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PAYE plus vat: is that double taxation?

JONATHAN HORE

Most of us may know that the majority of employees solely depend on employment income for their livelihood. But as long as an employee earns more than P36 000 per annum or P 3 000 per month, they should pay a tax called Pay As You Earn (PAYE).

This tax is deducted by an employer and the employee receives the net amount. After receiving the net of PAYE remuneration, the same person also pays VAT when he buys Vatable items such as groceries, electricity and clothes. In this article, I want to analyse the fusion of these taxes and analyse whether the subjection of VAT and PAYE on the same income is double taxation.  Throughout this article, words importing the masculine shall be deemed to include the feminine.

PAYE

PAYE is a tax that is deducted from the remuneration that is earned by an employee from an employer-employee arrangement, i.e. is a direct tax as it is levied on a specified person’s income. Remuneration includes both the monetary and non-monetary rewards that an employee is entitled to. Regardless of the employment arrangement, a salary forms an integral part of most employment arrangements.

Technically, if an employee earns P 12 000, then PAYE of P 1 087.50 is deducted from them as prescribed by the Income Tax Act. Notice that the employee will take home the after-tax amount of P 12 000 less P 1 087.50, which is P 10 912.50. But after the subjection of the PAYE on that income, that same employee pays another tax called VAT and I will analyse this below.

VAT

VAT is an indirect tax that is levied on goods and services that are chargeable to VAT as prescribed by the VAT Act. I must state that the general VAT rate is 12% and there are some goods/services which are chargeable to VAT at 0%. There are a few other goods/services which are not subject to VAT at all such as educational services and residential accommodation. The way the VAT system is designed is such that everybody pays the VAT and the tax becomes their cost if they are not registered with BURS for VAT purposes.

In other words, if you and I walk into Sefalana and buy groceries, the prices we see on the shelves usually include VAT and we bear the VAT as a cost, since we are the final consumers of those goods. Therefore, we effectively pay two taxes from the same income that we earn. Now, that then beings us to the major question we want to address today being whether there is double tax on the income that we earn.

WHAT’S DOUBLE TAXATION?

Double taxation is the subjection of the same type of tax on the same income, usually in the same country. However, double taxation may also occur when the same type of tax is applied on the same income in two different countries and this explains why we have double taxation avoidance agreements which protect us from double taxation. Let’s now limit our analysis to the PAYE and VAT that is levied in Botswana and find out whether there is double taxation of the same income.

As I stated above, double taxation arises when the same income is subjected to the same tax more than once. But remember that we stated that PAYE is Income Tax which is chargeable in terms of the Income Tax Act. We also mentioned that VAT is payable in terms of the VAT Act. Let me be technical and state that the Income Tax and the VAT Act are two separate statutes which are divorced from each other. Therefore, when you pay PAYE or income tax per the Income Tax Act, you pay a tax that is called Income Tax, a direct tax on your income.

When you later pay VAT on goods and services such as groceries, cars and medical services, you are now paying an Indirect Tax that is charged based on the consumption of taxable goods/services. Therefore, since these two taxes are charged in terms of different statutes, there is no double tax to talk about. The reality is that you pay the taxes from the same income you earn but as long as the taxes are charged by different statutes, we can’t talk about double tax. However, double tax would arise if we were paying Income Tax or VAT more than once on the same income. 

Well folks, I hope that was insightful. As Yours Truly says goodbye, remember to pay to Caesar what belongs to him. If you want to join our Tax Whatsapp group, send me a text on the cell number below. Jonathan Hore writes on behalf of Aupracon Tax Specialists and feedback can be relayed to jhore@aupracontax.co.bw or 7181 5836. This article is of a general nature and is not meant to address particular matters of any person.

Most of us may know that the majority of employees solely depend on employment income for their livelihood. But as long as an employee earns more than P36 000 per annum or P 3 000 per month, they should pay a tax called Pay As You Earn (PAYE). This tax is deducted by an employer and the employee receives the net amount. After receiving the net of PAYE remuneration, the same person also pays VAT when he buys Vatable items such as groceries, electricity and clothes. In this article, I want to analyse the fusion of these taxes and analyse whether the subjection of VAT and PAYE on the same income is double taxation.  Throughout this article, words importing the masculine shall be deemed to include the feminine.

PAYE

PAYE is a tax that is deducted from the remuneration that is earned by an employee from an employer-employee arrangement, i.e. is a direct tax as it is levied on a specified person’s income. Remuneration includes both the monetary and non-monetary rewards that an employee is entitled to. Regardless of the employment arrangement, a salary forms an integral part of most employment arrangements.

Technically, if an employee earns P 12 000, then PAYE of P 1 087.50 is deducted from them as prescribed by the Income Tax Act. Notice that the employee will take home the after-tax amount of P 12 000 less P 1 087.50, which is P 10 912.50. But after the subjection of the PAYE on that income, that same employee pays another tax called VAT and I will analyse this below.

VAT

VAT is an indirect tax that is levied on goods and services that are chargeable to VAT as prescribed by the VAT Act. I must state that the general VAT rate is 12% and there are some goods/services which are chargeable to VAT at 0%. There are a few other goods/services which are not subject to VAT at all such as educational services and residential accommodation. The way the VAT system is designed is such that everybody pays the VAT and the tax becomes their cost if they are not registered with BURS for VAT purposes.

In other words, if you and I walk into Sefalana and buy groceries, the prices we see on the shelves usually include VAT and we bear the VAT as a cost, since we are the final consumers of those goods. Therefore, we effectively pay two taxes from the same income that we earn. Now, that then beings us to the major question we want to address today being whether there is double tax on the income that we earn.

WHAT’S DOUBLE TAXATION?

Double taxation is the subjection of the same type of tax on the same income, usually in the same country. However, double taxation may also occur when the same type of tax is applied on the same income in two different countries and this explains why we have double taxation avoidance agreements which protect us from double taxation. Let’s now limit our analysis to the PAYE and VAT that is levied in Botswana and find out whether there is double taxation of the same income.

As I stated above, double taxation arises when the same income is subjected to the same tax more than once. But remember that we stated that PAYE is Income Tax which is chargeable in terms of the Income Tax Act. We also mentioned that VAT is payable in terms of the VAT Act. Let me be technical and state that the Income Tax and the VAT Act are two separate statutes which are divorced from each other. Therefore, when you pay PAYE or income tax per the Income Tax Act, you pay a tax that is called Income Tax, a direct tax on your income.

When you later pay VAT on goods and services such as groceries, cars and medical services, you are now paying an Indirect Tax that is charged based on the consumption of taxable goods/services. Therefore, since these two taxes are charged in terms of different statutes, there is no double tax to talk about. The reality is that you pay the taxes from the same income you earn but as long as the taxes are charged by different statutes, we can’t talk about double tax. However, double tax would arise if we were paying Income Tax or VAT more than once on the same income. 

Well folks, I hope that was insightful. As Yours Truly says goodbye, remember to pay to Caesar what belongs to him. If you want to join our Tax Whatsapp group, send me a text on the cell number below. Jonathan Hore writes on behalf of Aupracon Tax Specialists and feedback can be relayed to jhore@aupracontax.co.bw or 7181 5836. This article is of a general nature and is not meant to address particular matters of any person.

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Export Processing Zones: How to Get SEZA to Sizzle

23rd September 2020
Export Processing Zone (EPZ) factory in Kenya

In 2005, the Business & Economic Advisory Council (BEAC) pitched the idea of the establishment of Special Economic Zones (SEZs) to the Mogae Administration.

It took five years before the SEZ policy was formulated, another five years before the relevant law was enacted, and a full three years before the Special Economic Zones Authority (SEZA) became operational.

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Egypt Bagged Again

23rd September 2020
Samson

… courtesy of infiltration stratagem by Jehovah-Enlil’s clan

With the passing of Joshua’s generation, General Atiku, the promised peace and prosperity of a land flowing with milk and honey disappeared, giving way to chaos and confusion.

Maybe Joshua himself was to blame for this shambolic state of affairs. He had failed to mentor a successor in the manner Moses had mentored him. He had left the nation without a central government or a human head of state but as a confederacy of twelve independent tribes without any unifying force except their Anunnaki gods.

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‘RO, ‘RO ‘RO YOUR ‘BOT

23rd September 2020

If I say the word ‘robot’ to you,  I can guess what would immediately spring to mind –  a cute little Android or animal-like creature with human or pet animal characteristics and a ‘heart’, that is to say to say a battery, of gold, the sort we’ve all seen in various movies and  tv shows.  Think R2D2 or 3CPO in Star Wars, Wall-E in the movie of the same name,  Sonny in I Robot, loveable rogue Bender in Futurama,  Johnny 5 in Short Circuit…

Of course there are the evil ones too, the sort that want to rise up and eliminate us  inferior humans – Roy Batty in Blade Runner, Schwarzenegger’s T-800 in The Terminator,  Box in Logan’s Run,  Police robots in Elysium and  Otomo in Robocop.

And that’s to name but a few.  As a general rule of thumb, the closer the robot is to human form, the more dangerous it is and of course the ultimate threat in any Sci-Fi movie is that the robots will turn the tables and become the masters, not the mechanical slaves.  And whilst we are in reality a long way from robotic domination, there are an increasing number of examples of  robotics in the workplace.

ROBOT BLOODHOUNDS Sometimes by the time that one of us smells something the damage has already begun – the smell of burning rubber or even worse, the smell of deadly gas. Thank goodness for a robot capable of quickly detecting and analyzing a smell from our very own footprint.

A*Library Bot The A*Star (Singapore) developed library bot which when books are equipped with RFID location chips, can scan shelves quickly seeking out-of-place titles.  It manoeuvres with ease around corners, enhances the sorting and searching of books, and can self-navigate the library facility during non-open hours.

DRUG-COMPOUNDING ROBOT Automated medicine distribution system, connected to the hospital prescription system. It’s goal? To manipulate a large variety of objects (i.e.: drug vials, syringes, and IV bags) normally used in the manual process of drugs compounding to facilitate stronger standardisation, create higher levels of patient safety, and lower the risk of hospital staff exposed to toxic substances.

AUTOMOTIVE INDUSTRY ROBOTS Applications include screw-driving, assembling, painting, trimming/cutting, pouring hazardous substances, labelling, welding, handling, quality control applications as well as tasks that require extreme precision,

AGRICULTURAL ROBOTS Ecrobotix, a Swiss technology firm has a solar-controlled ‘bot that not only can identify weeds but thereafter can treat them. Naio Technologies based in southwestern France has developed a robot with the ability to weed, hoe, and assist during harvesting. Energid Technologies has developed a citrus picking system that retrieves one piece of fruit every 2-3 seconds and Spain-based Agrobot has taken the treachery out of strawberry picking. Meanwhile, Blue River Technology has developed the LettuceBot2 that attaches itself to a tractor to thin out lettuce fields as well as prevent herbicide-resistant weeds. And that’s only scratching the finely-tilled soil.

INDUSTRIAL FLOOR SCRUBBERS The Global Automatic Floor Scrubber Machine boasts a 1.6HP motor that offers 113″ water lift, 180 RPM and a coverage rate of 17,000 sq. ft. per hour

These examples all come from the aptly-named site www.willrobotstakemyjob.com    because while these functions are labour-saving and ripe for automation, the increasing use of artificial intelligence in the workplace will undoubtedly lead to increasing reliance on machines and a resulting swathe of human redundancies in a broad spectrum of industries and services.

This process has been greatly boosted by the global pandemic due to a combination of a workforce on furlough, whether by decree or by choice, and the obvious advantages of using virus-free machines – I don’t think computer viruses count!  For example, it was suggested recently that their use might have a beneficial effect in care homes for the elderly, solving short staffing issues and cheering up the old folks with the novelty of having their tea, coffee and medicines delivered by glorified model cars.  It’s a theory, at any rate.

Already, customers at the South-Korean  fast-food chain No Brand Burger can avoid any interaction with a human server during the pandemic.  The chain is using robots to take orders, prepare food and bring meals out to diners.  Customers order and pay via touchscreen, then their request is sent to the kitchen where a cooking machine heats up the buns and patties. When it’s ready, a robot ‘waiter’ brings out their takeout bag.   

‘This is the first time I’ve actually seen such robots, so they are really amazing and fun,’ Shin Hyun Soo, an office worker at No Brand in Seoul for the first time, told the AP. 

Human workers add toppings to the burgers and wrap them up in takeout bags before passing them over to yellow-and-black serving robots, which have been compared to Minions. 

Also in Korea, the Italian restaurant chain Mad for Garlic is using serving robots even for sit-down customers. Using 3D space mapping and other technology, the electronic ‘waiter,’ known as Aglio Kim, navigates between tables with up to five orders.  Mad for Garlic manager Lee Young-ho said kids especially like the robots, which can carry up to 66lbs in their trays.

These catering robots look nothing like their human counterparts – in fact they are nothing more than glorified food trolleys so using our thumb rule from the movies, mankind is safe from imminent takeover but clearly  Korean hospitality sector workers’ jobs are not.

And right there is the dichotomy – replacement by stealth.  Remote-controlled robotic waiters and waitresses don’t need to be paid, they don’t go on strike and they don’t spread disease so it’s a sure bet their army is already on the march.

But there may be more redundancies on the way as well.  Have you noticed how AI designers have an inability to use words of more than one syllable?  So ‘robot’ has become ‘bot’ and ‘android’ simply ‘droid?  Well, guys, if you continue to build machines ultimately smarter than yourselves you ‘rons  may find yourself surplus to requirements too – that’s ‘moron’ to us polysyllabic humans”!

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