Free Market Foundation CEO David Ansara advised South African businesses and individuals to avoid paying more tax than needed.
Ansara told Biznews that the basic idea of paying taxes is that individuals give the state money and get services in return.
“The state is responsible for managing those resources judiciously and effectively. We are very far away from that,” he said.
He argued that depriving the state of resources is effective leverage for individuals and companies to drain power from the state.
Ansara stressed that he is not advocating for people to break the law and engage in tax evasion. Instead, he advised South Africans to focus on tax avoidance.
- Tax evasion is a form of tax fraud where people use illegal methods to hide income or information from the South African Revenue Service (SARS) to avoid paying taxes.
- Tax avoidance is using legal ways within the current tax regime to reduce the amount of tax a business or individual pays.
He advised South Africans to consider using legal ways available in the current tax regime to reduce the tax they pay.
One of the easiest ways for companies is to change a business structure by establishing an offshore company in a tax haven.
“An easy way to limit your tax exposure is to incorporate a holding company in a jurisdiction like Mauritius, which has a double taxation agreement with South Africa,” he said.
Mauritius has a 15% corporate tax rate and no dividend withholding tax. “Through clever structuring, you can lower your taxes,” he said.
He said that at the local government level, ratepayer associations are taking power away from dysfunctional municipalities.
For example, the Westville Ratepayers Association (WRA) have withheld approximately R1.2 million from the eThekwini Metro since 31 July.
The eThekwini Rate Protest Movement said it will not stop until residents of the metro see good governance and an end to the misappropriation of their funds.
Ansara said the Free Market Foundation encourages individuals, businesses, and communities to take it upon themselves to provide the services they need.
The call to pay as little tax as possible is not new. Efficient Group chief economy Dawie Roodt has also advised South Africans to pay as little tax as possible without breaking the law.
Roodt said taxpayers should object to the government’s overspending by using legal means to pay as little tax as possible.
“I encourage people not to break any laws but to make use of every possible loophole to pay as little tax as possible in South Africa,” he said.
“One rand in your pocket is worth much more than one rand in the pocket of the civil servants,” Roodt told delegates at the Tax Indaba.
However, he warned against a tax revolt or stopping to pay taxes altogether, as it would have severe consequences for the country.
“Once people stop paying taxes, including municipal levies, getting them to start paying taxes again – even under a new government – is difficult,” he said.
“Of course, you have to pay your taxes, but nothing more.”