Category Retirement
SUB CATEGORIES Annuties |  General |  Savings & Investments | 

Lekker tax

13 August 2006 Angelo Coppola

Professor Matthew Lester spoke recently about the tax regime facing the country for the next five years, and what people should be focusing on.

As a starting point he says that anyone who has a taxable income and isn't using that taxable portion to invest in an RA should be found guilty of a criminal offence.

Things have changed a lot in tax terms in the last 10 years, when tax advice was a service that could be offered as a leverage point for customers. Added to which, while we are living the life of Larry, the minister of Finance - Trevor Manuel- in February warned that things won't always be rosy.

He says that SARS has had a good run. What country could boast a jump from R300bn to R460bn in tax brought in, in a two year period? This is extraordinary and the question is rather, or should rather have been: can we spend it?

The debate around trusts and estate duties is a misplaced one and are no longer the point. Its about accumulating capital to have enough retirement annuity when you retire. Did you know that you would need R10m invested now to retire with a retirement annuity of R25k per month. Thought provoking, isn' it.

While that is a problem, Lester says that small business is the flavour of the month, and the package that Manuel presented was so generous that the minister should have been charged donations tax. For those readers that are interested- this rebate structure and benefits package kicks in at the beginning of 2007.

There is also a tax amnesty which is tasty, and the minister is effectively writing off the tax not paid by this grouping (SME), all for just R7800 'admission of guilt' fine. This is compared to the penalties that would be incurred for VAT, PAYE, SDL and input tax, not paid, which would effectively cripple a small business.

While there is an amnesty year Lester maintains that people should take advantage of it. SARS has to go light on the penalties, and there is a legal judgment to back this up.

On a broader political level, the issue however is that there are only 4 million tax payers, so there is no chance of a social safety net. People nearing retirement should be downsizing and simplifying their lives, and getting rid of the hangers-on.

Editor's thoughts:
* SMEs should be looking at the package on offer. In fact the dti has until recently had a rather attractive offering for SMEs with a range of rebates and specials.
* Its all about simplifying one's life and this would include debt consolidation. Why wait until you are near retirement? Clients and readers should be looking at their lives on a regular basis.

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