SARS and the Fat Man
by Fred on 13/09/06 at 3:38 pm
2 comments
Since age 25 I’ve been running my own business(es), and have struggled with tax laws and regulations ever since. I have spent an inordinate amount of time trying to get my head around all the countless levies and costs that we have to cough up to our venerable government.
Now thanks to the supreme talents of Andrew (the ‘Brain’), as well as a very systematic accountant, I feel pretty confident that my personal and company tax is paid and up to date. It still bites when I have to pay the tax man every so often, but I do it, because I want to do things right.
So, it was with interest that I read the newspaper headline on Monday: ‘South African Revenue Service takes aim at SA’s richest 500’. It turns out that there are a lot of people in South Africa that don’t feel the same way; that there are some higher beings in our country, loaded with wealth and wine farms, that feel that they are exempt from adhering to the same laws that we, the lowly street-fighting entrepreneurs, have to.
Check this out (taken from the Cape Times Business Report on September 11):
- ‘A disturbing number of high-profile business people have not paid tax at all’
- SARS has sent letters to 100 of the 500 top earners
- These include chief executives, chairmen and directors of top companies
- In 2005, South Africa, along with India, South Korea and Russia had the fastest growth in high-net-worth individuals
- In 2005, the Johannesburg Stock Exchange delivered a 43% percent return, making it one of the best performing markets
- There are about 43, 000 South Africans with more than $1 million to invest
- There are about 23, 000 South Africans with more than $2 million to invest
- There are about 300, 000 South Africans with more than $80, 000 to invest
- Of the 8.7 million wealthy individuals world wide, Africa accounts for 0.1 percent
Amazing. A friend of mine is the marketing director of a very exclusive car company (nameless, but let’s just say that Magnum PI was a big fan), and he also sends letters to the same list. He told me that he has seen first-hand the way money can change people.
I reckon the best quote in the Cape Times article was this one talking about the response from the top 500 list: ‘Some are co-operative, others deny being high-net-worth and some people are driven by ego and phone to ask why they have not received the letter.’
Fred Roed is the marketing guy in the Ideate crew. He runs a web marketing company called World Wide Creative and loves writing about people out there doing marketing right. View more articles by Fred.
David e
Nov 23rd, 2006
Hay, why not tap some of Andrew’s brain with some cool tax tips?
I mean, if you start making money, what’s the best way to get tax going right etc?
Is it via a CC or through personal income etc?
Also, from your experience, how do Tech/Internet companies (virtual workers) get treated by SARS? Do they like understand what it’s about?
Andrew
Nov 24th, 2006
Hi David
I’m sure you need some sort of license in order to give the advice that you are looking for! (Just another way for SARS to make money I suppose). Seeing as I don’t have any such license (or even any formal qualifications) you should ignore everything I say and do the opposite.
I think your questions require a whole post in order to answer properly. I have added it to my list of “must blog about some time”.
A super-quick summary would be: you probably won’t save much tax by forming a cc, and there are extra costs and lots of paperwork involved. The real reason to form a cc would be to create a structure that is separate from you, so that if an unhappy client sued you, or the company went bankrupt, you keep your personal reputation clean. Unless of course you have signed personal surities on debts, in which case you pretty screwed (ie, never sign those things). cc’s are also useful for working in partnership with other people, for building up a company that could be sold one day, and for making yourself look a whole lot more professional and giving the impression you’re going to stick around.
Getting back to the tax issue – if you create a cc just to do “personal services” type work for clients (ie selling your own time) SARS doesn’t like it, and they’ll tax you at the same rate as the maximum personal tax rate. You would need a couple of employees and/or products and services that are just your own hours.
Oh dear, even the “super-quick” summary is turning into an essay. It’s a big topic!