Some employers have arrangements where they provide their employees with free or subsidised meals. Such arrangements may be done for various reasons such as considering the remoteness of the workstation especially for some mines or improvement of staff welfare.
I want to show you that such meal arrangements may result in PAYE in the hands of the employees. These meals are taxed as free benefits as there is no cash involved but the employees enjoy a benefit. For the avoidance of doubt, the tax we will discuss today is PAYE or employees’ tax as the benefit arises from an employer-employee arrangement. In this article, words importing the masculine shall be deemed to include the feminine.
The Income Tax Act brings to tax any employer-provided free benefits enjoyed by employees. The tax is payable by the employees but is supposed to be deducted by the employer. For the record, whenever an employee enjoys an ‘advantage’ or ‘free benefit’ from a facility provided by an employer, that employee is potentially taxable. I must also state that free benefits are non-monetary items availed to employees which result in the employees enjoying an advantage that they would not otherwise enjoy had it not been availed by the employer. It is critical to reiterate that there is always no money which is directly paid to employees when a benefit arises. The employee however enjoys an advantage over any other employee who does not get to enjoy that facility, which is the reason why PAYE arises.
MEAL BENEFIT TAXABLE
Before I continue with taxation of meal benefits, I must state that a ‘meal allowance’ is not, by a BURS’ concession, taxable. Such ‘allowances’ are usually provided to employees when they are out of town or their workstation. What must be clear is that a ‘meal allowance’ is a monetary payment that is given to an employee for them to have a meal whilst a ‘meal benefit’ is not money but an arrangement where an employee gets to have a meal provided by an employer. Therefore, these two are different, albeit close to each other.
Below are some of the arrangements where meal benefits are taxable:
Free meals: An employee is taxable when the employer provides him with a free meal. The benefit taxable in the hands of the employee is equivalent to the market value of such a meal. In other words, the employee is taxed using the value of the meal that would otherwise be charged if such meal was to be provided to a third party. The benefit arising from the meal benefit is added to that employee’s salary and then tax is applied.
Subsidised meals: It may also happen that employers provide employees with meals but at subsidized prices. For example, if a meal costs P40 and employees are allowed to pay P15 per that meal, then the benefit will be P25 per meal for each employee who enjoys that meal. Meal vouchers: Sometimes, employers provide their employees with meal vouchers which they redeem by getting meals and such meals are taxable. The fact that the employee enjoys the meal provided by the employer makes the benefit taxable. I must point out that it does not matter whether the meal vouchers are redeemed at the employer’s facilities or at third party’s facilities; PAYE still arises.
The biggest challenge with this benefit is the implementation part as it is not always easy to determine who had a meal and when. However, the truth of the matter is that if employers want to monitor the benefit enjoyed, they certainly can. It will be administratively burdensome but not something that cannot be done. The other issue to note is that non-deduction of the tax makes employers personally liable for the PAYE, before a possible 200% penalty that BURS may charge.
Where employers intend to avoid passing the tax to employees, they may consider grossing-up the benefit, essentially bearing the tax themselves. However, it must be noted that grossing-up may even make compliance with this tax more complex than just subjecting the benefit to tax. Lastly, I must reiterate, as stated above, that meal benefits enjoyed by employees when they are out of office are not taxable.
The reason for that exception is that the benefit is enjoyed in advancing the employer’s business. The taxable benefits stated above are ones that arise when employees are, in most cases, at their normal workstations. 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 email@example.com or 7181 5836. This article is of a general nature and is not meant to address particular matters of any person.
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.
Youngest Maccabees scion Jonathan takes over after Judas and leads for 18 years
Going hand-in-glove with the politics at play in Judea in the countdown to the AD era, General Atiku, was the contention for the priesthood. You will be aware, General, that politics and religion among the Jews interlocked. If there wasn’t a formal and sovereign Jewish King, there of necessity had to be a High Priest at any given point in time.
Initially, every High Priest was from the tribe of Levi as per the stipulation of the Torah. At some stage, however, colonisers of Judah imposed their own hand-picked High Priests who were not ethnic Levites. One such High Priest was Menelaus of the tribe of Benjamin.
Parliament has rejected a motion by Leader of Opposition (LOO) calling for the reversing of the recent appointments of ruling party activists to various Land Boards across the country. The motion also called for the appointment of young and qualified Batswana with tertiary education qualifications.
The ruling party could not allow that motion to be adopted for many reasons discussed below. Why did the LOO table this motion? Why was it negated? Why are Land Boards so important that a ruling party felt compelled to deploy its functionaries to the leadership and membership positions?
Prior to the motion, there was a LOO parliamentary question on these appointments. The Speaker threw a spanner in the works by ruling that availing a list of applicants to determine who qualified and who didn’t would violate the rights of those citizens. This has completely obliterated oversight attempts by Parliament on the matter.
How can parliament ascertain the veracity of the claim without the names of applicants? The opposition seeks to challenge this decision in court. It would also be difficult in the future for Ministers and government officials to obey instructions by investigative Parliamentary Committees to summon evidence which include list of persons. It would be a bad precedent if the decision is not reviewed and set aside by the Business Advisory Committee or a Court of law.
Prior to independence, Dikgosi allocated land for residential and agricultural purposes. At independence, land tenures in Botswana became freehold, state land and tribal land. Before 1968, tribal land, which is land belonging to different tribes, dating back to pre-independence, was allocated and administered by Dikgosi under Customary Law. Dikgosi are currently merely ‘land overseers’, a responsibility that can be delegated. Land overseers assist the Land Boards by confirming the vacancy or availability for occupation of land applied for.
Post-independence, the country was managed through modern law and customary law, a system developed during colonialism. Land was allocated for agricultural purposes such as ploughing and grazing and most importantly for residential use. Over time some land was allocated for commercial purpose. In terms of the law, sinking of boreholes and development of wells was permitted and farmers had some rights over such developed water resources.
Land Boards were established under Section 3 of the Tribal Land Act of 1968 with the intention to improve tribal land administration. Whilst the law was enacted in 1968, Land Boards started operating around 1970 under the Ministry of Local Government and Lands which was renamed Ministry of Lands and Housing (MLH) in 1999. These statutory bodies were a mechanism to also prune the powers of Dikgosi over tribal land. Currently, land issues fall under the Ministry of Land Management, Water and Sanitation Services.
There are 12 Main Land Boards, namely Ngwato, Kgatleng, Tlokweng, Tati, Chobe, Tawana, Malete, Rolong, Ghanzi, Kgalagadi, Kweneng and Ngwaketse Land Boards. The Tribal Land Act of 1968 as amended in 1994 provides that the Land Boards have the powers to rescind the grant of any rights to use any land, impose restrictions on land usage and facilitate any transfer or change of use of land.
Some land administration powers have been decentralized to sub land boards. The devolved powers include inter alia common law and customary law water rights and land applications, mining, evictions and dispute resolution. However, decisions can be appealed to the land board or to the Minister who is at the apex.
So, land boards are very powerful entities in the country’s local government system. Membership to these institutions is important not only because of monetary benefits of allowances but also the power of these bodies. in terms of the law, candidates for appointment to Land Boards or Subs should be residents of the tribal areas where appointments are sought, be holders of at least Junior Certificate and not actively involved in politics. The LOO contended that ruling party activists have been appointed in the recent appointments.
He argued that worse, some had no minimum qualifications required by the law and that some are not inhabitants of the tribal or sub tribal areas where they have been appointed. It was also pointed that some people appointed are septuagenarians and that younger qualified Batswana with degrees have been rejected.
Other arguments raised by the opposition in general were that the development was not unusual. That the ruling party is used to politically motivated appointments in parastatals, civil service, diplomatic missions, specially elected councilors and Members of Parliament (MPs), Bogosi and Land Boards. Usually these positions are distributed as patronage to activists in return for their support and loyalty to the political leadership and the party.
The ruling party contended that when the Minister or the Ministry intervened and ultimately appointed the Land Boards Chairpersons, Deputies and members , he didn’t have information, as this was not information required in the application, on who was politically active and for that reason he could not have known who to not appoint on that basis. They also argued that opposition activists have been appointed to positions in the government.
The counter argument was that there was a reason for the legal requirement of exclusion of political activists and that the government ought to have mechanisms to detect those. The whole argument of “‘we didn’t know who was politically active” was frivolous. The fact is that ruling party activists have been appointed. The opposition also argued that erstwhile activists from their ranks have been recruited through positions and that a few who are serving in public offices have either been bought or hold insignificant positions which they qualified for anyway.
Whilst people should not be excluded from public positions because of their political activism, the ruling party cannot hide the fact that they have used public positions to reward activists. Exclusion of political activists may be a violation of fundamental human or constitutional rights. But, the packing of Land Boards with the ruling party activists is clear political corruption. It seeks to sow divisions in communities and administer land in a politically biased manner.
It should be expected that the ruling party officials applying for land or change of land usage etcetera will be greatly assisted. Since land is wealth, the ruling party seeks to secure resources for its members and leaders. The appointments served to reward 2019 election primary and general elections losers and other activists who have shown loyalty to the leadership and the party.
Running a country like this has divided it in a way that may be difficult to undo. The next government may decide to reset the whole system by replacing many of government agencies leadership and management in a way that is political. In fact, it would be compelled to do so to cleanse the system.
The opposition is also pondering on approaching the courts for review of the decision to appoint party functionaries and the general violation of clearly stated terms of reference. If this can be established with evidence, the courts can set aside the decision on the basis that unqualified people have been appointed.
The political activism aspect may also not be difficult to prove as some of these people are known activists who are in party structures, at least at the time of appointment, and some were recently candidates. There is a needed for civil society organizations such as trade unions and political parties to fight some of these decisions through peaceful protests and courts.