In a recent interview with Biznews, Free Market Foundation CEO David Ansara shared valuable insights on how South African businesses and individuals can reduce their tax burden without resorting to unlawful methods. His advice centers on the importance of optimizing the existing tax regime to pay as little tax as legally possible.
Are You Paying Too Much Tax?
The core principle of taxation is simple: individuals contribute to the state through taxes and, in return, receive public services. However, Ansara argues that there is much room for improvement in the way the state manages these resources. He emphasizes that we are far from an ideal scenario where public funds are judiciously and effectively administered.
Importantly, Ansara does not endorse or promote any form of tax evasion or illegal activities. Instead, he encourages South Africans to focus on tax avoidance, a legitimate practice within the current legal framework to reduce their tax liabilities.
Tax evasion is an illegal act involving the use of fraudulent methods to conceal income or information from the South African Revenue Service (SARS), with the aim of evading taxes. In contrast, tax avoidance entails utilizing legal strategies and mechanisms to minimize the amount of tax an individual or business is required to pay.
To help individuals and companies achieve this, Ansara suggests exploring legal avenues within the existing tax regulations. One effective strategy for businesses is to consider changing their business structure by establishing an offshore company in a tax-friendly jurisdiction.
For instance, Ansara highlights the benefits of incorporating a holding company in a place like Mauritius, which boasts a favorable corporate tax rate of 15% and no dividend withholding tax. Through strategic structuring, companies can significantly reduce their tax obligations while staying compliant with the law.
At the grassroots level, Ansara points out that ratepayer associations are making a difference by exerting influence over poorly functioning local municipalities. The Westville Ratepayers Association (WRA), for instance, has withheld approximately R1.2 million from the eThekwini Metro since July 31. The eThekwini Rate Protest Movement has also taken a stand, vowing to persist until the metro demonstrates improved governance and fiscal responsibility.
The Free Market Foundation encourages individuals, businesses, and communities to take initiative and provide the services they need, thereby lessening their reliance on the state.
It's important to note that Ansara's call to pay as little tax as possible is not isolated; other financial experts, including Efficient Group chief economist Dawie Roodt, share this sentiment. Roodt advises South Africans to minimize their tax liabilities within the bounds of the law as a way of objecting to government overspending.
While Roodt encourages the use of legal loopholes to reduce tax burdens, he also emphasizes the importance of not crossing the line into tax evasion. He believes that one rand in your pocket is far more valuable than one rand in the hands of the government.
However, Roodt issues a strong warning against staging a tax revolt or entirely discontinuing tax payments, as this could have dire consequences for the nation. The difficulty of reinstating tax compliance, even under a new government, makes it essential to continue paying taxes, albeit no more than legally required.
So if you are looking for guidance and assistance in optimizing your tax strategy to pay as little tax as legally possible, please don't hesitate to contact My-Accountants. We are here to provide expert support and help you navigate the complexities of taxation effectively. Email: info@my-accountants.co.za
Acknowledgment: Daily Investor
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