Fringe benefits tax on HIV/AIDS disease management of employees in the world of work

Bokelman, Elizabeth Johanna (2005-04)

Thesis (MPhil)--Stellenbosch University, 2005.

Thesis

ENGLISH ABSTRACT: HIV-positive employees that receive treatment for HIV/AIDS by having their employers pay for the treatment are being taxed on their lifesaving HIV benefits paid by their employer. This comes after the Commissioner of Inland Revenue (CIR) or South African Revenue Service (SARS) identified the provision of treatment by employers as a “fringe benefit” in terms of paragraphs 2(e), 2(h) and 2(i) of the Seventh Schedule to the Income Tax Act1 and as such is taxable if the treatment is given from the work place. The treatment contribution is included in an employee’s remuneration package as a fringe benefit. Pay-as-you-earn (PAYE) and other assessed taxes are calculated from that. The taxable benefit is included on the employees’ annual IRP5 certificates. In order for the employer’s Human Resources department to affect this on the IRP 5 certificates the affected employee has to disclose his HIV/AIDS status and accordingly pay the PAYE on the fringe benefit. In terms of paragraph 2(e) of the Seventh Schedule to the Income Tax Act No. 58 of 1962, any service rendered at the expense of the employer to the employee, whether by the employer or by some other person, which has been utilised by the employee for private or domestic use, such value of the service must be included in the employee’s consideration for remuneration. Paragraph 2(h)2 taxes the employees on debts paid by the employer on behalf of the employees and paragraph 2(i)3 taxes a one third contribution benefit back in the hand of an employee for contributions to medical aids. If the employee were to receive chronic medication from a medical aid for HIV/AIDS treatment this will be included in the fringe benefit tax as a medical contribution.The Employment Equity Act No. 55 of 19984 promotes the elimination of unfair discrimination in the work place and ensures the implementation of Employment Equity to redress the effects of discrimination. Above all it also promotes the constitutional right to equality. In terms of confidentiality of the employees HIV/AIDS status; the Income Tax Act No. 58 of 1962 (Income Tax Act)5 as interpreted seems to be in conflict with the Employment Equity Act No. 55 of 1998. A solution therefore has to be sought where: - The anonymity of an employee in terms of his/her HIV/AIDS status is protected as envisaged by the Employment Equity Act6. - It is also necessary to understand whether there is in fact conflict between the Income Tax Act7 and the Employment Equity Act8. - It is also necessary to establish whether there are any misconceptions in the interpretation of the legislation and - Try to find the best possible solution to minimise the impact of Income Tax and yet protect the confidentiality of the employees concerned.

AFRIKAANSE OPSOMMING: MIV-positiewe werknemers wat behandeling vir MIV/VIGS ontvang by hul werkgewers word belas op hul lewensreddende MIV voordele wat deur hul werkgewers betaal word. Hierdie word bepaal nadat die Kommisaris van Binnelandse Inkomste (KBI) of die Suid- Afrikaanse Belastingsdiens (SAB) die voorsiening van behandeling deur werkgewers ag as ‘n belastingbyvoordeel in terme van paragrawe 2(e), 2(h) en 2(i) van die Sewende Skedule van die Inkomste belastingwet9 indien die diens gelewer word buite die werksplek. Die bydrae tot behandeling word ingesluit in die werknemer se vergoedingspakket as ‘n belasbare byvoordeel. Werknemersbelasting of LBS en ander aangeslaande belastings word hiervandaan bereken. Die byvoordeel word op die werknemer se IRP5 sertifikaat aangedui. Om hierdie aan te dui op die IRP5 sertifikaat van die geaffekteerde werknemer moet die werknemer se MIV status aan die werkgewer se Menslike Hulpbron departement bekend wees om die nodige byvoordeel te bereken. In terme van paragraaf 2(e)10 van die Sewende Skedule van die Inkomste Belastingwet nr. 58 van 1962, word enige diens gelewer deur die werkgewer namens die werknemer, of deur die werkgewer of deur sekere ander persone, wat gebruik word deur die werknemer vir privaat en huishoudelike gebruik geag as vergoeding te wees en die diens moet ingesluit wees in die vergoedingspakket. Paragraaf 2(h)11 belas die werknemers op skuld betaal namens die werknemer deur die werkgewer en paragraaf 2(i)12 belas een derde van die bydrae terug in die hand van die werknemer vir bydraes betaal deur die werkgewer aan mediese fondse. Indien die werknemer kroniese medikasie ontvang van die mediese fonds vir MIV/VIGS behandeling sal dié belas word as ‘n belasbare byvoordeel. Die Gelyke Indiensnemingwet nr 55 van 199813 bevorder die eliminasie van ongeregmatige diskriminasie in die werksplek en verseker dat die implementasie van die wetgewing die impak van diskrimasie reg aanspreek. Die wetgewing bevorder die konstitisionele reg tot gelykheid. In terme van die vertroulikheid van die MIV/VIGS status van werknemers bleik die Inkomstebelastingwet in konflik te wees met die Gelyke Indiensnemingswetgewing. ‘n Oplossing moet dus gevind word, waar: - Die anonimiteit van die werknemers in terme van hul MIV/VIGS status beskerm word soos veronderstel word in die Indiensnemingsekwiteitswetgewing - Dit is ook nodig om te verstaan of daar inderdaad konflik is tussen die onderskeie wetgewings, naamlik die Inkomstebelastingwet en die Indiensnemingsekwiteitswetgewing. - Dit is ook belangrik om te bepaal of daar enige miskonspesies in die interpretasie van die wetgewing is en - Om te probeer om die bes moontlike oplossing te vind om die impak van Inkomstebelasting te verminder en terselfdertyd die konfidensialiteit van die werknemers te verseker.

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