Want to pay less tax? Here’s how -- legally
WHEN Finance Minister Pravin Gordhan delivers his budget speech in February next year, he’ll tell you that you need to pay more tax. It will come in the form of higher excise duties on the fun stuff: alcohol and cigarettes, as well as an inevitable increase in the price of fuel. Plus, if you are in the top 10% of income earners, he will tell you that you need to pay more income tax. Currently, the marginal rate sits at 41% of everything you earn above R700 000 a year. Expect it to rise to as much as 45% over the next couple of years.
The message will be delivered with the calm benevolence of your pharmacist advising on the application of a suppository — it’s not very comfortable but in your own best interests.
At the risk of torturing the medical analogies, the growing tax burden for many is an increasingly bitter pill to swallow. South African income taxpayers have for a while been getting increasingly angry about the abuse of public money, the biggest single symbol being the R246-million Nkandla fiasco. The president, under duress, paid back R7.8-million in “non-security” upgrades, but the mounting evidence of widespread abuses is wearing down the patience of even the most compliant of citizens.
Recent revelations by the auditorgeneral of a spike in wasteful and irregular expenditure again sparked anger and a flurry of e-mails to my inbox about my becoming a cheerleader for a national tax revolt.
That’s not going to happen because, simply put, it would do more harm than good. A middleclass tax revolt would do nothing to curb abuses. If anything, it would probably worsen them.
Do you really think a corrupt civil servant up to his neck in the trough would first do the right thing and ensure the gogo in rural uMgungundlovu district gets her monthly social grant before he plunders what is left? Not likely.
Anecdotally, companies and individuals are seeking advice on how to pay less tax. It doesn’t help that social media is awash with rumours that the South African Revenue Service is withholding refunds. That, coupled with headlines this week that the SARS commissioner and the finance minister’s relationship has deteriorated to a point where Gordhan is questioning the integrity of the senior management, creates a sense of dysfunctionality and the belief that the time is opportune to dodge your legal obligations.
Don’t be fooled. You will eventually be caught out.
Let’s assume, though, that you are hellbent on the idea of paying less tax. Here’s how:
Earn less. It’s the surest method of paying less tax. You will probably be able to accept a job that is less stressful and, by moving into a lower tax bracket, you will automatically contribute less to a system you feel you cannot support.
If that is a step too far, you could take a more passive-aggressive approach. That dream home you were considering moving to after years of scrimping and saving — don’t. You will avoid paying capital gains on your current property and won’t have to pay transfer duties and VAT on lawyers and bank charges to move to the next one.
You might have upgraded your furniture and appliances to match your new lifestyle. Don’t. And you will save all that VAT.
Drink less these holidays. Better yet, don’t drink at all. Actually, why go on holiday? And dump the smokes — R14 on every pack goes to the Treasury. That new car? Are you kidding? And don’t get me started on kids’ Christmas presents.
Here’s the best idea. Opt out completely and live in a cave near the old ZAR railway line from Pretoria to Maputo. Get a secondhand metal detector from Cash Crusaders. Pay the VAT — it won’t be much. It will be the last time you ever have to pay tax on anything because, when your find the missing Kruger millions, no one will be able to stop you living the dream trading off the grid using gold.
Whitfield is a public speaker on the political economy and an awardwinning financial journalist and broadcaster