Pay as little tax as possible

South Africans should minimise their tax burden as much as possible to give politicians less money to spend and protect their wealth. 

This should be done through legal channels, such as investing in tax-free investment accounts and retirement annuities, and taking money offshore. 

Efficient Group chief economist Dawie Roodt encouraged South Africans to do this as they are already overtaxed. 

Roodt explained on the Newsday podcast that South Africa’s tax revenue is 30% of GDP, which is far higher than that of its peers and some developed economies. 

In South Africa, this revenue comes from a small proportion of high-earning individuals and companies, making the country’s tax base very concentrated. 

As a result, the country’s tax base is vulnerable to external shocks and is at breaking point, Roodt said. 

Roodt explained that a tax revolt of sorts is underway in South Africa, with individuals aggressively structuring their affairs to minimise their liability. 

The renowned economist a supporter of aggressively structuring individual finances to reduce tax payments, particularly when citizens get very little in return. 

“Do whatever you can legally 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. 

“We are totally overtaxed in South Africa. You have to make use of all legal opportunities there are to pay as little tax as possible.”

Roodt pointed out that those earning more than R1.5 million a year, which is 268,000 people in South Africa, are responsible for 33% of all personal income tax (PIT).

For reference, South Africa has a tax base of 8.3 million income taxpayers, 3% of whom earn more than R1.5 million.

This means 3% of the tax base accounts for a substantial share of the state’s revenue, with PIT being the government’s largest source of income.

This tax revenue is then used to support 28 million South Africans who receive state social grants and 2 million civil servants.

Roodt said this is very difficult for normal salary earners, with their options limited to retirement fund contributions, medical aid tax credits, and tax-free investments. 

Once you have a pool of capital that has been saved up or from your own business, your options to reduce your tax burden in South Africa expand. 

“If you have some money to take out of the country, then you can legally structure your investments in a way that reduces your tax burden in South Africa,” Roodt said. 

“Externalise your business if you can and move the head office to the Seychelles or Mauritius or wherever, because we are overtaxed here.”

Roodt made it clear that he is not calling for a full-on tax revolt where people stop paying taxes, as that would be catastrophic. 

Once people stop paying taxes, it is incredibly difficult to get them to start paying again. 

“I have this conflict here on how I should advise my clients. Do I do what is best for my clients or best for the country? I think my first responsibility is with my clients,” Roodt said.