JOHANNESBURG – You may have in the past felt like writing a letter to SA Revenue Service, and request to have your subscription to PAYE cancelled. The bad news is you can’t cancel the subscription.
The Professional Tax Handbook Volume 1 contains 1 018 pages and I recall feeling like a little boy sitting down to watch a new episode of Star Trek attending my first tax class at university.
The intricacies of the Income Tax Act and the interactions between the various sections is a thing of beauty that can be compared to the paintings such as Rembrandt. In the act, there is one definition to rule them all, gross income. It’s the equivalent of the commandments brought down by Moses, thou shall be taxed on all thy income.
Everything you receive, in a year from March 1 to February 28 the following year is included in gross income, except for what you receive that is of a capital nature (read the articles to follow, mind you), that is only included again through the eighth schedule (Capital Gains Tax).
Gross income encapsulates the true essence of the act and can either be seen as magnificent – or is that maleficent?
Taxed on everything
You are to be taxed on everything that you receive. Whether you are an industrious young budding entrepreneur, a farmer toiling raising his livestock, a seamstress bleeding from needle pricks or selling your goods to the highest bidder while wearing stilettos or sneakers, we are all in the net of gross income.
All receipts, whether in cash or otherwise, are included in gross income.
There is one little phrase that you might think will be a get out of jail free card, but you would be wrong. Receipts of capital nature are excluded from gross income, but it is pulled right back in through the eighth schedule.
“1 2 3 Block myself” was the phrase as a child. I am afraid it is true. There are but two certainties in life, death and taxes.
One definition and one schedule that catches it all – and then what of the other 1 017 pages?
Now that is the fine print you see and don’t read. Just like the building instructions for your bookshelf. You plan, you build, it stands. You call your other half and as you place the first book on the shelf, it all comes tumbling down! Why? Because you failed to read the instructions.
Tax is the same. If you don’t read the fine print and you don’t follow the 1 000 pages of instructions that takes you four years to grasp, another 20 years to understand, your constructed tax planning cabinet is going to come crashing to the floor. The question I can assure you is not if, but when.
There you have it. One section that includes everything that you receive into gross income. One schedule that pulls capital gains right back into the tax net. Oh yes, 1 000 pages of fine print that will ultimately determine the exact quantification of your income tax liability.
Even a Starship captain that has spent 25 years of his life to gain an understanding of an infinitely complex tax universe will admit that he, too, needs his crew as this is not a solo voyage.
May you always declare all your revenue and, in the words of Mr Spock: “May you live well and prosper.”
Willem Oberholzer, CA SA, MCom (tax), is an independent non-executive director of Ecsponent.