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Supply-chain managers advised to grasp indirect tax

18 June 2012   (0 Comments)
Posted by: SAIT Technical
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By Amanda Visser (Business Day)

A CRUCIAL factor in efficient supply-chain management was the ability of a company to identify and quantify the indirect taxes it paid and incentives it received, but many companies were incapable of doing this, Ernst & Young trade adviser and director Christina Horckmans said last week.

Those that did not ran serious tax and compliance risks when changes were made to the supply chain, she said.

Indirect tax considerations were still not at the forefront when companies had to decide on how to achieve more efficient supply chains, though they should be, said Ms Horckmans. Whatever changes a company made to its business model in terms of the movement of tangible goods affected their indirect tax burden, indirect tax compliance and indirect tax complexity, she said.

Indirect taxes such as value added tax (VAT), green taxes, health taxes and customs and excise, were directly related to every transaction completed in the domestic and international market. This meant that introducing one extra transaction in a supply-chain company could double its transactions costs, and double the risk and the possibility of income leakage — income that is not passed on.

There had been several changes in indirect taxes in recent years, she said.

"In developed countries, governments are introducing more and more new taxes. Green taxes, taxes to protect consumers or taxes trying to change behaviour (sin taxes) are used to increase revenue streams. They are even introducing ‘snack taxes', linked to the sugar level of certain food products,” she said.

Ernst & Young tax director Charl Niemand said in SA the Motor Industry Development Programme was a good example of where an incentive played an important part in the decision-making process of manufacturers to have their production plants in SA.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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