Experts have shot down proposed taxation on benefits in the so-called 'voyager card' system.
Mention in the Budget that the Tax Advisory Committee (TAC) was looking at "the presence of implicit tax benefits in the so-called 'voyager card' system" has raised minimal concern among tax experts and those involved in developing frequent flyer programmes.
According to a spokesman from the TAC, this matter has been on the agenda for over a year.
Last week First National Bank announced it had launched an incentive programme with Sun Air - AIRewards.
The programme competes with SAA's frequent flyer programme, Voyager, which is currently believed to have about 450 000 members, 350 000 of whom are locally-based.
Frequent flyer programmes enable those who spend a certain amount on credit cards from a few banks; hire cars from particular rental companies; stay at certain hotels; or fly on selected airlines, to build up "miles". Once a set number of miles has been attained, the programme member qualifies for benefits which, at tops, can be free tickets to fly overseas.
Peter Langschmidt, project leader for AIRewards, says there are no tax implications to the programme at present but he recognises that tax might be imposed at some time in the future. However, if frequent flyer programme benefits became taxable, he doubts whether it would dampen enthusiasm for the products.
"These rewards don't cost the members a cent. Even if they have to pay R200 in tax, they are still receiving benefits worth several thousand rand. I believe just as many people would be attracted to the programme, even if it did become taxable," Langschmidt says.
Ernest Mazansky, tax partner at Kessel Feinstein, suggests SA Revenue Services is facing far more pressing issues than taxing frequent flyer programmes.
Such a tax would be quite administratively burdensome and it was doubtful whether it could yield enough to justify the work involved in policing it.
Another tax expert said there are numerous problems in taxing frequent flyer programmes, including the difficulty in placing a taxable value on the benefit.
The free tickets or holidays may cost the participating airlines nothing because they are taken outside peak times, while some companies who take over the air miles accumulated by their employees sometimes donate the resulting free tickets to sporting teams.
Attempts in other countries to tax frequent flyer programme benefits have apparently not met with unqualified success.
According to the May/June issue of InsideFlyer International, a magazine devoted to frequent flyer programmes, the US and UK governments do impose a tax on these benefits but the onus is on travellers to declare their free flights. On the whole, travellers do not declare these flights and the government tends to look the other way.
Sweden has just introduced a tax on frequent flyer programmes, also putting the onus on travellers to declare free flights, or, if the traveller's employer paid for the tickets, travellers must inform their companies that they are using the points for free flights and the companies must inform the tax authorities, although the tax still falls on the employee.
In Australia, a Federal Court last year over-ruled the tax authorities' attempt to tax a member of a frequent flyer programme.
The court ruled that the frequent flyer points in this case were not taxable benefits because they were won as a result of entitlement under the Qantas Frequent Flyer Programme, not as a result of the member's employment.