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Ponzi schemes will put you on SARS' radar!
Tax Bulletin | 1 July, 2009 | Hot Topics:
Dear fellow taxpayer,
The newspapers are full of stories about a crowd of South African investors who put more than R1 billion into an alleged Ponzi scheme run by a kangaroo watcher called Barry Tannenbaum.
Many of these investors say they’ll take their knock and walk away. They’d better run; SARS and the Reserve Bank already have their bloodhounds sniffing around because these schemes are often used to cover hot money, or to get money out the country!
What’s more, SARS and the Tax Court have taken a harsh stance on these schemes. Take the recent cases relating to the Krion scheme run by a lady in Vanderbijlpark: the investors were taxed on the interest they earned, and disallowed an income tax deduction on the bad debts they suffered when they lost the capital they invested.
The following is a worst (but actual) case scenario
Mr Clever failed to declare some R5 million of his business income over a period of three years and stuck it into a local Ponzi scheme. He earned R1 million in interest before the pawpaw hit the fan. He was taxed at 40% on the R5 million, plus 200% additional tax - thus R6.2 million, plus another R1.2 million on the interest he also didn’t declare.
Moral of the story? Stay away from such schemes…they just aren’t worth it!
Until next time.
Regards
Nothando Hlatshwayo
Managing editor
The Practical Vat Handbook
Editors note
Fulvia Becatti
Tax Bulletin Editor
The Tax Bulletin is packed full of tax tips, commentary on changes to the tax landscape and is also an interactive tax forum which aims to help you efficiently manage your taxes and avoid all the traps. It is also a handy reminder of the deadlines which taxpayers have to meet.
