Pay as little tax as possible in South Africa

Efficient Group chief economist Dawie Roodt said that South Africans should do what they can to pay as little tax as possible.

He shared his views on South Africa’s tax regime in an interview with Newsday, where he argued that the South African Revenue Service (SARS) is too aggressive.

Roodt explained that the economy is not growing, which places pressure on state finances. To address this issue, SARS is encouraged to collect more taxes.

“The Minister of Finance gives SARS more resources to improve efficiency, and SARS is effectively squeezing the last drop of blood from the economy,” he said.

“South Africa’s tax burden is currently over 30% of the gross domestic product (GDP), which is the highest it has ever been.’

Roodt said that government expenditure continues to rise while economic stagnation prevents natural revenue growth.

“The state now forces revenue collections up by funding a more aggressive SARS to extract more money from a shrinking economy,” he said.

“I believe SARS is overstepping, but the underlying root cause remains the lack of economic growth.”

As a result of high taxes and poor service delivery by the government, South Africans want to reduce the taxes they pay.

“The first two things most clients tell me are that they want to take their money out of the country, and they don’t want to pay tax,” Roodt said.

“I am not in favour of tax evasion. However, I am very much in favour of structuring your tax affairs well, in fact, quite aggressively.”

“You should do whatever is legal to pay as little tax as possible, because the only way we can get politicians to spend less money is to give them less to spend.”

Roodt said that people in South Africa are overtaxed, which is one of the reasons the economy is not growing.

“Investors avoid environments that are overregulated, inefficient, incompetent, and corrupt, as the South African government largely is,” he said.

Roodt said that, given that people are overtaxed, they should make use of all available legal opportunities to minimise their tax burden.

“While it is difficult for regular salary earners to structure their tax affairs, there are still basic legal options to reduce their tax burden,” he said.

The easiest ways are to contribute to a retirement annuity, use a tax-free savings account, or pay for medical aid and claim tax credits.

“If you have capital, there are further options. You can take a portion of your money out of the country legally or use international structures to reduce your tax footprint,” he said.

“If possible, you can even externalise your business or relocate production facilities to jurisdictions like the Seychelles rather than South Africa.”