A controversial move to tax all income made abroad by South African workers has been stopped in its tracks.
Currently, if an SA tax resident works in a different country to Mzansi for more than 183 days a year – and passes certain income thresholds – they are not obliged to pay tax on their foreign-based income.
However, the Treasury proposed the ‘Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill’ back in July. It threatened to lift that exemption and force people to pay tax into the South African system.
Quite obviously, this went down like a a lead balloon. Under the new proposal, many workers abroad would have to pay tax to two different governments in two different countries, which was seen as ‘lunacy’ by staunch protesters.
The Treasury received more than 1,300 objections. Mainly from South Africans working in low-or no-tax countries in the Middle East, who would be most affected.
The South African Expats Tax Petition Group presented their arguments to Parliament last month. It seems they’ve managed to sway the government into amending the bill.
Rather than issuing a ‘blanket’ tax-ruling for everybody, the Treasury are now looking to add a threshold of R1m and above to the proposal. This is also expected to spark more debate and opposition, however.
Nigel Green is the CEO of financial consultants deVere Group. Speaking to BusinessTech, he perfectly summarised the unfairness of taxing people for income made abroad:
“The move is totally unjust and breaks the cornerstone principal of taxation: that the taxpayer receives government services for their taxes, such as healthcare, education, roads and police services.”
“These plans are highly discriminatory. It is simply unfair to tax someone because of their citizenship. Indeed, residence and/or territoriality are the only criteria upon which a fair income tax system should be based.”
It’s hard to disagree with: Just how ethical is it to ask for tax payments – designed to go towards public services – if those paying in aren’t in the country to use those services?
These changes (set to only affect the highest earners) will now also only come into effect on 1 March 2020. They were originally planned for a 1 March 2019 implementation date.