A panic attack swamped my family when I made age 20. The surviving old-folks demanded and pressed for their grandsons from all the young men in my age range. They said they were concerned about the "Karegyesa dynasty" originally from Butare. The folks and their ancestors had predetermined continuity through the boy child. (These beliefs are changing though).
I also know of several powerful kingdoms within the region that have sighed in relief when certain boys were born. These kingdoms' continuity had for decades been perceived to be threatened because they had not yet gotten children meeting certain qualifications
The concern in both was one thing; sustainability. Just like dynasties that have predetermined credentials for assured continuity, there are certain things that must happen in a certain way in order to see business entity sustainability into the future and sometimes into perpetuity
Several scholars on organizational financial sustainability have emphasized certain pillars for business continuity; Strategic Financial Planning, Income Generation, Diversification and Sensible Internal Control. They suggest that if a company focuses and gets those four right then it will be sustainable in the foreseeable future
I seem to agree with the good scholars but not entirely. For taxation to be seated within the Strategic Financial Planning Pillar is to deny it the ever increasing prominence and sensitivity it should exhibit. One of the gravest mistakes that our businesses commit is to regard taxation as one and the same with accounting and finance. Of course this is not true as accounting profits have got to be adjusted to come up to a taxable number. Making these adjustments may not be easy for someone whose focus is the routine work within the finance department
Tax legislation is also so dynamic, for example consistent loss makers may commence paying income tax after a certain number of years according to new proposals. Speaking into the VAT space, there are items that used to be zero rated some years back but are now exempt or taxed at a standard rate. The withholding tax rates are different in different circumstances and in different years. What is allowable to relieve profits from tax is also not static and no longer straight forward; let us look at the regulations coming up in the new financial year relating to borrowing costs where only certain amounts in certain circumstances will be allowable. It is clear somebody has got to keep an eye on all these changes
Anyone who has seen the recent tax proposals that I think will soon become law will agree that entities are becoming more responsible for persons they are paying, for instance the proposed requirements placed on entities to withhold 50% of VAT on the face of an invoice that meets certain criteria mean that the companies must also ensure that their suppliers comply and are registered when they need to. Since this VAT will also have a withholding tax hat, someone must ensure compliance with both VAT and withholding tax requirements
There are a number of organizations that have shut down simply because they did not regard taxation as an important pillar of their businesses; some even if were NGOs carrying-out exempt activities, they had not obtained definite exemption as required and some were not aware of their obligations to file annual income tax returns despite the exemption. Some organizations had unknowingly exceeded the VAT registration threshold and continued to do business as usual without collecting VAT on sales. There are cases where huge amounts in capital gains tax had not been considered at the point when assets were being disposed of. Most of these were cases of ignorance that resulted into tax liabilities in billions of shillings that led to a shut down
Despite enacting regulations, most of our people continue to regard Transfer Pricing as a foreign thing and only a preserve for large multinationals. I think most of our medium and large enterprises have and deal with associated entities. There are a lot of documentation requirements to prove that the pricing when dealing with associates would be the same had the transaction occurred with outsiders. The process of comparison and benchmarking to come up with a transfer pricing report and all the necessary documentation as required, needs technical competence that may not readily be available within the business entity. This area is also evolving, for example recent guidelines require compilation of a country by country report
I strongly feel that today's organisation needs to start entertaining the idea of having a tax department not as a "by-the-way" within the finance department or explore outsourcing the function to competent tax practitioners. The call is for the business but one thing is for sure, taxation has got to be given much more extra attention from now on.
I would want us to conclude today's discussion by agreeing that we amend the previous scholars' sustainability model to include a 5th Pillar; Tax and Legal.
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