SARS Revenue Collections

Finance Minister Pravin Gordhan announced the preliminary revenue collection statistics on 31 March 2012.

Some highlights (and comments):

• R742.7bn collected from individuals, corporates and VAT vendors is R4bn more than estimated. Good job on collections, and a good sign that the economy is improving. If taxes are up, so too must be company profits.
• Government spending is estimated R4bn down on budget. This may be good, one thinks, if government is spending wisely. But given the amount of wasteful expenditure as reported by the media, there must be some concern that the amount of effective spending is so reduced, the public are not benefiting from government spend as they should be.
• Tax revenue grew 10.2% year on year. This is a good indication of increased productivity, imports, profitability, and also widening of the tax net. More complying tax payers will surely lift the burden somewhat off the minority honest taxpayers.
• Tax refunds amounted to R164bn - though most of this was VAT refunds (R131bn), the high rate of income tax refunds is a clear indication that tax payers are simply paying too much on provisional payments and estimates. Sure it is great to get some money back, but that money was overpaid to start with - businesses and individuals could have better used that money during the year, rather than giving it to SARS and earning only 4.5% interest on it.

I still say "Good job SARS". Continued improvements in systems and handling of taxpayers has resulted in year on year increases in tax collections. Now somebody just has to improve the efficiency and effectiveness of spending this money for the real benefit of all South Africans!

Pricing Strategies

Here's a few ideas on pricing strategies, while contemplating your marketing strategies at the same time. It is critical to ensure these are both aligned:

• Knowing your maket demand is critical to determining your market price.
• Understanding your competitor's product and pricing is vital to placing your product within the same market.
• Understanding your fixed, variable and marginal costs coupled with estimating your demand curve is necessary in determining an end selling price for your product.
• Price determiniation needs to be aligned to business objectives such as revenue maximisation, profit optimisation, volume targets or price stability.
• Discounting structures must both appeal and be beneficial to end users.
• Product bundling is sometimes only beneficial to a seller. A buyer might not be interested in the extra potato peeler.
• There is no such thing as a free offer. Your customers already know this, and will be looking out for the trap.
• Price is the only marketing element that produces revenue. All other marketing decisions produce costs. That does not mean you should neglect other means of marketing your product though.
• Pricing may reflect your product's strengths and weaknesses. It would imply value as well as positioning.
• Estimating your customers price elasticity (or sensitivity) is practically impossible.
• Your customer's purchasing decisions are complex and influenced by many constantly changing factors. Price is but one of these.

Pravin's Budget 2012-13

Finance Minister Pravin Gordhan delivers his budget speech to parliament (and the nation) on 22 February.

Budgets are normally only prepared by accountants, and even they don't really like doing it. Yet everybody is interested in what the Finance Minister has to say.

We all hope to get some tax relief through bracket adjustments or higher rebates. And we will use this relief to pay for our bad habits of smoking and drinking. In fact, bet your bottom dollar, that electricity and fuel will soon be classified as sins as well, given the rate of levies, taxes and increases being lumped on to these commodities.

And talking of cuts - maybe it is time to relook at salaries of public servants, and reduce those double digit increases a bit. Maybe also reduce those billions of fruitless, wasteful and unauthorised expenses we see from each department and municipality. Cut all that, and you won't need to increase our taxes!

Then there is the spending. How much for healthcare? How much for defence? What about salaries of public servants? Infrastructure spend? And critically - education?

Let's just hope that what ever amount is allocated to each department, this money is spent wisely and appropriately in the right areas. For it is such wise spending that will have a positive impact on our economy (and nation).