Companies can claim for most of the costs incurred to alleviate the ongoing power cuts; so should consumers.
The increasing intensity of load-shedding has battered the budgets of most businesses in SA. However, they are not the only ones feeling the pinch. People are also under considerable strain due to the increased expenditure required to accommodate the blackouts, not to mention the greater threat to their personal security. They are paying for gas stoves, solar panels, generators, UPS devices, batteries, candles, and takeaway meals.
The present circumstances only worsen already depressed household income, and also raises the question whether there are any tax relief measures available. And, if not, whether there are any tax mitigation measures that government can implement to cushion the hammer blow.
Companies are able to claim for most of the costs incurred to alleviate load-shedding when submitting their tax returns to Sars since they are expenses incurred in the operation of a business. These expenses can range from the purchase and running costs of generators and solar panels bought to keep machinery operational, UPS devices to ensure that employees are able to work, surge protection devices to ensure that electrical circuits and/or appliances do not get damaged, water heaters, and battery-powered LED lighting and smart LED lights.
Why are individual taxpayers not yet able to claim similar deductions or tax credits for the money they spend on the same equipment? In fact, the concept is provided for in the Income Tax Act, which offers a “medical scheme fees tax credit” — a deduction that applies to payments to a registered medical aid scheme. While South Africans are forking out large amounts of money for private medical care in the absence of quality public health care, the small positive aspect is that annual tax deduction. Similarly, SARS allows taxpayers who receive a travel allowance to claim for the use of their private vehicles for business purposes.
Similar measures should be adopted in respect of the current power crisis. The National Treasury could implement legislation and processes to alleviate the burden on taxpayers and subsidise them for the financial inconvenience caused by the blackouts. The government has previously demonstrated its capabilities when faced with a crisis. During the Covid pandemic legislation was quickly amended in response. We were declared to be in a national state of disaster under the Disaster Management Act within 10 days from the date of confirmation of the first Covid-19 case in SA, and the government published amendments that were to be adhered to for the duration of the pandemic.
Perhaps it is time for the SA government to acknowledge that these unprecedented blackouts and the associated inconvenience and cost constitute another state of disaster? Where is the relief extended during the Covid-19 pandemic? Taxpayers desperately need help.
Measures could include efforts to assist taxpayers who are in arrears to settle their tax-related debts, implementing a load-shedding tax credit to allow for associated expenses to be claimed, and publishing a list of “essential load-shedding items” that would include all those required by a household to operate as if there were an uninterrupted power supply.
Taxpayers would then be entitled to a tax credit on all such items until load-shedding ends. Obviously, taxpayers would be required to keep accurate records and evidence of these expenses as supporting documentation. The costs incurred in buying these essential would qualify as deductible expenses and taxpayers would be provided with refunds or credits, similar to the travel allowance deductions.
The National Treasury could also introduce a monthly tax subsidy for all employees earning less than a set minimum. This subsidy could be provided through a pay-as-you-earn credit system. When a taxpayer is owed a refund, Sars could allow for earlier submission of tax returns, thus speeding up paying refunds.
The blackouts are evidence that taxpayers aren’t getting value for the money they pay the state. The least the government can do is implement some form of tax relief to ease an already considerable burden.
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