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Why unemployed pensioners suffer paye

JONATHAN HORE

You may know that PAYE stands for Pay As You Earn, a tax that is paid by employees on income they earn from their employers. Technically, we cannot talk about PAYE when there is no employer-employee relationship. Ok, it’s as simple as this; there has to be an employer who has a job and then an employee who offers services to the employer in order for us to talk about PAYE.

Now, how come pensioners who are not even employed get PAYE deducted from the income they earn? Further, this group of senior citizens only gets the pensions from pension funds, who in most of the cases would have never been their employers. In this week’s article, I will analyse why these senior citizens are subject to PAYE when it simply does not tie up with the principles of employees’ tax. In this article, words importing the masculine shall be deemed to include the feminine.

THE EMPLOYER-EMPLOYER ISSUE

Like I stated above, there is no PAYE when an amount is paid to someone who is not an employee. Further, the payer should be the employer of the employee earning remuneration, otherwise we just can’t talk about PAYE. Technically, the employer should own a job and the employee should be rendering services to the former. This explains why partners and sole traders should never suffer PAYE even when they draw salaries from their businesses. It’s that simple; partners can’t be employed by anyone, they employ themselves.

A sole trader is his own boss so there can’t be PAYE. But the mystery still remains; how come we subject pensioners to PAYE when they are nobody’s employees? And why is it that none of these pensioners has ever revolted against their pension funds on this matter? Ok, maybe they were told the law is the law and they chickened out without even asking what the law says. Or maybe they were used to seeing this as normal and they just did not want to trouble the taxman or the pension funds with the matter.

HERE IS THE ANSWER

I do not have an option but to take you to the law which governs the deduction of PAYE and this is the Income Tax Act Chapter 52:01 (‘Act’). The Fifth Schedule to the Act states that, ‘every employer shall, unless the Commissioner otherwise authorizes, deduct tax in accordance with this Schedule.’ In that schedule, the ‘tax’ to be deducted by the ‘employer’ is PAYE.

Now, the same schedule is read together with a section 56 of the Act which states that, ‘every employer shall deduct tax from the remuneration paid to his employees in accordance with and in the manner specified in the Fifth Schedule…’ That section specifically mentions that PAYE is deductible by employers from income earned by their employees. That is so consistent with what we established in the above paragraphs but we still haven’t directly addressed the pensioners.

Now, the Fifth Schedule states that the term ‘employee’ means ‘any person (other than a company) who, in respect of an employment receives remuneration from an employer, and includes any person to whom remuneration accrues  … from an approved superannuation fund.’ This is the straight answer to the burning question we have today. Look, the Act recognizes that a pensioner is not an employee and it therefore comes up with what I call a deemed employee, a term which includes a person who receives pension from an approved

superannuation (pension) fund. Now, an approved superannuation fund is just the legislature’s clever way of saying a pension fund. You see, the legislature does not use simple words like you and me because he gets a lot of complicated language from my learned colleagues; the lawyers.

We established above that a pensioner does not render services to a pension fund but the simple fact that the Act defines an employee as including such pensioner means that any income paid to them by the pension funds is subject to PAYE. So, the employer-employee relationship argument is the primary test of whether PAYE should be deducted but then there are deemed employees, which includes pensioners who get paid by approved pension funds.

THE PRACTICAL MATTERS

Let me remind you that the definition of ‘employee’ includes a pensioner who is paid by an approved pension. Technically, those are funds which are formed in Botswana and are approved by BURS as such. So, when an employee is working, their contributions to employers are not taxed, i.e. they are deducted from salary before PAYE is levied. When the pension amount is then paid after retirement, that is when the former employee is deemed to be an employee.

Pensioners get a tax certificate which shows the tax deducted from them and if they got another job or income, the different incomes are added together before tax is determined. For example, if a pensioner earns P200 000 from a pension fund and P 300 000 from rental income, he will be taxed on P500 000 in total. The tax deducted by the pension fund is knocked off against final tax payable to BURS. Now, that explains why pensioners are taxed and yet they are unemployed by the pension funds; they are deemed employees.

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 is the Managing Tax Consultant 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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The Daring Dozen at Bari

8th December 2020
JEFF---Batswana-smoke-unit

Seventy-seven years ago, on the evening of December 2, 1943, the Germans launched a surprise air raid on allied shipping in the Italian port of Bari, which was then the key supply centre for the British 8th army’s advance in Italy.

The attack was spearheaded by 105 Junkers JU88 bombers under the overall command of the infamous Air Marshal Wolfram von Richthofen (who had initially achieved international notoriety during the Spanish Civil War for his aerial bombardment of Guernica). In a little over an hour the German aircraft succeeded in sinking 28 transport and cargo ships, while further inflicting massive damage to the harbour’s facilities, resulting in the port being effectively put out of action for two months.

Over two thousand ground personnel were killed during the raid, with the release of a secret supply of mustard gas aboard one of the destroyed ships contributing to the death toll, as well as subsequent military and civilian casualties. The extent of the later is a controversy due to the fact that the American and British governments subsequently covered up the presence of the gas for decades.

At least five Batswana were killed and seven critically wounded during the raid, with one of the wounded being miraculously rescued floating unconscious out to sea with a head wound. He had been given up for dead when he returned to his unit fourteen days later. The fatalities and casualties all occurred when the enemy hit an ammunition ship adjacent to where 24 Batswana members of the African Pioneer Corps (APC) 1979 Smoke Company where posted.

Thereafter, the dozen surviving members of the unit distinguished themselves for their efficiency in putting up and maintaining smokescreens in their sector, which was credited with saving additional shipping. For his personal heroism in rallying his men following the initial explosions Company Corporal Chitu Bakombi was awarded the British Empire Medal, while his superior officer, Lieutenant N.F. Moor was later given an M.B.E.

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A Strong Marriage Bond Needs Two

8th December 2020

Remember: bricks and cement are used to build a house, but mutual love, respect and companionship are used to build a HOME. And amongst His signs is this: He creates for you mates out of your own kind, so that you may find contentment (Sukoon) with them, and He engenders love and tenderness between you; in this behold, there are signs (messages) indeed for people who reflect and think (Quran 30:21).

This verse talks about contentment; this implies companionship, of their being together, sharing together, supporting one another and creating a home of peace. This verse also talks about love between them; this love is both physical and emotional. For love to exist it must be built on the foundation of a mutually supportive relationship guided by respect and tenderness. As the Quran says; ‘they are like garments for you, and you are garments for them (Quran 2:187)’. That means spouses should provide each other with comfort, intimacy and protection just as clothing protects, warms and dignifies the body.

In Islam marriage is considered an ‘ibaadah’, (an act of pleasing Allah) because it is about a commitment made to each other, that is built on mutual love, interdependence, integrity, trust, respect, companionship and harmony towards each other. It is about building of a home on an Islamic foundation in which peace and tranquillity reigns wherein your offspring are raised in an atmosphere conducive to a moral and upright upbringing so that when we all stand before Him (Allah) on that Promised Day, He will be pleased with them all.

Most marriages start out with great hopes and rosy dreams; spouses are truly committed to making their marriages work. However, as the pressures of life mount, many marriages change over time and it is quite common for some of them to run into problems and start to flounder as the reality of living with a spouse that does not meet with one’s pre-conceived ‘expectations’. However, with hard work and dedication, couples can keep their marriages strong and enjoyable. How is it done? What does it take to create a long-lasting, satisfying marriage?

Below are some of the points that have been taken from a marriage guidance article I read recently and adapted for this purposes.

POSITIVITY
Spouses should have far more positive than negative interactions. If there is too much negativity — criticizing, demanding, name-calling, holding grudges, etc. — the relationship will suffer. However, if there is never any negativity, it probably means that frustrations and grievances are not getting ‘air time’ and unresolved tension is accumulating inside one or both partners waiting to ‘explode’ one day.

“Let not some men among you laugh at others: it may be that the (latter) are better than the (former): nor let some women laugh at others: it may be that the (latter) are better than the (former): nor defame nor be sarcastic to each other, nor call each other by (offensive) nicknames.” (49:11)

We all have our individual faults though we may not see them nor want to admit to them but we will easily identify them in others. The key is balance between the two extremes and being supportive of one another. To foster positivity in a marriage that help make them stable and happy, being affectionate, truly listening to each other, taking joy in each other’s achievements and being playful are just a few examples of positive interactions.
Prophet Muhammad (PBUH) said: “The believers who show the most perfect faith are those who have the best character and the best of you are those who are best to their wives”

UNDERSTANDING

Another characteristic of happy marriages is empathy; understanding your spouses’ perspective by putting oneself in his or her shoes. By showing that understanding and identifying with your spouse is important for relationship satisfaction. Spouses are more likely to feel good about their marriage and if their partner expresses empathy towards them. Husbands and wives are more content in their relationships when they feel that their partners understand their thoughts and feelings.

Successful married couples grow with each other; it simply isn’t wise to put any person in charge of your happiness. You must be happy with yourself before anyone else can be.  You are responsible for your actions, your attitudes and your happiness. Your spouse just enhances those things in your life. Prophet Muhammad (PBUH) said: “Treat your women well and be kind to them for they are your partners and committed helpers.”

COMMITMENT

Successful marriages involve both spouses’ commitment to the relationship. The married couple should learn the art of compromise and this usually takes years. The largest parts of compromise are openness to the other’s point of view and good communication when differences arise.

When two people are truly dedicated to making their marriage work, despite the unavoidable challenges and obstacles that come, they are much more likely to have a relationship that lasts. Husbands and wives who only focus on themselves and their own desires are not as likely to find joy and satisfaction in their relationships.

ACCEPTANCE

Another basic need in a relationship is each partner wants to feel valued and respected. When people feel that their spouses truly accept them for who they are, they are usually more secure and confident in their relationships. Often, there is conflict in marriage because partners cannot accept the individual preferences of their spouses and try to demand change from one another. When one person tries to force change from another, he or she is usually met with resistance.

However, change is much more likely to occur when spouses respect differences and accept each other unconditionally. Basic acceptance is vital to a happy marriage. Prophet Muhammad (PBUH) said: “It is the generous (in character) who is good to women, and it is the wicked who insults them.”
“Overlook (any human faults) with gracious forgiveness.” (Quran 15:85)

COMPASSION, MUTUAL LOVE AND RESPECT

Other important components of successful marriages are love, compassion and respect for each other. The fact is, as time passes and life becomes increasingly complicated, the marriage is often stressed and suffers as a result. A happy and successful marriage is based on equality. When one or the other dominates strongly, intimacy is replaced by fear of displeasing.

It is all too easy for spouses to lose touch with each other and neglect the love and romance that once came so easily. It is vital that husbands and wives continue to cultivate love and respect for each other throughout their lives. If they do, it is highly likely that their relationships will remain happy and satisfying. Move beyond the fantasy and unrealistic expectations and realize that marriage is about making a conscious choice to love and care for your spouse-even when you do not feel like it.

Seldom can one love someone for whom we have no respect. This also means that we have to learn to overlook and forgive the mistakes of one’s partner. In other words write the good about your partner in stone and the bad in dust, so that when the wind comes it blows away the bad and only the good remains.

Paramount of all, marriage must be based on the teachings of the Noble Qur’an and the teachings and guidance of our Prophet Muhammad (PBUH). To grow spiritually in your marriage requires that you learn to be less selfish and more loving, even during times of conflict. A marriage needs love, support, tolerance, honesty, respect, humility, realistic expectations and a sense of humour to be successful.

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Chronic Joblessness: How to Help Curtail it

30th November 2020
Motswana woman

The past week or two has been a mixed grill of briefs in so far as the national employment picture is concerned. BDC just injected a further P64 million in Kromberg & Schubert, the automotive cable manufacturer and exporter, to help keep it afloat in the face of the COVID-19-engendered global economic apocalypse. The financial lifeline, which follows an earlier P36 million way back in 2017, hopefully guarantees the jobs of 2500, maybe for another year or two.

It was also reported that a bulb manufacturing company, which is two years old and is youth-led, is making waves in Selibe Phikwe. Called Bulb Word, it is the only bulb manufacturing operation in Botswana and employs 60 people. The figure is not insignificant in a town that had 5000 jobs offloaded in one fell swoop when BCL closed shop in 2016 under seemingly contrived circumstances, so that as I write, two or three buyers have submitted bids to acquire and exhume it from its stage-managed grave.

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