Pay as little tax as possible in South Africa
Renowned economist Dawie Roodt advised South Africans to pay as little tax as possible, as long as it does not break the law.
Roodt shared his comments during a question-and-answer session at the recent Biznews Conference in Hermanus.
He told delegates that technological changes, which include developments like Bitcoin, have changed the financial landscape.
The impact of foreign exchange controls, for example, is limited as people can move money globally through cryptocurrencies like Bitcoin.
He shared a message of hope, where he is confident that South Africans will fix the problems the country is currently experiencing.
However, while there is light at the end of the tunnel, Roodt said the current government continues to overspend and hurt the economy.
South Africans can fight back by paying as little tax as possible. He said the only way to stop local politicians from overspending is to give them less money.
“I encourage people not to break any laws but to make use of every possible loophole to pay as little tax as possible in South Africa,” he previously explained.
“One rand in your pocket is worth much more than one rand in the pocket of the civil servants,” Roodt previously told delegates at the Tax Indaba.
However, he warned against a tax revolt or stopping to pay taxes altogether, as it would have severe consequences for the country.
“Once people stop paying taxes, including municipal levies, getting them to start paying taxes again – even under a new government – is difficult,” he said.
He also highlighted that South Africans are overtaxed, which means that the government does not have the luxury to increase taxes.
Roodt explained that the country has a highly concentrated tax base, with a small number of companies and individuals paying most corporate and personal income tax.
How to pay as little tax as possible in South Africa
Nicci Courtney-Clark, head of Tax at TaxTim and Bronwen Trower, co-portfolio manager at Investec Wealth & Investments, said there are many ways people can pay less tax.
The first is a tax-free savings account (TFSA) that allows individuals to save without paying tax on their investments.
You can deposit up to R36,000 per year, with a lifetime contribution limit of R500,000. If you deposit the maximum every year, it will take about 14 years to reach the lifetime limit.
Retirement savings are another way to maximise tax-free income. These accounts offer different tax benefits to a tax-free savings account.
Contributions to retirement accounts up to 27.5% of your annual income (capped at R350,000) can be deducted from your taxable income, giving you a tax break now.
However, when you eventually withdraw these retirement funds, they will be subject to tax at retirement.
Donating to specific charities in South Africa can be a great way to support causes you care about while also potentially lowering your tax bill.
To qualify for tax deductions, the organisation you donate to must be a registered Public Benefit Organisation (PBO) with SARS, meaning it operates on a non-profit basis and is tax-exempt.
Courtney-Clark explained that working from home can be another way to reduce your tax burden, but it is tricky to navigate.
This is because claiming a home office deduction in South Africa can be complex due to strict criteria and required documentation.
To qualify, you must work from home for more than 50% of your time and have a dedicated, separate space in your home solely for work purposes.
This is done by getting a letter from your employer which clearly states the percentage that you work from home, which SARS will use as proof.
If you contribute to a medical aid scheme, you qualify for a medical aid tax credit, which is a fixed reduction on your tax bill based on the number of dependents in your medical aid plan.
In addition to this, you may be eligible for an additional medical tax credit if you’ve had out-of-pocket expenses, such as doctor-prescribed medicines or doctor’s bills.
It is worth noting that these out-of-pocket medical credits are only granted if the expenses are significant enough, as SARS applies a complex formula based on your taxable income.
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