Pay as little tax as possible in South Africa

Efficient Group chief economist Dawie Roodt advised South Africans to pay as little tax as possible without breaking the law.

Roodt shared his views about South Africa’s tax regime during a Truth Report interview with podcaster Renaldo Gouws.

He highlighted that he is opposed to people stopping paying tax. However, he advised all South Africans to pay as little tax as possible.

“I am not telling people to evade taxes. However, I am telling people to do whatever they can to pay as little tax as possible,” Roodt said.

“One rand in your pocket is worth much more to South Africa than one rand in the pocket of the Minister of Finance.”

He said there is already a low-level tax revolt in South Africa. “Everyone who walks into my office says they don’t want to pay tax,” he said.

It has reached such concerning levels that the South African Revenue Service (SARS) is becoming concerned about it.

“SARS is getting very aggressive in collecting more money, and people are really getting fed up with the revenue service,” Roodt said.

The main problem for South African taxpayers is that the government squanders their money, which makes them less inclined to pay tax.

SARS is even trying to distance itself from the government, which is known for corruption, mismanagement, and wasting taxpayers’ money.

“The South African Revenue Service argues it is not part of the state. It wants to convince people that it is a separate and independent entity,” Roodt said.

“They are not. SARS employees are civil servants who work for the state. The government employs them.”

Roodt likened the situation to the mafia protection rackets in the 1920s, where people are threatened with violence unless they pay up.

“That is what we have in South Africa. If you stop paying taxes, the state will act aggressively and make you pay,” he said.

How to pay as little tax as possible

Roodt said there are many ways to legally structure a person’s tax affairs in South Africa to reduce their tax burden.

Many businesses and wealthy individuals use international structures to reduce the money they must pay to SARS. “It is totally legal to do that,” he said.

However, this is only suitable when the person or company deals with a large amount of money each year.

“These international structures are expensive to set up. If you have a million rand, it does not make financial sense,” he said.

He advised ordinary South Africans to consult a tax specialist on how to reduce their tax burden.

Roody added that people can make SARS’s life difficult by querying everything and paying their taxes as late as possible.

Nicci Courtney-Clark, head of tax at TaxTim and Bronwen Trower, co-portfolio manager at Investec Wealth & Investments, said people can pay less tax in many ways.

The first is a tax-free savings account 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 than 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.

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.

If you contribute to a medical aid scheme, you qualify for a medical aid tax credit, a fixed tax bill reduction 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.