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Submission of comments on the draft amendments to schedule no. 6 relating to diesel refunds

25 April 2013   (0 Comments)
Posted by: Author: Sharon Smulders
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Source: Prof. Sharon Smulders

SAIT submitted comments on the Draft Amendments To Schedule No. 6 Relating To Diesel Refunds that make provision for:

1. The insertion of Note 5A to make retrospective allowance for supplementary information that farming diesel refund beneficiaries may present in the absence of logbooks to support refund claims for the period 1 April 2011 to 31 March 2013, and
2. the amendment of Part 3 of Schedule No. 6 - Deletion of Note 5A and insertion of Note 6(a)(xi) to define the logbook record requirements expected from all diesel refund beneficiaries to substantiate diesel refund claims.

The comments were as follow:

1. Insertion of Note 5A: Retrospective allowance for provision of supplementary information in the absence of logbooks to support refund claims from 1 April 2011 to 31 March 2013. 

1.1 Concern regarding period of the retrospective allowance

Problem statement: 

Although the retrospective allowance for supplementary information being allowed to be presented in the absence of a logbook is sincerely welcomed, it is not sure why this allowance is only in place from 1 April 2011. Some farmers have been assessed/audited for periods prior to this and they will thus be unable to use the concession mentioned above.

Proposed solution / recommendation: 

We suggest that this concession be made effective from the date the diesel refund was instituted (or latest 2010 year of assessment) and it should be effective until 30 April 2013 (considering that comments on this proposed change are only due by 19 April 2013).

1.2 Retrospective allowance applied at the discretion of the Commissioner 

Problem statement: 

The retrospective allowance for supplementary information being allowed to be presented in the absence of a logbook will be applied at the discretion of the Commissioner. This discretion is usually exercised by the SARS official performing the audit. Different officials might interpret certain situations/information in different ways than others.

Proposed solution / recommendation:

More clarity on how this discretion is to be exercised should be provided so that the practical implications of this discretion can be clearly understood by all parties concerned. 

2. Deletion of Note 5A and insertion of Note 6(a)(xi): Defining logbook record requirements to support refund claims from 1 April 2013.     

2.1 Deletion of Note 5A 

Problem statement: 

The allowance for supplementary information being allowed to be presented in the absence of a logbook is no longer applicable from 1 April 2013.

Proposed solution / recommendation: 

We suggest that this concession be made available permanently as an alternative to logbooks. Reasons for this are mainly due to the problems encountered with keeping a logbook (see below).

2.2 Insertion of Note 6(a)(xi) – keeping of logbooks

Problem statement: 

Complying with the logbook requirements set out in Note 6(a)(xi) from 1 April 2013 will be time-consuming and costly for farmers who are already subject to economic hardships. Over and above the economic hardships, farmers have to work under very severe conditions – rain, dust, mud, darkness (when working at night), lack of accurate meters on equipment (diesel tanks without gauges and tractors/implements without hour gauges), vast distances etc. Furthermore, the farm workers operating the farm vehicles are mostly illiterate making the task of keeping a written detailed logbook extremely difficult (if not impossible).

Proposed solution / recommendation: 

Although we appreciate the concern of SARS with regard to the refund claims, the logbook requirements are not practical and will place an excessive burden on farmers. We therefore suggest that the concession allowing alternative methods of proving the refund be allowed for all future refund claims. 

Alternatives to keeping the logbooks could be the requirement to install a well-known GPS device on farming vehicles/equipment. The GPS could provide a "printout” of the places that the vehicles/equipment were used (including the diesel storage facility).An investigation into the cost-effectiveness of this option should be done, however, there is a view that using this method would almost certainly be more beneficial from a cost perspective than complying with the logbook requirements proposed.

2.3 Insertion of Note 6(a)(xi) – logbook details

Problem statement: 

The requirements contained in the Diesel Storage Logbook and Diesel Usage Logbook are too onerous. Furthermore, neither the logbooks nor the audit provisions specifically cater for the evaporation of fuel. This is important as some of the fuel dispensers on a farm are not calibrated.

Proposed solution / recommendation: 

Should completion of the logbooks be possible, we suggest that the following be the minimum requirements needed to comply with the legislation: 

  • Diesel Storage Logbook – one logbook per main distribution tank 
  • Diesel Usage Logbook – 
    • Farm vehicles: date of use, amount of diesel dispensed, reason for use.
    • Trucks and SUVs: date of use, opening and closing kilometres, reason for use.  

Monthly, rather than daily, usage of distillate fuel should be permissible as this would still indicate any sudden deviations from the prior month. Auditors should also take cognizance of possible error variances that may arise due to fuel evaporation if not specifically recorded on the logbook. 

Consideration could perhaps be given to providing that should a logbook be maintained, then the full refund is payable (as opposed to the current 80%). The absence of a logbook would then automatically result in allowing only 80% of the refund claim.

Overall, there is consensus that the rebated needs to be regulated, but the proposed regulation is not practical. We therefore suggest that before the legislation is finalized, the above recommendations be "tested” on a few farms (of various sizes) to establish their feasibility or to come up with possible alternatives. 


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