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Long service awards are taxable

JONATHAN HORE

Most employers reward their employees for serving them for long periods and these arrangements differ from employer to employer. The basic principle of such awards is that they are meant to appreciate the dedication and loyalty that the employee would have shown to the employer. Such loyalty, as expected, may trigger some monetary or non-monetary reward from the employer. The issue that then arises is whether or not these awards should be subject to PAYE. This is the issue I will address in today’s article. In this article, words importing the masculine shall be deemed to include the feminine.
 
THE REMUNERATION CONCEPT

The Income Tax Act brings to tax all forms of remuneration, whether they be monetary or non-monetary. Monetary rewards include salaries, allowances and other forms of payments made in cash. Non-monetary rewards include anything which an employee enjoys but without necessarily getting cash from the employer. Technically, this is what the said Act refers to as, ‘the value of any other benefit or advantage granted to an employee in respect of his or her employment.’ To simplify this concept, anything that makes the employee better-off or enjoy a facility which they could not have enjoyed had they not been employed by their employer is an advantage or a benefit subject to PAYE. We sometimes refer to these as ‘free benefits,’ ‘advantages,’ ‘fringe benefits’ or ‘benefits in kind.’

LONG SERVICE AWARDS

Having established above that both free benefits and monetary rewards are taxable, it is now time to focus attention on the forms that long service awards take. What we must be clear on is the fact that the long service awards are inseparable from the rendering of a service and their payment has its roots from the fact that the employee worked for the employer. Therefore, that should remove any doubts whether or not such amounts are subject to tax. It’s a given that they are subject to PAYE.

Below are some of the forms which these long service awards may take:

Monetary payments: Some employers make monetary payments to employees as long service awards and such monetary payments are subject to PAYE. As stated above, this is a monetary reward given by the employer and it stems from the fact that the employee served the employer for long periods, hence the reward. In essence, if there was no employment relationship, the employee would not receive such payments. As a consequence, the reward received is subject to PAYE.

Holidays: Some employers choose not to grant cash benefits but some sort of advantage in the form of a holiday or any other such advantage. Such holiday is provided to the employee, just like any other employee, as a reward for the long service is therefore a non-monetary reward or simply, a free benefit which is taxable. The amount subject to tax is the total value of the holiday, which would include air flights, accommodation, food, leisure facilities etc. In simple, the employer brings to tax the full amount spent on such holiday.

Vouchers: Some employers give vouchers to employees, which may be redeemed at different service stations. Such vouchers are a free benefit which gives the employee the right to enjoy goods or services provided by an employer and are by default, taxable. Assets: There is nothing which stops an employer from giving away an asset to an employee in recognition of long service.

Such assets could be shares in a company, immovable property or movable property. Again, those assets do have a monetary value that can be attached to them and as such, PAYE is deductible from the employees. If an employer gives away a car for example, they should obtain the open market value of the car from a car dealer and bring the benefit to PAYE.

Tokens of appreciation: Where an employer rewards employees with things such as certificates or trophies which do not have a commercial value, then there is no PAYE to talk about. Those tokens of appreciation are neither monetary nor non-monetary rewards, hence we can’t talk of PAYE.

CONCLUSION

As you may well know, the liability to deduct PAYE falls on the employer and so do any consequences of non-deduction of the tax. Whilst these payments are sometimes sporadic, the correct tax treatment must be accorded on the rewards to ensure that employers are compliant with their tax obligations.

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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