The amendment to the Financial Emigration Law which comes into force on March 1 could cause a mass exodus from the South African tax base, says Professor Jannie Rossouw, head of Wits Business School.
In an interview with the CitizenRossouw said it will be mostly young, skilled people who already work remotely for international companies who will emigrate.
“They’re just going to move to a new location and continue their job, which means they won’t leave a vacant position that needs to be filled,” he said.
He added that the amendment is a way to keep pensioners’ savings in the country and goes against the spirit of removing exchange controls.
Currently, pension fund members can immediately access their funds in a provident or retirement fund when they emigrate from South Africa, if such emigration is recognized by the SARB.
According to the latest tax law amendment bill, as of March 1, 2021, withdrawal will only be allowed if the member can prove that he has been a tax non-resident for an uninterrupted period of three years.
This means an effective three-year freeze on pension funds from the effective date, said Jean du Toit, lawyer and head of tax technique at Tax Consulting South Africa.
It’s important to note that for those planning to leave in the near future, in terms of the National Treasury’s response to public comments on the amendment, members will be allowed to withdraw their funds under the current exemption if they file a complete application before March 1, 2021.
Other analysts have warned that the National Treasury will have to perform a delicate balancing act as more taxpayers continue to leave the country.
However, Nazrien Kader, head of the tax group at Old Mutual, said Finance Minister Tito Mboweni was not oblivious to the feeling that any tax increase will not be tolerated in the current landscape.
“The perception is that the pool of individual taxpayers is constantly shrinking with the increase in emigration and the exodus of professionals in search of greener pastures.”
“For those left behind, with the number of downsizing, small business closures and pay cuts (not to mention the lack of bonuses) being damage from the pandemic, the expected drop in tax collections individual is real.
There is little appetite for a tax hike or – even the so-called “once out” tax – when the government has so much leeway to act, Kader said.
This includes elements such as cost containment measures, expenditure containment and the use of the resources at its disposal to apply good governance in public enterprises.
The government also has the opportunity to engage not only those who get rich at the expense of the state, but also those who allow wasted spending, commit white-collar crimes, and turn a blind eye to the mismanagement under their watch. .
“This might be easier said than done, given that unions are pushing for an above-inflation payroll increase this year, due to the cancellation of the 2020 increase; the additional cost to the state of the Covid-19 pandemic; State-owned enterprises continue to resist further bailouts; and the campaign for the R350 ‘Covid grant’ to become a permanent feature of the national budget, ”she said.
Read: More evidence South Africans are trying to get their money out of the country