Tax Avoidance vs Tax Evasion: Toeing the Line

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“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” (Denis Healey, former UK Chancellor of the Exchequer)

 

The line between tax avoidance and tax evasion can sometimes appear blurry, especially in complex transactions or fierce tax planning strategies. The comparison below is a good starting point:


What is tax avoidance?

Tax avoidance refers to legal arrangements or transactions designed to reduce or eliminate tax liability, without breaking the law.

Examples of tax avoidance include:
  • Moving a company into a special economic zone for the sole reason of achieving a lower corporate income tax rate.
  • Timing the sale of capital assets to control the timing of capital gains and losses.
  • Getting your company to pay for a motor vehicle or other expenditure as it may, depending on the circumstances, be taxed at a lower rate.
  • Placing a large amount of your income into a retirement fund to obtain the highest deduction possible.
  • Investing in tax-free savings accounts (this applies to individuals only).

Often termed “permissible tax planning”, tax avoidance is legal and accepted. However, when tax avoidance becomes overly aggressive or artificial (i.e., lacking commercial substance), it may cross into what tax authorities consider “impermissible” or “abusive” tax avoidance. This, while not necessarily criminal, may be challenged under anti-avoidance rules such as the General Anti-Avoidance Rule (GAAR).

South Africa employs GAAR to counteract tax avoidance strategies that exploit loopholes. These rules allow tax authorities to disregard or re-characterise transactions that have the primary purpose of avoiding tax.


What is tax evasion?

Tax evasion is characterised as the illegal act of deliberately and intentionally avoiding paying taxes, either by avoiding paying tax entirely, or by illegally reducing or deferring taxes payable. It can involve hiding or ignoring one’s tax liability by making false representations or statements, or hiding income or information that would otherwise be subject to taxation.

Examples of tax evasion include:

  • Failing to file required tax returns
  • Making false statements on tax returns
  • Failing to declare income or deliberately underreporting income
  • Claiming personal expenses as business expenses
  • Over-declaring expenses, which may include falsifying invoices
  • Using multiple entities without legitimate business purpose
  • Moving money through multiple accounts to obscure its source

SARS uses data-driven insights, self-learning computers, and artificial intelligence to combat tax evasion, and is empowered to conduct criminal investigations into tax offences and work with the criminal justice system to prosecute offenders.

Tax evasion can result in severe penalties of up to 200% of the shortfall in tax, plus interest, and even jail sentences of five years or more.


Best practices for legal tax avoidance

  1. Stay updated with ever-changing tax legislation to make informed decisions.
  2. Structure your business operations or transactions in a manner that legally minimises taxes – for example, operating as a sole proprietorship or a private company have different tax implications.
  3. Engage in permissible tax planning by adhering to all tax laws and regulations, and avoiding abusive tax schemes designed to exploit loopholes in the tax laws.
  4. Utilise all tax deductions, credits, exemptions and incentives, including deductions for business expenses, tax credits for certain investments or activities.
  5. Comply with reporting requirements and avoid penalties and interest by filing accurate tax returns on time.
  6. Maintain accurate records of all your financial transactions and tax-related documents to ensure all claims and deductions can be substantiated when required by SARS.
  7. Ensure transparency and full disclosure by always providing full and accurate information on tax returns: concealing information or providing misleading details can easily cross the line into tax evasion.


Best practice as a service

By adhering to these best practices, taxpayers can effectively employ tax avoidance strategies without crossing the line into the realm of tax evasion.

5 Tips for Helping Your Employees Through a Crisis

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“When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.” (Simon Sinek)

Employee engagement. It determines so much about the direction of a company, its staff productivity and how likely it is to succeed. According to a Gallup poll just 23% of South African employees are actively engaged, and the support offered by your company during difficult times is a key predictor of whether your employees are doing better or worse than that. Ignoring a personal crisis or mismanaging it can result in diminished trust, high turnover, and costly legal complications. On the other hand, getting it right can transform a tough moment into a team-building exercise that drives loyalty across your enterprise. Here are our five tips for handling an employee’s crisis with care, compassion, and professionalism.

1.  Listen without judgement

The first step in supporting someone through a crisis is simply to listen. Not all employees will be forthcoming, and many will fear repercussions or shame if they do share. By creating a psychologically safe environment where they feel heard and respected, you allow the conversation to unfold in a way that will allow you to help.

Listening does not mean solving. Ask what they need. Avoid overpromising or reacting too quickly. This is their experience, not yours, and your job is to provide space for them to express it.

2.  Tailor your support to the individual

There is no one-size-fits-all approach. While one employee might benefit from time off, another may prefer flexible hours or a change in responsibilities. Consider what reasonable accommodations can be made, in accordance with HR policies and employment laws. What’s important is that the support feels personal and meaningful, not generic or performative. You will likely want to speak to HR or, in a smaller business, ask for outside advice.

3.  Communicate clearly (and privately)

When an employee’s going through emotional turmoil, one of the most challenging aspects is managing the line between transparency and confidentiality. While you may need to inform certain stakeholders about changes in workflow or responsibilities, the nature of an employee’s crisis should never be discussed openly or speculated about in the office.

Establish clear, private channels of communication and check in regularly. Let the employee know what’s being shared and with whom – and always ask for their consent where appropriate. Trust is fragile and you need to protect it.

4.  Support your other employees too

It’s not just the employee in crisis who needs help – often their direct manager, or co-workers will also be feeling overwhelmed, overworked or unsure how to proceed. Offering management training on crisis response, mental health first aid, and compassionate communication can improve outcomes for everyone involved.
Managers are on the front line of employee wellbeing, and giving them the right tools helps avoid missteps that could escalate the situation.

5.  Make room in your budget for empathy

There’s no denying that crisis support can come with financial implications, from offering extra leave to making temporary hires to cover the missed workloads and even therapy for the staff member. But investing in your people always pays off in the long run. This is where your accountant becomes more than a numbers person.

Your Tax Deadlines for May 2025

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  • 07 May – PAYE submissions and payments
  • 23 May – VAT manual submissions and payments
  • 29 May – Excise duty payments
  • 30 May – VAT electronic submissions and payments, & CIT Provisional Tax payments where applicable.

Mind The Tax Gap! Here’s How…

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“In 2025/26, SARS will focus on addressing the tax gap to improve revenue collection.” (National Treasury Budget Review)

 

With additional funding from National Treasury, SARS will now be better positioned than ever to collect the estimated R800 billion in unpaid taxes which SARS Commissioner Edward Kieswetter has identified as a better alternative than a VAT hike to balance the South African Budget.

Much of the estimated R800 billion in unpaid taxes consists of the so-called “tax gap” – the difference between how much tax is legally due to SARS and the amount that is actually paid on time. SARS has reported the following:

  • Just over R400 billion in undisputed uncollected debt
  • Over R100 billion in debt currently under dispute
  • More than 54 million outstanding returns dating back several years
  • 156,000 South Africans with substantial economic activity who are not registered taxpayers, or are not filing their tax returns.

The remainder of the R800 billion unpaid taxes is made up by “aggressive tax planning” such as base erosion, transfer pricing, and other means of tax evasion, as well as unpaid excise duties, unpaid VAT, and illicit trade flows.

Kieswetter said R2 billion of the additional R2.5 billion that SARS will receive for 2025/26 will be used for “a massive debt recovery programme”, while R500 million will be used to modernise SARS’ systems.

Given SARS’ enhanced capabilities and focus on collecting outstanding debt, our tax expertise will be crucial in ensuring you and your business maintain complete compliance and react immediately and correctly should your tax affairs become the subject of SARS’ scrutiny.

Tax compliance tick box 

Maintaining compliance starts with:

✔ Being registered for all applicable tax types within the stipulated time frames
✔ Making accurate declarations
✔ Filing returns and other required documentation on time
✔ Paying the correct amount of tax on time
✔ Promptly responding to SARS communications
✔ Paying penalties and interest for non-compliance, such as late submissions or under-declared income.


How we can help you mind the tax gap  

We can help you to comply with your specific tax obligations with up-to-date tax expertise and best practices.

  • We promptly and professionally respond to communications from SARS, such as notices of demand for unfiled returns, requests for information, or notifications of penalties levied.
  • We take immediate and correct action following demands for outstanding tax debts. Taxpayers have ten business days after receiving a Final Demand to either pay, arrange deferral of payment or make a payment arrangement, file a suspension of payment with an objection, or enter into a compromise agreement.

What’s more, our expertise and experience enable us to monitor that SARS is following the correct legal procedures. This ensures that your taxpayer rights are protected and preventing illegal collection measures such as unauthorised SARS withdrawals from bank accounts.


Bottom line

SARS says it will be relentless in its efforts to collect the billions of rands in uncollected taxes, and that it is ready to act against those who wilfully and defiantly ignore their legal tax obligations.

Similarly, we will be relentless in ensuring you maintain complete tax compliance in all your affairs. And we are ready to take the proper and timely action when SARS’ spotlight shines on your tax affairs. 

This Workers’ Day, Look After Your Business’ Greatest Asset

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“Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.” (Richard Branson)

Whether you call it May Day, Labour Day or International Workers’ Day, 1 May is an opportune time for businesses to consider and prioritise their workers.

Here’s why happy workers are a business’s greatest asset (and some ways to foster a happier workforce).


Business benefits of happy workers 

  1. Increased productivity. Various studies have shown that happy workers are more committed to company goals and up to 13% more productive.
  2. Improved customer service. People who are happy at work provide better customer service, leading to higher customer satisfaction and loyalty.
  3. Reduced costs. Lower absenteeism and improved worker retention mean substantially reduced labour costs.
  4. Enhanced creativity and innovation. Happy workers buy into the big picture, offer creative solutions, take thoughtful risks, collaborate and are more likely to experiment.
  5. Superior business performance. Gallup research shows that companies with happy workers can outperform competitors by up to 200%, and achieve up to 22% higher profitability.

5 ways to increase happiness in your workplace

  1. Create a supportive work environment

    Essential for employee wellbeing is a safe and supportive work environment in which diversity is valued and everyone is included and treated respectfully. This is also the foundation for a company culture that’s centred around teamwork, collaboration, job satisfaction, and accomplishment.

  2. Balance job demands with resources

    Providing sufficient and appropriate resources to ensure staff can meet their work demands means the work gets done efficiently and on time. It is also important that workers’ roles and responsibilities are clear and aligned with company goals, and that issues like time pressures and overwhelming workloads are addressed quickly.

  3. Offer competitive compensation and benefits

    Be sure to offer fair compensation packages as well as benefits that add value to employees, such as flexible scheduling and work arrangements, extra paid time off or even an onsite canteen, gym, or creche. Maintain this competitiveness through annual compensation reviews.

  4. Recognise and appreciate all workers

    It can be a really good idea to implement a formal recognition programme. After all, over 70% of employees say “feeling unappreciated” is the biggest driver of dissatisfaction. It’s equally important to make health and wellbeing a priority in your workplace and to encourage workers to share their feedback, ideas and concerns. Nobody likes to feel ignored!

  5. Invest in professional development

    Continuously provide the necessary training and tools for employees to perform effectively. Complement this by investing in professional development, and offering workers at all levels opportunities for upskilling and career advancement.

The bottom line 

There is a real return on an investment in happy workers – and many easy ways to increase the level of happiness and engagement among your workers.

The 5 Cognitive Biases That Could Sink Your Business

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“Too often we hold fast to the clichés of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought.” (John F. Kennedy, former US president)

Humans are creatures of habit. We form opinions and sets of actions that we use as shorthand for all future decisions. We become trapped in loops of our own making and fall prey to common human ways of thinking that may save time, but ultimately hurt us. In business, these sorts of cognitive biases can damage relationships, and lead companies down dangerous paths. The sad thing? Most of us don’t even realise they exist. Here are five cognitive biases that could sink your business if you’re not careful.

1.  Favouring evidence that backs our beliefs

Back in the days of VHS, video rental behemoth Blockbuster was offered the opportunity to buy a start-up that distributed their videos by mail, and were building the infrastructure to stream videos online. Convinced that the video store model was the only way to go, the board rejected the opportunity to purchase Netflix and over the next few years Blockbuster went bankrupt.

While it’s tempting to see this as a sign of foolishness, the reality is that all of us are prone to undervaluing data which contradicts our beliefs and favouring that which reinforces it. These confirmation biases can only be overcome by actively seeking out disconfirming evidence and encouraging a culture of robust debate among your employees.

2.  Doggedly holding the line

In 2008, signs began to leak out across the American economy that a large collapse was coming. Banks were overextended and the money from loans was not being returned fast enough – but many large businesses held the line and did not prepare for failure. The information they’d been given for years suggested the loans model worked and they did not adjust their behaviour as the data first trickled, and then thundered in. The result? An economic collapse for the ages.

A 1974 study by Tversky and Kahneman explains their decision making with the anchoring bias. This study showed that even when presented with later information, people’s numerical estimates were significantly influenced by irrelevant initial figures. The first information is given much more weight than later information, even if the later information comes from stronger sources. Luckily this bias is easy to overcome, by simply distrusting the early data – always compare it carefully with what comes later.

3.  Too much self-belief

Convinced their market dominance would carry them through, and unimpressed with the new digital cameras, photographic film manufacturer Kodak continued business as usual in the early 2000s. Despite their position as market leader and an early pioneer, these decisions lead to their eventual complete collapse. Kodak is a clear example of the overconfidence bias, which Bazerman and Moore detailed in their book Judgement in Managerial Decision Making.

Overconfidence bias is our very human tendency to overestimate one’s own knowledge, skills, or the accuracy of one’s predictions. In business, this can manifest in risky decisions, such as under-pricing products, over-leveraging debt, or ignoring potential competitors. To overcome this, regularly schedule sessions to evaluate your decisions against the data, and seek outside advice from your accountants and other experts.

4.  Don’t follow the Joneses

Anyone who was alive in the 1990s remembers the Dotcom bubble. Tech companies were absolutely flooded with investment, with little care for the fundamentals from those who were convinced that tech’s bright future would lead to their own financial success. When the bubble burst in the early 2000s, many of those investors found themselves without a penny to their names.

The Dotcom bubble is an example of what’s known as the herd mentality. It describes a cognitive bias in which people have a tendency to mimic the actions of the masses, even against their own better judgement or personal logic. The rule here is simply: don’t do something just because everyone else is doing it. Never blindly follow trends.

This comes with a caution though – while copying others for the sake of it is a bad idea, don’t fall into the trap demonstrated by Sears either. The former retail giant exhibited loss aversion bias by clinging to its traditional brick-and-mortar model and resisting e-commerce expansion for years – ultimately resulting in it filing for bankruptcy in 2018.

5.  Place the blame correctly

In 2008 Lehman Brothers was possibly the largest casualty of the economic collapse. Where many other financial institutions managed to keep their heads above water, Lehman Brothers sank below the waves. Unlike their more successful peers, Lehman Brothers had attributed all of their woes to the external factors of the economic collapse and failed to recognise the company’s own risky investments and poor decision-making as contributing factors.

This error is commonly known as attribution bias. In 2014, Mallett and Monteith explored attribution bias in business settings, showing that leaders often misattribute their company’s failures to external forces, preventing them from identifying areas for improvement. You can avoid this by promoting self-awareness and accountability. Don’t be afraid of asking experts for their input and always encourage regular post-mortems on projects to identify both internal and external factors contributing to their success or failure.

Your Tax Deadlines for April 2025

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  • 01 April – Start of the 2025/26 Financial Year
  • 07 April – PAYE submissions and payments
  • 25 April – VAT manual submissions and payments
  • 29 April – Excise duty payments
  • 30 April – VAT electronic submissions and payments, & CIT Provisional Tax payments where applicable.

Budget 2025: Your Tax Tables and Tax Calculator

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Budget 2025, if adopted by Parliament,  will effectively bring about an increase in personal income tax by not adjusting the tables for tax rates, rebates and credits, while also implementing substantial increases in ‘sin’ taxes and introducing a 0.5% VAT increase on 1 May 2025 and another 0.5% increase effective 1 April 2026.

This selection of official SARS Tax Tables and other useful resources will help clarify your tax position for the new tax year.

Individual taxpayers: Tax tables unchanged since 2023

Source: SARS

Source: SARS

Source: SARS

Sin taxes raised

Source: Adapted from Budget 2025 People’s Guide

Businesses: Corporate tax rates unchanged

Source: Adapted from SARS Budget Tax Guide 2025

Proposed VAT increases

Source: Adapted from Budget 2025 People’s Guide

Transfer duty: 10% upward adjustment from 1 April

Source: SARS’ Budget Tax Guide 2025

How much will you be paying in income, petrol and sin taxes?

Use Fin 24’s four-step Budget Calculator here to find out the monthly and annual impact on your income tax, as well as what you will be paying in fuel and sin taxes.

Budget 2025: How It Affects You and Your Business

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“… the economy needs to grow much faster and in an inclusive manner. This is the central objective of the current administration.” (Finance Minister Enoch Godongwana – Budget 2025)

 

The tabling of Finance Minister Enoch Godongwana’s fourth Budget in February was marked by an unprecedented three-week postponement, following a deadlock around the original Budget proposal to increase VAT by 2%.

A revised Budget, finally tabled on 12 March, proposed a 0.5% increase from 1 May 2025, with a second 0.5% VAT increase from 1 April 2026 – but the proposal was still not enough to satisfy most other political parties.

In his Budget Speech, the finance minister called the Budget proposals “a bold and pragmatic approach” to ensure the economy grows “much faster and in an inclusive manner”. He admitted that the economy has stagnated for over a decade, with GDP growth averaging less than 2%, while forecasts for medium-term GDP growth are a dismal 1.8%.

While the powers that be attempt to reach consensus on the Budget 2025 proposals, businesses and individuals in South Africa will find little support from the fiscus to survive these low-growth economic conditions.

This is evident from our overview below of the most pertinent Budget 2025 proposals. In a nutshell, the finance minister is trying to cover another substantial Budget shortfall by directly and indirectly increasing the tax burden on corporate and individual taxpayers.


Budget proposals that will impact you 

  • The 0.5% VAT increases proposed for 2025 and 2026 will impact every South African, while disproportionately affecting lower-income households strained by high electricity costs, inflation and interest rates in a weak economy. To alleviate their impact on poor households, the list of zero-rated food items is extended to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals.
  • Personal income tax brackets will not be adjusted for inflation for a second year running. This means that, like last year, individuals who receive a salary increase will again pay more tax, and could be pushed into a higher tax bracket.
  • No inflation adjustments were proposed for tax rebates or medical tax credits – which once again translates into more tax payable by individuals.
  • Above-inflation increases in the excise duties on alcohol (6.75%) and tobacco (4.75 – 6.75%) are no surprise. This means that with immediate effect, the duty on:
    • a 340ml can of beer increases by 16c
    • a 750ml bottle of unfortified wine goes up by 29c
    • a 750ml bottle of fortified wine goes up by 48c
    • a 750ml bottle of spirits will increase by R5.97
    • a 23g cigar goes up by R8.49
    • a pack of 20 cigarettes rises by R1.04
    • vaping products increase by 14c per millilitre.
  • Changes to the rules regarding the tax treatment of cross-border retirement funds are proposed.
  • A one-year extension in the R370 social relief of distress (SRD) grant and above-inflation increases ranging from R30 to R130 per month in other social grants will provide minimal relief to the poorest South African households.
  • SARS has been allocated R3.5 billion this year and an additional R4 billion over the medium term to enhance its tax collection capabilities, so taxpayers can expect increased scrutiny and administration.


Budget proposals that will impact your business 

The 0.5% VAT increases proposed for 1 May 2025 and 1 April 2026 will certainly impact all companies in South Africa’s struggling economy, with a disproportionately negative impact on the small and micro businesses that are crucial to economic growth.

  • VAT hikes directly raise the cost of goods and services, impacting competitiveness and profitability.
  • Higher prices resulting from the VAT increase will reduce consumer purchasing power in an already-constrained economy.
  • The VAT increase could trigger inflationary pressures, further eroding household incomes and potentially forcing an interest rate hike.
  • Two VAT increases over two years will also result in a significant administrative burden on businesses to implement the required changes to their systems.
  • Carbon taxes increased from R190 to R236 per tonne on 1 January, while the temporary incentive for renewable energy introduced in 2023 has not been extended.
  • From 1 April 2025, the formula to calculate the employment tax incentive and the eligible income bands will be adjusted.
  • It is proposed that the sunset date for the urban development zone tax incentive be extended by five years to 31 March 2030.
  • The Budget proposes to cancel the inflationary increase in the health promotion levy, and that the ad valorem excise duties on smartphones are limited to higher value phones.


Some good news

  • The general fuel levy and the Road Accident Fund levy will not be increased again this year, providing tax relief of R4 billion. However, the carbon tax on fuel and diesel will increase. Budget 2025 also proposes an adjustment to the diesel refund for the primary sector for the next tax year.
  • Property buyers will benefit from an upward adjustment of 10% in transfer duty brackets from 1 April 2025.
  • A R1 trillion investment over the next three years in public infrastructure spending, focussed on transport and logistics, energy, and water and sanitation, should positively impact on the economy.
  • Besides the proposals detailed above, Budget 2025  made no mention of a wealth tax or the National Health Insurance (NHI).
  • In a media interview following the Budget Speech, the minister said that if the economy does well, the VAT increase in 2026 may not be necessary.

5 Tips for Using Reviews to Boost Your Business

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According to a recent survey, 91% of people regularly or occasionally read online reviews, and 84% trust online reviews as much as a personal recommendation from a friend. There’s no doubt that reviews are having a moment.

The challenge comes when you learn that it can take as many as 20 good reviews to overcome a single bad one. Little wonder, then, that many companies try to focus on encouraging unhappy customers to remove their bad reviews, while generally neglecting the good ones, save for a short thank you message. This may, however, be short-sighted as using reviews correctly, can change the entire good vs bad formula, strengthen your company, improve sales and improve your bottom line. Here are our tips for maximising those good reviews.

  1. Maximise your visibility onlineGone are the days when search engine optimisation (SEO) was purely about the words on your website. Google is now working tirelessly to ensure that good companies with great customer service are more visible online. Customer reviews can be used in your online content to add credibility and “expertise” and therefore improve the way Google views your content. But reviews can’t simply be shoe-horned into your site – they must be incorporated in a way that’s justifiable and organic.

    Remember, you can no longer simply write your own reviews as Google tracks which reviews are left when and by whom. Real people leaving reviews in a believable way boost rankings – but fake ones hurt them.

  2. Boost your conversion ratesConversion rates are probably the single most important stat for an online business and your reviews can be used to make a significant impact. Research conducted by the Medill Spiegel Research Center has revealed that displaying reviews across your website has the potential to boost conversions by as much as 270%. Because of the weight users give to the views of others, simply seeing a good review boosts credibility and trust and encourages users to take the next step.
  3. Don’t hide bad reviews, use them to boost trustEarlier we spoke about how many companies try to remove their bad reviews. This is not necessary. Everyone’s going to get a bad review from time to time, and your customers know this. Leaving your bad reviews up – along with your clear responses to try and fix the issues – has actually been shown to boost customer confidence. People like to know that if something goes wrong, you’ll do whatever you can to fix it. These bad reviews help them to see that far better than if you simply sweep them under the carpet.
  4. Good reviews can lead to better hiresYour reviews can also be used to attract better staff. A 2024 study by Deloitte showed that 44% of millennials and 49% of Gen Zs consider a company’s values before accepting a job. People want to work for likeable companies. Including a few choice Google reviews on your website can therefore be used to create a more attractive employer brand and therefore lure in more applications, which will help you to find the best-of-the-best.
  5. Leverage reviews in the real world tooDigital reviews almost never make it out of the digital sphere – and yet they can have just as much impact on paper as they do online. Including reviews in sales documents, pitch decks and press releases has been shown to generate credibility and boost trust. There’s also evidence that including reviews in press releases increases the likelihood they will be published at all.

The bottom line

Your reviews are some of the most valuable tools you can use and finding the money in your budget to maximise them is therefore essential. As your accountants, we can help you to refine your budgets and free up cash to improve all of your marketing efforts.