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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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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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