This is how businesses in South Africa are using Bitcoin to evade tax

Hanno Labuschagne

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This is how businesses in South Africa are using Bitcoin to evade tax

Many South African businesses are evading tax by converting their profits into Bitcoin and transferring it unnoticed out of the country.

This is feedback from a well-placed South African businessman who said there are cryptocurrency platforms and agents who are facilitating these transactions.

The scheme is aimed at local businesses which mostly trade in cash and are operated by foreign nationals.
 

deweyzeph

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The biggest flaw in this scheme though is that your business has to be a cash business in the first place. Without this element the scheme falls flat. Cash provides the key ingredient to the tax evasion, not the Bitcoin.
 

RandomGeek

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"The scheme is aimed at local businesses which mostly trade in cash " who would have thought...
 

Sapphiron

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Nothing about this is new. cash has been used like this for centuries.

I think SARS can get around the problem by not having it in the first place.

Like with private individuals, there should be a tax exempt bracket at the bottom of the business market, with higher top end tax rate for the largest companies.
 

deweyzeph

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Nothing about this is new. cash has been used like this for centuries.

I think SARS can get around the problem by not having it in the first place.

Like with private individuals, there should be a tax exempt bracket at the bottom of the business market, with higher top end tax rate for the largest companies.

Makes you wonder how rife tax evasion was before electronic payments like debit/credit cards and EFT's came along.
 

Sapphiron

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Makes you wonder how rife tax evasion was before electronic payments like debit/credit cards and EFT's came along.
That's why early tax collection involved burley men with clubs collecting a "wealth tax"
 

JayM

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Like with private individuals, there should be a tax exempt bracket at the bottom of the business market, with higher top end tax rate for the largest companies.

They do have something like this already. SBC tax rates (for companies under R20M turnover) are progressive starting a R0 for under R70K profit and going up to the full 28% for above R550K net profit.
 

Johnatan56

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Makes you wonder how rife tax evasion was before electronic payments like debit/credit cards and EFT's came along.
Erm, you think it's changed? There's a reason USA and Europe will take a long time to move away from cash.
 

markings

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"What aggravates this tax fraud is that many of these businesses claim VAT back from SARS while not paying VAT or corporate tax on most of their income."

That would surely bring such businesses to the attention of SARS. Nowadays a simple and rare VAT refund request brings up requests for additional documentation and possibly an audit.
 

deweyzeph

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"What aggravates this tax fraud is that many of these businesses claim VAT back from SARS while not paying VAT or corporate tax on most of their income."

That would surely bring such businesses to the attention of SARS. Nowadays a simple and rare VAT refund request brings up requests for additional documentation and possibly an audit.

I agree. It would be foolish for anyone evading tax like this to claim VAT refunds, especially if you are a retailer with inventory. A simple audit and physical inspection of your inventory from SARS would very quickly pick up your non-declaration of cash sales by simply matching up your declared sales, your supplier invoices and what's currently physically on your shelves.
 

Bobbin

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Just wish I was part of this tax fraud. Been paying taxes all my adult life, feels like I'm missing out. :p
 

Swa

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So they're really using cash to evade tax and not Bitcoin. Who would have thought...
 

Swa

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"What aggravates this tax fraud is that many of these businesses claim VAT back from SARS while not paying VAT or corporate tax on most of their income."

That would surely bring such businesses to the attention of SARS. Nowadays a simple and rare VAT refund request brings up requests for additional documentation and possibly an audit.
That's not how it works. They don't claim a VAT refund which would attract attention. The VAT you pay is deducted from the VAT markup you charge. By not declaring the cash transactions the VAT declared is less so they end up paying little or near zero VAT.
 

deweyzeph

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This article is confusing tax evasion with exchange control violations. The heading of the article should rather be "How businesses in South Africa are using Bitcoin to evade exchange control regulations". Using Bitcoin to move assets overseas in violation of exchange controls is a separate crime in itself regardless of whether or not tax evasion has taken place. This is actually more of an issue for the Reserve Bank than it is for SARS.
 

Arthur

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Makes you wonder how rife tax evasion was before electronic payments like debit/credit cards and EFT's came along.
Er, before EFT we used cheques, for at least a century. The infrastructure to handle and process them was massive.

As several others have already pointed out, the tax evasion by cash-based businesses has nothing to do with crypto, forex or excon.
 
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deweyzeph

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Er, before EFT we used cheques, for at least a century. The infrastructure to handle and process them was massive.

Sure, but it was easy to evade taxes with cheques. You could simply sign them over to someone else or cash them in and there would be no record of it in your bank account for the authorities to even know you had made a sale.
 

Arthur

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Sure, but it was easy to evade taxes with cheques. You could simply sign them over to someone else or cash them in and there would be no record of it in your bank account for the authorities to even know you had made a sale.
True, but only cheques with no endorsement. To limit of prevent transfers, most businesses crossed or endorsed their cheques in one of several ways:
- Account Payee Only
- Not Negotiable
- And the tightest of all, Not Transferable.
 
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