National Treasury has floated self-defeating new laws for fear of missing out on some of the foreign earnings of South Africans.
Forget Scrooge. Forget corporate fat cats. The epitome of crass and self-defeating greed is the taxman.
As soon as the government gets wind that someone, somewhere, might be making unauthorised money to make ends meet in South Africa’s increasingly sclerotic, dysfunctional economy, it sends its agents, like protection-racket goons, to demand a slice of the action or else.
If the target of their action is likely to shoot back, the taxman usually keeps a prudent distance, but the average remote worker, based behind a laptop screen in South Africa doing work online for foreign companies, are a soft target.
They often get paid in foreign currency, which has the taxman’s eyes glittering and its ravenous maw drooling.
Well-paying work is scarce in South Africa. Employment is hard to come by because of a deep morass of inflexible, race-based employment law and other growth-sapping regulations. For many people, the only option – if they want to remain in South Africa – is to work for dollars or pounds.
This is an attractive alternative for anyone skilled in the sort of work – writing, design, research, consulting, or virtual call centre work for example – that can easily be done remotely.
Grubby hands
National Treasury, however, smells money that the South African Revenue Service (SARS) hasn’t been able to get its grubby hands on.
So it has, according to BusinessTech, proposed a new law that will honour a long tradition of promising to cut red tape before creating more red tape. In fact, it will create so much red tape, that these jobs will simply vanish.
The law seeks to gather foreign employers of South African workers in the net for pay-as-you-earn (PAYE) tax, unemployment insurance (UIF) and skills development levies (SDL). This would, the government reckons, ‘level the playing field’ between domestic and foreign employers.
Perhaps it would, but the playing field for domestic employers is a bombed out field of muddy craters, into which no respectable foreign company would wade.
The law would require foreign firms employing South Africans residents to establish a branch office in South Africa, comply with all the relevant Companies and Intellectual Property Commission (CIPC) regulations, obtain a SARS income tax number, register for PAYE, UIF and SDL, and implement a payroll system to produce annual financial statements.
All this, just so SARS can see exactly who the dirty rotten scoundrels are earning foreign money that they turn into local currency to enrich the anaemic domestic economy.
The irony is that SARS is probably already collecting income tax from most of these foreign currency earners.
According to the tax consultants cited in the article, most people who work in this fashion are likely already provisional taxpayers, dutifully depositing their annual pound of flesh into the cavernous maw of the National Treasury, for fear of having their assets seized or being imprisoned.
Conversations
I can just imagine the recruitment conversations.
Foreign company: ‘Hey, my china, I saw you on LinkedIn. Want to do some social media posting for us for $300 a week?’
My china: ‘Kiff, man. Lekka.’
Foreign company: ‘Just send us an invoice every month.’
My china: ‘I will, but first, you have to establish a South African branch office, with the locally-resident and properly remunerated corporate officers required by law, and fill out a dozen forms in triplicate for the local taxman, and employ someone to run a payroll system, and promise to pay a cut of that $300 to tax, plus pay a slice to the UIF and another slice to the SDL (haven’t you heard of the skills development patronage train?), and then you have to produce annual financial statements every year to prove that you’ve done all this and are on the up and up. But sure, I’m totally in, 24/7, night or day.’
Foreign company: ‘…’
My china: ‘You there?’
Foreign company: ‘My china, I have a list of eleventy thousand people in Thailand, India, Australia, Chile, Zimbabwe, Kenya, Russia and Nigeria who’ll do this job without all the rigmarole. Sort out your government. Sorry, buh-bye!’
Self-defeating
So a lot of South Africans who are employed by foreign employers – and were probably already paying tax – will lose their jobs, and SARS will lose tax revenue instead of gain it.
For now, it doesn’t sound like contract work will be affected, but don’t put any self-defeating idiocy past the big brains of our greedy National Treasury.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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