People are now on a spending spree as the festive season reaches its climax. Whilst we are in the festive season mood many hardly pay regard to the cost of buying things or send money because we are just elated.
However, some remain cheapskates whether it’s festive or not, to the extent that they don’t even want to pay a cent of tax. The tax I’m talking about here is that 2% tax. Some pennywise people are managing to avoid paying this tax. They are avoiding the tax when they use EcoCash (simply because its used by many people), I’m not sure if other platforms are being used to do this. So my explanations will be in relation to the use of EcoCash.
How are they doing it?
As you well know the 2% tax starts to take effect when you spend or send above $10. So what some ‘clever’ guys are doing is; they send money in batches that don’t exceed $10 hence they don’t get charged the 2% tax. Suppose they want to send someone $20, they send $10 in two transactions (to make it $20) rather than send $20 in one transaction where they will be charged 2% tax (since $20 is over above the $10 threshold). Ingenious and tedious right?
I know you see getting charged EcoCash fees twice (by sending $10 twice to make it $20) and you start to think that the transaction becomes pricey more than just sending the $20 once and getting charged EcoCash fees and the 2% tax. But NO it doesn’t make the transaction pricey. Let’s do the math on this $20 transaction and you’ll see it for yourself:
- If you send $20 in one transaction you are charged: 0.37 (EcoCash fee) + 0.40 (2% tax)= 0.77 cents. You are charged 0.77 cents for sending $20 in one transaction.
- If you send $20, as two $10 separately, you are charged: 0.16 (EcoCash fee for the first $10) + 0.16 (EcoCash fee for another $10)= 0.32 cents. (Remember you are not charged the 2% tax for transactions of $10 and below, you are just charged EcoCash fees that’s why there is no 2% tax in that math). So you are only charged 0.32 cents for sending $20 as two transactions of $10.
As you can see this kind of tedious ‘tax avoidance’ is only feasible when you want to send money to another person instead of paying a merchant. Yes, it’s still cheaper to make payments that way (send money in batches) but it’s not feasible. Will a cashier in Pick n Pay tolerate you to pay for a cake in batches? No, I don’t think so.
Forgive me for throwing the word ‘tax avoidance’ in the middle of nowhere. As it happens, I’m no expert at tax but I’m curious to know if this practice is tax evasion (illegally dodging taxes) or tax avoidance (legally dodging taxes). Let us know in the comment section below
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