OPINION: PAYE is not the employer's money, it's a provisional tax
Tax / 20 September 2018, 3:30pm / Willem Oberholzer
JOHANNESBURG - Our price to live and enjoy the social liberties in our beautiful rainbow nation is PAYE - if you earn a salary or a wage.
Now don't live under the misconception that PAYE is a different kind of tax, it's merely a monthly form of tax collection from employees. It's collected by employers on remuneration and paid over to the SA Revenue Service (Sars).
Sars defines PAYE as “the tax required to be deducted by an employer from an employee's remuneration paid or payable”. (Employees’ tax [Pay-as-you-earn PAYE] - Sars. http://www.sars.gov.za/TaxTypes/PAYE)
So let's say that you earn a salary of R20000 a month (total cost to company salary), for making available your skills to your employer, who in turn has contractually agreed to pay you for these services. Your employer is then compelled to deduct employees' tax to the amount of R2722.20 - not counting Unemployment Insurance Fund (UIF) to the amount of R148.72, et cetera - and pay the deducted taxes over to Sars.
The accumulated total monthly deducted taxes are - on filing your income tax return when you receive your IRP5 - deducted from your Income Tax Liability. So your tax liability is paid in 12 instalments.
Individuals contribute an estimated R480.51billion to the national revenue Budget in the form of PAYE - that is 37.8percent of the total tax collections.
PAYE is a tax collection mechanism for personal income tax when you earn a salary or wage.
Some employers don't pay the PAYE collected from their employees to Caesar as they should.
So, to those employers I ask - are all animals not equal? Or are some animals more equal than others?
Maybe these employers should try and borrow money from their employees as opposed to taking their tax money (PAYE) to fund their companies in these recessionary times. You might be surprised by your employee's reaction.
PAYE is not the employer's money. Is the money your mom gave you to buy bread and milk for the house your money, or your mom's money?
The same principle applies here. PAYE is the provisional tax payment of the salaried employees and cannot be used by employers, like duct tape on a leaking bucket.
Caesar does not have a high tolerance level for employers using PAYE for any other purpose whatsoever.
As to whether the recession is due to our political stability or the lack thereof, politics and or global market forces, employers cannot use PAYE to help smooth their cash flows - it's not your money. What would your employees say if your played open cards with them instead? You may be surprised by what our rainbow nation is willing to do in tough times.
There are times when the abundant rivers of cash dry up. It's not to say it will never rain again, or the rivers will not flow once more. Where PAYE is concerned, it is better asking permission than forgiveness. Your penance for a transgression may get you an orange jumpsuit, and very friendly cell mate - and, no, I'm not alluding to a WhatsApp friend.
Willem Oberholzer, CA SA, MCom (Tax), is an independent non-executive director of Ecsponent.