Environmental, Social and Governance (ESG) versus Friedman Doctrine and the SME
The Friedman doctrine is a theory advanced by economist Milton Friedman which holds that the social responsibility of a business is to increase its profits. This approach views shareholders as the economic engine of the organization and the only group to which the firm is socially responsible. decide such matters for them. The Friedman doctrine has been very influential in the corporate world.
- Shareholders
- Directors
- Employees
- Suppliers
- The environment
While most of us take the view that only large corporates need to take heed and apply these standards, we are all responsible for “doing our bit”.
Extension of the Temporary Reduction in the General Fuel Levy
On 31 March 2022, the Minister of Finance and the Minister of Mineral Resources and Energy jointly announced a temporary reduction in the general fuel levy of R1.50 per litre from Wednesday 6 April 2022 until 31 May 2022 to provide limited short-term relief to households from rising fuel prices following the Russia/Ukraine conflict. The relief was to be funded by a liquidation of a portion of the strategic crude oil reserves.
Since this announcement, the continuation of the Russia/Ukraine conflict, supply chain bottle-necks and a tightening of global monetary policy have led to further unfavourable changes in the two key drivers of the regulated petrol price, the exchange rate and the global oil price. These events have led to even larger increases in fuel prices compared to a few months ago when the temporary fuel levy relief was introduced. The withdrawal of the temporary relief in the general fuel levy would contribute to an increase in petrol prices of close to R4 per litre, and push prices of 95 octane unleaded petrol (ULP) to above R25 per litre, an increase of just under 20 per cent with effect 1 June 2022.
Due to this significant monthly price increase, the Minister of Finance has submitted a letter to the Speaker of the National Assembly, requesting the tabling of a two-month proposal for the extension of the reduction in the general fuel levy. This will take the form of a continuation of the relief of R1.50 per litre for the first month, from 1 June 2022 to 6 July 2022, and then a downward adjustment to the relief for the second month to 75c per litre from 7 July 2022 to 2 August 2022. The temporary relief will be withdrawn from 3 August 2022.
We will keep you informed of developments in this regard.
Trusts
In spite of the ongoing uncertainty about how trusts will be taxed in South Africa in the future, trusts remain a very useful estate planning tool and are widely used for a number of purposes. However, if a trust is not formed or administered correctly, it can create a nightmare that acts against the very reason for forming it in the first place. Anyone thinking of setting up a trust needs not only to make sure that they are creating a valid legal structure, but also to understand the nature of the trust, the duties of trustees, and the rights of beneficiaries.
Some points to consider when setting up a trust:
The most important thing to consider is whether the founder/ donor is willing to relinquish direct control over assets transferred to the trust. If not, the trust may be regarded as a front (sham) and the protection and planning opportunities afforded by trust ownership will be lost. Another important consideration will also be how to get any growth assets from an estate planning point of view into the trust.
Other considerations are:
- Whether the trust fits into the overall estate plan
- The trust should not primarily be used to mitigate paying taxes
- Whether the benefit of the trust justifies the costs and administration involved in keeping
- the trust compliant
- Whether to appoint an independent trustee to ensure the trust is properly administered
- Loans made by individuals and companies to trusts
SARS Reminds Representative Taxpayers of Trusts of Their Duty to Register Trusts for Income Tax Purposes
Trusts are included in the definition of a “person” in terms of the Income Tax Act, 1962 (ITA), and as such the trustees or representative taxpayers have a responsibility to register all trusts for income tax purposes.
Sincerely,
