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South Africans working in low tax or no tax havens have reacted with outrage at plans by the South African government to change tax laws so that they will have to pay the same tax on income as if they were living at home. There is a large South African diaspora spread across countries in the Middle East, Europe and the Asia-Pacific region. Many working outside South Africa can’t find jobs in South Africa, with black economic empowerment laws limiting opportunities in corporates and government. Nevertheless, the intention of many of these individuals is to return home. They also contribute to the South African economy, maintaining homes and investments in the country. The South African government announced tax changes – including closing a loophole that allowed for tax avoidance provided you spent a certain number of days outside the country – when it unveiled the national budget earlier this year. The move is part of a strategy to tax higher income earners in order to cover government shortfalls. Instead, the South African government should be working on improving the economy and taking steps to boost employment in order to increase the tax base at home. A South African expatriate living in the Middle East explains why living in a tax-free country doesn’t automatically place an individual in a category with the rich. There might be less, or no, tax, but the cost of living is so high that funds must be ploughed back into the host country’s economy. A campaign has been launched to lobby against the proposed changes on foreign income. – Jackie Cameron
There is a wide misconception in South Africa that living in a tax free country is financially profitable. Barry Pretorius writes:
To the contrary, not only is the cost of living high in comparison, but is also structured in such a manner to ensure that up to 70% of income earned is injected back into the country’s economy.
For example, a typical one bedroom apartment will rent in SA for approximately R6 000.00 per month. A similar apartment in the UAE could cost R35 000.00 per month. And there is little freedom of choice to find alternative lower priced accommodation in a predominantly locally controlled housing market.
To name education fees: A six-year-old scholar’s school fees can run up to R140 000.00 per year. There are also many forms of tax such as on imported foods built into the overseas systems which are not VAT.
A tax system, based on SA tax scales, and current deductions would not “financially inconvenience” SA expats, it would place us in a position where we simply could not afford to pay the South African taxes.
We, as expats, are a mixed group of all ages/race/gender from young workers seeking international experience to older people trying to build some retirement funds as we do not have or receive pension funds abroad and must save our own.
Many of us cannot find work in SA. However, we still contribute to the economy.
A SA worker coming abroad, under SA tax law, can claim a tax deduction of USD 190.00 per day. In the UAE it is a equivalent of R71 250.00 per month, which is a clear indication that SA recognizes the high costs of being abroad.
Under current SA tax laws if we were to be taxed, as expats, on our housing allowances/ schooling allowances on SA tax scales, we would be in the high tax brackets.
This is not our home. Our intent is mainly to return to SA. Our accommodation abroad is not our primary residence. It’s a place of doing business.
We need the tax laws to include exclusions on foreign income earned. This is more complex than just changing Section 10.1 the “183 day” article.
The South African Expatriates Tax Petition Group was founded to advance the interests of South African expatriates earning income outside of South Africa and who might become liable under new legislation to pay more taxes.
The group will focus on informing expatriates on developments in the promulgation of this legislation and provide a forum for expatriates to act as a uniform front to oppose legislation which might put them at an unfair disadvantage.
Source: – Fin24
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