in the Skills Development Act, indicate that a learnership must:
Include a structured learning component Include practical work experience Lead to a qualification Relate to an occupation
For employers within the Fasset sector who want to offer a learnership, Fasset requires that the employer be accredited as a workplace provider. Essentially, this is Fassets way of ensuring that the learner who is on a learnership will be getting all the required experience to fulfil the learnership requirements. As with all learnerships, the provider (employer) will also need to be accredited. Learners and employers should only make use of accredited providers. The list of accredited providers as well as further information on Fassets learnership agreement procedures can be found on the Fasset website at www.fasset.org.za. In collaboration with the SAIT and the tax industry, Fasset is in the process of developing a tax professional learnership. The tax professional qualification has been developed and is at the Quality Council for Trades and Occupations (QCTO) awaiting registration. The tax learnership is in development and will be ready for registration with the Department of Higher Education and Training (DHET) later this year.
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86%
TAX OFFERS
diverse career
Tax is often written off as a niche career, but proves to be just the opposite.
By DAVID PROSSER
The number of tax directors who believe that technical knowledge will remain a prerequisite for positions of tax leadership despite the shift in focus to other skills and talents.
OppORtunities
The number of CFOs who say the ability for tax directors to design and execute business and tax strategy will become more important over the next three years, according to an Ernst & Young survey.
95%
R
MOrE POSItIVElY, taX IS bECOMINg aN INCrEaSINglY INtErNatIONal CarEEr, wIth PrOFESSIONalS wOrkINg ON aN EXPatrIatE baSIS all OVEr thE wOrlD
40
TAXTALK STUDENT CAREERS
ecruitment consultants who specialize in working with tax professionals constantly complain that there is a shortage of supply in this area of the accounting industry. One reason is that newly qualified accountants often assume tax is a narrow field where theyll be required to specialize very early on. In fact, nothing could be further from the truth tax combines commercial acumen with the disciplines of law and accountancy and offers tremendous diversity and depth to those who choose it as an area of accounting in which to build a career. Most of the leading consultancies allow tax professionals to develop their careers in a wide range of areas both domestic and international and both business and personal enabling them to focus on crucial business issues such as:
invisible indirect taxes (VAT, customs duties for example) can have on their supply chain, cost base and cash flow (Indirect Tax) How businesses can meet their executive tax compliance obligations, stay on top of regulatory change and manage their global talent effectively (Human Capital) How businesses can mitigate transaction risk, enhance opportunity and provide crucial negotiation insights when doing deals (Transaction Tax) How businesses can thrive in different markets by actively managing and reducing legal and other risks (Law). This is a UK example, but this sort of breadth is mirrored globally.
burdens around the world by uncovering opportunities, managing global tax risks and meeting cross-border reporting obligations (International Tax) How businesses can address their tax compliance and advisory needs, wherever in the world they are located (Business Tax Services) How businesses can manage accurately and in real time the impact which often
They may end up as executive directors, say, or government officials. Timescales vary enormously, of course, and will depend on individual circumstances. But many tax professionals really value the structure that this sort of career path offers. The work can be rewarding too. Asked to name the things they really enjoy about their jobs, the most common response from tax professionals is the opportunity to build strong relationships with clients. They also appreciate being able to apply their technical knowledge and skills, and to engage in advocacy arguing a case to the tax authorities, for example. There are downsides too: tax professionals biggest gripe is that tax authorities constantly tinker with the rules. They also complain that there has been a rise in litigation against tax professionals accused of negligence. Plus, there is concern that the public sees the profession as complicit in tax avoidance and tax evasion. More positively, tax is becoming an increasingly international career, with professionals working on an expatriate basis all over the world. Currently, students are studying for the UK Chartered Institute of Taxations Advanced Diploma in International Taxation in 70 countries globally.
slowdown and recession. The upward pressure on pay partly reflects scarcity of supply there are fewer tax professionals competing for each job than in other accounting disciplines. Another explanation is that, in many parts of Europe, tax professionals must be qualified lawyers As a result, accountancy firms and corporate employers must compete with the salaries offered by the legal profession.
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TAX
EMPlOYEE taX These professionals deal with tax liabilities associated with employees, such as payroll, UIF and skills development PErSONal taX These advisers deal with tax affairs of individuals
EXCITING,
VITAL,
TERRIFYING, OR DULL
VIEwS ON taX aS a PrOFESSION INEVItablY VarY wIDElY. But FEw PEOPlE aPPrECIatE ItS DIVErSItY aND DEPth, Or ItS POtENtIal rEwarDS FOr thOSE whO SuCCESSFullY ClIMb uP thE raNkS
TAX FACTS
EXPatrIatE taX These individuals handle tax affairs involving overseas assignment
70
The number of countries that are currently studying for the CIOT Advanced Diploma in International Taxation
There are many routes to follow. Although many think of tax as a single area of specialism, there are diverse routes that tax professionals can pursue. The following highlights eight common routes that can be followed.
TraNSFEr PrICINg Much in demand currently, transfer pricing professionals handle taxes involving cross-border transactions
TOP 3 tHings tHat taX pROFessiOnals MOst enJOy abOut tHeiR caReeR CHOice: 1. 1. Build strong relationships with clients 2. Apply technical knowledge and skills 3. Advocacy arguing a case to the tax authorities, for example
The number of employers planning to pay tax professionals a bonus during 2013
40%
INDIrECt taX Indirect tax professionals advise on tax issues such as VAT and excise duties/ levies
TRUSTS This category of tax professional looks after tax issues associated with financial and tax planning
COrPOratE taX The central tax function focused on tax compliance, planning and managing corporate tax liabilities
Tertiary Learner
GRADUATE TRAINEE
YEARS
0-3
YEARS
3-4
MANAGER
SENIOR MANAGER
Partner/director
YEARS
5-6
YEARS
6-7
YEARS
7-9
YEARS
10+
1. Constant changing of rules by government 2. The rise in litigation accusing tax professionals of negligence 3. The public perception that they facilitate tax evasion
YEARS
4-5
the limelight
Area Tax Leader for the Europe, Middle East, India and Africa (EMEIA) region at Ernst & Young
IN thE SaME waY that FINaNCE FuNCtIONS haVE EVOlVED tO bECOME buSINESS PartNErS, SO taX DIrECtOrS arE alSO StEPPINg INtO thE lIMElIght
oday, a tax director is more of a real-time commentator and advisor to management than a historical custodian. Historically the tax director was predominantly a technical expert within the finance function. With a focus on technical reporting, compliance and tax planning, there was little, if any, alignment with the rest of the business. Today, a tax director is more of a real-time commentator and advisor to management than a historical custodian. This means that in addition to their technical knowledge they need a range of other skills and tools: strong influencing and communication skills, people and team-building skills, the right technology tools and a tax risk management mindset. In the same way that finance functions have evolved to become business partners, so tax directors are also stepping into the limelight. Tax directors no longer sit in a corner of the finance department, but are interacting with managers across almost every function in the business. The economic and fiscal environment is a key driver of this change. With governments around the world seeking to manage their finances better and administrations sharing information to an unprecedented extent, tax policy and enforcement activities are more pervasive to business than at any time in recent memory. Companies that do not understand the implications of these trends will quickly find
themselves facing greater scrutiny from tax administrations, as well as the potential for reputational risk. In this environment, it is crucial for companies to adopt a proactive approach to tax management that is closely aligned with their strategic choices. The role of the tax director is now broader, higher-profile and more commercial than it was in the past. Tax directors have more opportunities than ever to step into other roles, and companies are now keen to create careers for tax professionals that give them exposure to different disciplines and geographical locations. A higher profile for the tax director has also added significantly to the demands of the role. The tax function often faces conflicting expectations, for example:
With tax likely to remain high on the political agenda for some years to come, the way in which companies manage tax and build links between the tax department and the rest of the business is increasingly critical.
45
Anna Elphick The Vice-President Tax, Head of Plc and M&A at Unilever, Elphick, says the role of departments such as hers has been transformed during her years in the profession, with the tax function now expected to operate asa partner to the business.
A changing tax
landscape
By DAVID PROSSER
A higher profile for tax in the corporate hierarchy means that tax professionals can enjoy a broader career and benefit from higher remuneration
15%
Premium earned by many tax professionals over comparable rates in the broader finance function
he role of the tax professional is changing. Just a few years ago, tax departments were primarily comprised of technicians who liked nothing better than burying themselves in a textbook. They inhabited a distant corner of the finance department and had few, if any, links with the broader business. Today, however, tax professionals are expected to be business partners who can forge excellent relationships with internal and external stakeholders, while also showing strong commercial instincts. The journey from Clark Kent to Superman is ongoing for many tax professionals, but there is no doubt about the direction of travel. There is also no question that these changes are broadening the career options in tax and encouraging the profession to recruit different types of people. When I started out, tax was very much a numbers-based role and we were focused on getting our point across within the tax function, says Anna Elphick, Vice-President Tax, Head of Plc and M&A at Unilever. Now, there is so much more integration with almost every other function in the business. We are a hub for a great deal of activity and weve gone from being quite an
introverted department to one that is expected to be a true business partner. There are a number of crucial trends that are driving this transformation. One is a growing awareness of the effect that tax policy can have on the bottom line, particularly as tax systems, both domestic and international, become more complex. Another is the impact of tax issues on so many diverse areas of companies operations from tax incentives for research and development, say, to the tax treatment of employees working on assignments across borders. It is not just internally that tax professionals have seen their profiles raised. In this age of austerity, tax authorities around the world are taking a much more proactive approach to raising revenue. For the most part, it is tax professionals who shoulder the burden of coping with these demands. Globalization is also having a major impact. Jane Djat, Executive Director for Human Capital at Ernst & Young in Switzerland, advises leading companies around the world on performance and reward in many different functions, including tax. In a global business environment, she says, the most senior tax staff can no longer primarily be technicians and nor should they be. No tax director can be expected to be familiar with the detail of tax regimes in 100 different countries, says Djat. Instead, were seeing the emergence of tax directors who are focused on process and
risk management. The latter is especially important, for it is not just tax authorities that are becoming more inquisitive about companies tax affairs. Companies also face scrutiny of their tax arrangements from the media and special interest groups, and any perceived shortcomings can quickly cause serious reputational damage. Elphick says that the challenge for tax directors and their teams today is to embed tax across the business. This ensures that the tax function has a clear view of the activities of every business unit while also being seen as an enabler of operations rather than an obstacle to commercial success. Tax can help drive change but it has to have a place at the table right from the beginning, she explains. And while your technical skills have to be the basis of the value you add, youve also got to be an articulate and tactful communicator. You cant just impose your views on other departments, you have to explain how you can help.
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thE ChaNgINg NaturE OF thE taX PrOFESSIONalS rOlE, FrOM tEChNICIaN tO buSINESS PartNEr, IS DrIVINg a DEbatE abOut rEwarD
Switzerland, Luxembourg and The Netherlands: The European countries where tax professionals can currently expect to earn the highest salaries
SUMMARY
The changing nature of the tax functions role should be welcomed by those who hope for a more varied career path. The options for tax professionals are growing by the day and salaries are rising too
had a noticeable effect on the skills for which recruiters of tax professionals both corporate and in private practice are now looking for. Whenever Im asked by a CFO to find a new head of tax, technical skill is probably now eighth out of 10 in the list of requirements, says Pryor. Higher up the list is the need for candidates to display leadership, understand risk management and be a strong commercial interface with the business. Pryor thinks that many tax departments have more work to do if they are to realize the sortof ambitions expressed by Elphick. Tax is already much more visible to the rest of the company and its staff is now forging much better relationships internally and externally, he says. But more could be done by heads of tax to change the perception of how their departments can add value; this starts with how they put together business case for recruitment in a time of cost constraint the all-singing and all-dancing tax departments are still in the minority. There may also need to be an acceptance on the part of in-house tax teams that working life is going to become more demanding. Cornelius Grossmann, Ernst & Youngs law leader based in Germany, argues that the old perception that in-house tax professionals have it easier than those working in private practice is no longer accurate. In the past, it could be said that you would have a better work-life balance working in-house but, these days, the same pressures apply, says Grossmann. Still, those who need a reason to speed up their modernisation should recognize that, while boosting the role of tax is in the corporate interest, it is also in the selfish interests of tax professionals. The increased
visibility of staff from the tax function and the broadening of their roles have not only made the day-to-day work more varied and challenging, but also boosted their career potential.
than their peers in the finance department, says Pryor. And there really has been a noticeable movement upwards in base salaries over the past two to three years, with increases over and above inflation across the sector especially at newly qualified and head of tax level. One might expect that demand and supply mismatch to level out, given the premium tax professionals are currently demanding. But the perception that tax is a more ambiguous area of accounting and finance, however misguided, appears to be working in favor of its professionals, with trainees less likely to take their careers in this direction for fear of specializing too early. The exception to the rule that tax professionals lead on earnings, says Pryor, is at the most senior level, where a companys tax director would typically earn less than, say, the account director or the group treasurer. Unusually, however, in-house tax professionals can generally expect to earn more than their peers in private practice. From the newly qualified level up to senior management, total earnings tend to be higher in-house, adds Pryor. In companies, the base salary might be slightly higher, but thats the crucial component of the package, whereas in-house staff generally enjoys a much wider range of benefits, including bonus, car allowance and better pensions. Another factor driving salaries is that, in much of Europe, tax professionals are qualified lawyers. In countries such as Spain and France, every tax adviser is a lawyer while, in many other countries, a significant portion of the industry holds legal qualifications. Ernst & Youngs Cornelius Grossmann says that the Big Four tax and audit firms are now
having to work hard to compete for the best people. The top firms offer tax specialists very attractive packages and, if the Big Four do not offer similar deals to candidates, they will lose out, says Grossmann. The same is true for companies competing for staff to come and work in-house. That said, Grossmann identifies advantages that the Big Four accounting practices have when recruiting. Unlike most of the law firms, he points out, the large accounting firms are truly global businesses with networks of offices in many different countries across the world. They may be able to offer new staff a much more varied career path, with greater scope for working internationally than the law firms. This is due to the multi-disciplinary teams that work together within the Big Four. Its not just a matter of the absolute amount, of course the structure of remuneration is important too. Here, the changing nature of the tax professionals role, from technician to business partner, is driving a debate about reward. On the other hand, there are dangers in remunerating tax professionals in similar ways to staff on the frontline of operations. In my view, remuneration in tax should be weighted toward fixed rather than variable pay says Djat. You dont want to be incentivising anyone in a control function to take an unreasonable level of risk.
A BALANCING ACT
A balance is difficult to achieve. Some measures might seem obvious key performance indicators (KPIs) for senior tax professionals the companys effective tax rate, or the value of its savings from
good tax planning, for example. But if these measures were to encourage tax directors to be too aggressive, the damage caused by challenges from tax authorities, or embarrassment in the media, might be counterproductive. Therefore other KPIs are worth considering, adds Djat. One possibility is the number of audits the company is subjected to by the tax authorities and the length of time it takes to conclude these. Brewer Morriss Pryor says that, among his clients, bonus levels are definitely on the increase after a few disappointing years. For newly qualified tax professionals, 10% to 15% of salary is now typical, he says, while the most senior directors might expect bonus potential of 50% to 100% of base salary or even multiples of it. Pryor too is aware of the dangers of incentives. Currently, tax professionals bonuses are determined in the classic way 50% on corporate performance and 50% on individual targets, he says. What many people would like to see is a link between their bonus and how much tax theyve saved the company. In the end, says Ray Harraway, a Director at the Human Capital, Performance and Reward Group at Ernst & Young in South Africa, the challenge is to build remuneration packages that reward the sort of tax professionals employers want. We need new KPIs for these people, says Harraway. Weve seen the role of the tax director move from the supportive to requiring a broader understanding of risk management and how that is integrated into the risk management programe of the whole company. That does require new skills, particularly in the areas of relationship building and commercial awareness.
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LIFESTYLE
LIFESTYLE
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ADVICE
Artices sourced from the 2010 Career Compass career development guide
WORk
By DANIEL T SIKHWARI manner, hear it out, mull it over, learn from it, and be grateful for the chance to conquer your weaknesses and improve upon your strengths.
Branding?
By SHeri Seetal
PeRsOnal
BEHAVE PROFESSIONALLY
How you look is important, but how you behave at work determines your professional image. People should regard you as a mature and responsible individual rather than somebody who is always wasting time, frequently idling and often stands at the desk of others instead of your own. Being ready at all times. Being a professional is being on time and ready to work for the next client who comes in through the door. Be discreet. If a client, co-worker or boss asks you to keep something confidential, it is very important for you to do so. Be careful of what you say, and use clean language. Personal situations should stay at home and politics or religion should never be discussed in the workplace. Never speak badly about a client, co-worker or your boss. It is just a matter of time before your comment reaches the person you spoke about.
AVOID PROCRASTINATION
Do not procrastinate or let things drag out to the deadline. Try to get a reputation for finishing your tasks in time. Be efficient! Be prepared to go the extra mile Give 110% effort to your job and use all of the skills you have learned. Dont be a slacker. Always take your job seriously and know that its what you do for a living. Be one of the first to step forward and volunteer whenever it is possible. If you are asked to come in on the weekends, come in, and if you are asked to take work home, do it. These tasks are looked upon with a positive attitude.
ARRIVE EARLY
Arrive at least fifteen minutes before the required time. Show your supervisor that you are willing to make work a priority. Improve your attendance at work by establishing a pattern and make changes when necessary.
ersonal branding is a process of building your image, reputation and credibility. It is your pledge of quality or advantage over competing people. Branding includes the visual, emotional, attitudinal and cultural images associated with you. Your personal brand will include your character, talent, uniqueness, presence, attitude your dress, appearance, how you speak and conduct yourself. It is a process of defining who you are as a young professional and differentiating yourself from the crowd. Your brand is what makes you unique from other people with similar qualifications and will determine your competitive edge over other graduates with similar talent and skills. It is about becoming visible, outstanding and different. A positive brand image is the foundation for personal and corporate success. Your brand or image helps you move out of one environment into another by creating an identity for yourself that ensures you are seen as a leader, creator or innovator in a particular field. Why a personal brand? Just as retailers promote their products through marketing the best attributes and benefits to the consumer and managing their brand, having a personal brand follows the same principle. A personal brand defines your ability to succeed. Knowing who you are in terms of your strengths and weaknesses helps you to improve how you manage yourself. By being self-aware you are more likely to take initiative to overcome your weaknesses and enhance your strength and to raise your self-confidence. You can develop your selfconfidence by participating in extracurricular activities, societies, organisations and workshops on campus. Improving your general knowledge will enhance your marketability by keeping in tune with current affairs through watching the news and reading the newspapers, especially the business and the careers section. Managing your brand includes analysing what your strengths are, your core
competencies, what you stand for, what makes you stand out and what makes you marketable? Hence your self-analysis should include seeking constructive feedback from trusted persons. Self-analysis includes introspection about how you will handle stress and your emotions. This process involves having a personal development plan and learning to communicate your brand to others. A strong personal brand improves your chances of being the candidate of choice in recruitment, being successful in the workplace, and being successful in general. Benefits of a personal brand A personal brand can work for you on an interpersonal level and organisational level. On the interpersonal level it creates admiration, respect and support. On an organisational level it attracts new opportunities, breeds trust and familiarity. What do employers want in terms of a personal brand? For the new graduate, employers often
look for someone who has developed themselves holistically in terms of their personal brand and their professional image. Over and above the qualification you have acquired, they look at the level of expertise, knowledge, solid reputation and value-added contribution. Other skills that are important for them include strong interpersonal skills, problem solving ability, team work, good communication skills, a strong circle of influence, a desire to achieve, resilience, tolerance, thirst for new information and willingness to learn. Marketing yourself and selling your brand becomes easy when you:
Know yourself and have high levels of self Know what you stand for and value Know your limitations Can deliver on your promise Keep your brand current through
awareness
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Be prepared with a plan, but expect the unexpected. This is especially true in the case of postgraduate studies, where you have to devise a timeframe within which to complete a dissertation, thesis or technical report. You can and should allocate specific timeslots to each chapter or project. But also build in a safety net. Add at least an extra month to accommodate unexpected external factors, like an ill-timed bit of legislation released by SARS that impacts your research. Avoid highly stressful situations that are within your control (see points 3 and 4). Lets face it: studying is stressful enough without adding more emotional or financial burdens to an already overloaded plate. If you can avoid it, do. By the way, this is the same advice I would give as a tax practitioner: If you can avoid tax, do (legally of course!). Do not move or relocate while you study. If you do, do not try and do it yourself. Carrying boxes and furniture for 48 hours is overrated. I speak from experience. Donate unused stuff before you move, so theres less to carry. And dont buy useless stuff to begin with. Incidentally, dont throw away your outdated tax textbooks. Rather take them to a paper recycling depot. Do not get a new pet in the year you study. Especially a ginger male kitten. Do not be fooled by how cute and helpless they look when theyre asleep. They eventually wake up three oclock in the morning. I dearly love animals (particularly our two cats), but you really cannot afford distractions when you have hectic deadlines to meet. Rest. Theres a reason why a university or college calendar is divided into four terms with breaks in between. And despite what that chocolate advertisement says, you dont get 25-hour days. Have other healthy interests / hobbies / sports. Watching 44 consecutive episodes of Glee in two weeks might be a marathon, but it is not a healthy sport. Get fresh air, eat healthily and exercise. Why not learn a new skill or language? Lets start now: mens sana in corpore sano. A sound mind in a healthy body.
Define your personal boundaries and learn to say no. Friends and family should also respect your deadlines. Admittedly, it is very difficult to miss out on family gatherings and parties with friends. I am not advocating a complete withdrawal from society. I am saying, though, that you need to get your priorities straight and to communicate them to your loved ones in an appropriate manner. The sooner you successfully complete your studies, the better for all concerned. Besides, you dont want to mess up your planning schedule (refer to point 1). However, you do need supportive friends and family. Cherish them! Embarking on your studies can often become a lonely voyage. You need all the support you can get. Dont try to do it all and never lose track of whats really important in your life. As a temporary measure, use Facebook to stay up to date with your friends. But dont succumb to Angry birds. Theres always a bigger picture. When your studies (or work prospects) arent turning out the way you wanted them to, its a good time to take a moment and consider why and how your priorities might have changed. For example: you might be performing poorly in a specific module. If this is because you havent studied or put in the requisite effort: get your act together and work harder. On the other hand, if this is because that particular module absolutely bores you to tears, contemplate a different module or course of study (time and finances permitting). Remember that there is always a bigger picture of your life: maybe you just need to look through different glasses? Have a teachable attitude. If you are hungry and committed enough, how can you not succeed? Open your mind to new ideas and make peace with the fact that you dont (and never will) know everything. Learn from your mistakes. Learn from other peoples mistakes. Be a perpetual student.
My concluding remark is borrowed from internationally recognised leadership expert John C Maxwell, who has this to say about teachability: Teachability is not so much about competence and mental capacity as it is about attitude. It is the desire to listen, learn, and apply. It is the hunger to discover and grow. It is the willingness to learn, unlearn, and relearn.
he more I read, the more I acquire, the more certain I am that I know nothing. One of the many quotes ascribed to Voltaire and one with which I, as student and as teacher, wholeheartedly agree with. I have found that the further I progress with my studies and the deeper I delve into a topic, the more I become aware of my own ignorance. Ten years ago, when I eagerly received my Bachelors degree at my first Maties graduation, I thought I was an intellectual giant. Thereafter, graduating with an Honours and subsequently a Masters degree, my misplaced scholarly superiority
was fortunately chiselled away. I am now a PhD student and senior lecturer in tax and have never felt as much of an academic dwarf as I do now. And what a good place to be! For I believe that when you realise and accept you dont know everything, the true learning process can then begin. That being said, I never meant for this article to take such a philosophical turn. Rather, I wanted to share ten practical tips that I have picked up in my decade as student and lecturer (first at Stellenbosch and then at Cape Town). These tips are not limited to tax studies; I flatter myself that they can be applied in any academic endeavour:
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