Not being taxed on that spare change someone gave you after you served their table – basically the reward you get for working in the service industry.

But that could all change soon.

It is suspected that to equate people who earn the same amount, but in different forms such as voluntary incomes likes tips, Minister of Finance Pravin Gordhan will announce that waiters and others alike will soon be taxed as well.

Yup.

This according to BusinessTech, who spoke to Patricia Williams, a tax partner at a law firm, who noted that “to promote equality and broaden the tax base more equitably, a new law may be introduced to deem all voluntary or other payments paid by customers for services rendered, as paid by the employer.”

Deep. I wonder if Williams has ever held down a job in the service industry?

In this way, “employee tax would be payable in the same manner as for other equivalent income earners,” Williams said. She continued:

One of the fundamental constitutional values is equality. However, technicalities of our tax system sometimes do not promote equality among people in similar circumstances.

For example, Williams noted that anyone earning over R6 250 a month (or R75 000 a year) is subject to employees’ tax – and some waiters earn a lot more than that.

But, because their wages and tips are paid to them in two different formats, the tips aren’t recorded by the establishment and so the waiter gets off scot-free.

You know how it is.

Williams continues her argument:

Waiters should be paying income tax on these amounts, but because ‘tips’ are paid by the restaurant’s customers and not the restaurant itself, the waiters are supposed to submit an income tax return and declare and pay the relevant taxes themselves, instead of having employees’ tax deducted as the amounts are earned.

Practically, these taxes are lost to the fiscus.

From restaurants’ point of view, however, they have always argued that it’s very difficult for them to know how much waiters receive in tips – but Williams disagrees with this:

This might have been the case when most bills were paid in cash, but these days by far most restaurant bills are paid via credit card, or other forms of electronic transfer of funds. This should enable restaurateurs to determine amounts received by waiters much more accurately.

With a small amount of extra effort, even cash receipts could be included in the reporting of tips.

Now, in the service industry each restaurant has its own way of dealing with its staff. From those restaurants which require you to submit police clearances, to those who don’t even care if you are allowed to work in South Africa, it’s going to be quite a procedure to make sure everyone abides by one law when others aren’t even considered.

But that’s just me.

If the law does come into place, and you find yourself completely lost over how and where to pay your taxes, take charge and employ your own tax people at Galbraith | Rushby and they’ll sort you out in no time.

After all, they are our first choice when it comes to tax advisory and compliance and should be yours, too.

[source:businesstech]