The proposed scrapping South Africa’s expats’ tax exemption is “unjust, discriminatory and regressive”, according to deVere chief executive Nigel Green.
As reported, plans are put forward by the country’s Revenue Services (SARS) to domestically tax those who earn overseas – even though they would still be taxed on their income abroad too. Presently, those working in another country for more than 183 days each year do not pay tax on income from overseas.
South Africa’s move has been slammed as “totally unjust,” “highly discriminatory,” and “achingly regressive” by the outspoken Green, who believes that the plans by SARS to drop this exemption is going to hit “hundreds of thousands” of South Africans, who choose to live and work outside of the country.
“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,” said Green, pictured above.
“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.
“This draconian move to double tax South African expats effectively shackles them to South Africa and they would no longer enjoy the same freedoms as almost everyone else in the world. Under these proposals, they would be persecuted for living abroad.”
As reported, under the South African government plans to remove the foreign employment income tax exemption for South African expatriates, foreign employment income will become fully taxable and the only relief may be claimed is foreign taxes paid as a tax credit.
For example, where the employee falls into the 45% tax bracket and pays 25% tax in the foreign country, the SARS will now collect the difference of 20%.
The current tax law determines that South African tax residents abroad must disclose their worldwide income to SARS and may then claim an exemption on their employment income physically earned outside South Africa.
The move originally came via South Africa’s controversial former minister of finance Pravin Gordhan, previously announced in his Budget Speech earlier this year 2017 that such changes were “on the horizon”.
The change in law is proposed to take effect 1 March 2019 onwards, allowing a period of grace period for expatriates to get their affairs in order. More urgent, however, is the 18 August deadline that has been set for comments from expats and their financial advisers on the Treasury’s changes.
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Green points to global opposition against similar moves that in the US and goes on to say: “There are only two other countries in the world that maintain this outdated, misguided and wrong citizen-based taxation (CBT) regime: the US and Eritrea [a country in the Horn of Africa].
“There is a growing campaign for the US to change from this system to residence-based taxation enjoyed by the rest of the planet. It is achingly regressive for South Africa to be looking to adopt CBT and to do so would put the country on the wrong side of history.”
The deVere CEO concludes: “The Draft Rates and Monetary Amounts and Amendment of Revenues Laws Bill is open for public comment until 18 August. I would urge all South Africans at home and overseas who care about freedom and prosperity to make their opinions heard.
“This move to scrap the tax exemption for South Africans who live and work overseas is not the way forward for a modern, democratic nation.”