IMBO Magazine Issue 33: One Love | Page 88

FINANCIAL FUNDIS To put everything in context, Statistics SA estimated South Africa’s population at 54 million people in mid-2014, meaning less than 10 percent of the population pay tax. This places a heavy burden on higher income earners, as South Africa uses a progressive tax system where the more you earn, the more you get taxed. But what if you don’t want to pay tax? For high-income individuals, especially the exorbitantly wealthy, there is hope. All they have to do is find and utilize those places known only as‘tax havens’. The Organisation of Economic Cooperation and Development (OECD)has set four key factors to identify tax havens: 1. No or nominal tax on relevant income 2.Lack of effective exchange of information between countries 3. Lack of transparency 4. No substantial activities As of 2014, the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes classified four jurisdictions as being non-compliant - the worst possible rating (or the best if you are intent on stashing your money away). These areas have been identified as the British Virgin Islands, Cyprus, Luxembourg and the Seychelles with nine other countries classified as partially compliant - those being: Andorra, Anguilla, Antigua and Barbuda, Austria, Barbados, Indonesia, Israel, Saint Lucia, and Turkey. IMBO/ ISSUE 32/ '14 88 Switzerland, in pop culture is perhaps the most famous of places where the rich go to hide their booty, is currently under review - as are others such as Marshall Islands, Dominica, Guatemala, Lebanon, Liberia, Panama, Nauru, and Trinidad and Tobago. The implications of tax evasion are serious, especially for the state. In May 2013, Oxfam estimated that US $18.5 trillion was hidden away by wealthy people in tax havens worldwide, representing a loss of more than US $156 billion in tax revenue. According to Oxfam, two-thirds of that amount, over US $12 trillion, was hidden in European Union related tax havens. That figure does not include companies who would register an affiliate in a tax haven as a means of pipelining profits away from tax authorities. Beyond the Global Forums efforts, another important player in the crack down on tax havens is the United States, made evident through their passing