magazine business

THE TAXING BUSINESS
OF MONEY
LAUNDERING: SOUTH
AFRICA

BY
BERND SCHLENTHER

Author Name
Muhamad Badrul Hisham
Bin Kamaruddin

Bachelor of Information Science
(HONS.) Records Management
Diploma in Information
Management
[email protected]

THE TAXING BUSINESS OF MONEY
LAUNDERING: SOUTH AFRICA

BY BERND SCHLENTHER

What is the definition of MONEY
Business Tax? LOUNDERING

A business tax is just what it sounds like, a tax that the A Money laundering
government requires a business to pay. Just as the refers to any act that
governments of cities, states, and countries require obscures the illicit nature
individuals to pay taxes on the income they earn each or the existence, location
year (income taxes), they may also tax businesses and or application of
corporations every year. Businesses must pay taxes on proceeds of crime
such things as sales of goods and services, personal (De Koker, 2007, p. 4).
property, and the income they earn.  Money laundering
legislation typically
provides for three
substantive offences in
respect of money
laundering. 

Do you know the Here about Income
types of Tax!!!.

Business Tax? Annual charge levied on
both earned income
* Income Tax. (wages, salaries,
*Estimated Taxes commission) and unearned
income (dividends, interest,
  rents).

*Self-Employment Tax
*Employment Taxes
* Excise Tax

What Is Tax Evasion
in Business?

Tax evasion in a crime in which an
individual or entity intentionally
underpays, or avoids paying, taxes.
Every year, each citizen who has
income and/or assets is required to
file a tax return. Each year many
people misrepresent how much
money they earned, and claim
deductions to which they are not
entitled in an effort to keep their
money away from the IRS.

Tax Evasion or
Mistakes?

Tax evasion is not the same as
making a mistake. Since tax forms
can be complicated, mistakes can,
and do occur. If an individual files
his taxes after having made a
mistake on the tax return forms, he
would not face tax evasion charges.
In order for an individual or business
to face criminal tax evasion charges,
the Internal Revenue Service must
prove that the underpayment was
intentional.  If the underpayment
was due to an error, the taxpayer
will likely be required to pay the
deficient amount, and possibly a
small fine, or interest on the
amount.

Tax Evasion Penalties

If a person willfully commits the act of tax evasion, he
may face felony charges. Tax evasion penalties
include imprisonment of up to five years, and fines as
high as $250,000. The defendant may also be ordered
to pay for the costs of prosecution. Other tax evasion
penalties include community service, probation, and
restitution depending on the circumstances of the
case.

BUSINESS TAXING

The last stage of the
money laundering
process involves the
integration of all the
funds – the original
amount minus the
costs of the
laundering process, is
amassed and
controlled as apparent
legitimate business
funds.

Tax Avoidance and  It is no longer sufficient to In many instances tax
Money Laundering distinguish between evasion may be a
avoidance (a legal action) predicate crime to
Tax avoidance transactions and evasion (an illegal money laundering.
are structured transactions action). However, sometimes
whereby a taxpayer qualifies Money laundering is made the predicate offence
for favourable tax treatment up of three may have been fraud
under the literal language of processes:placement, or theft and the
the statute. The taxpayer may layering and integration. The perpetrator may have
argue that the statutory aim of the layering process is declared the
language is clear and entitles aimed at separating the illicit proceeds thereof as
him to the treatment sought proceeds from their criminal income. 
(Vanistendael, 1996, p. 30).  source which may entail a
Because of the ambiguous complex series of
nature of the concept, tax transactions which are solely
avoidance has become a aimed at blurring the money
highly subjective and trail. 
political term and covers a
wide range of actions.

What is Property Tax on Business Property?

If your business owns real property(real estate), like a building, your
business must pay property tax to the local taxing authority (usually

the city or county) where the property is located.

The tax is based on assessed value (like your house). There are also
special considerations for paying property taxes when you sell a piece

of business property. 

Self-Employment Tax on SALES TAX ON PRODUCTS AND
Owner Share of Business SERVICES SOLD IN SOME STATES

Income Businesses don't directly pay sales tax on products and
services they sell. But, if your business operates in a
Self-employment taxes are state that has state income tax, you must set up a
those paid by sole system to collect, report, and pay state sales tax.
proprietors and partners
for social security and Sales tax is required to be collected by merchants in
Medicare, based on the most states and paid to the state department of
income of the business. revenue. Specific products and services are sales-tax
eligible and money must be collected and paid, and
Because business owners reports must be completed on a regular basis.
are not employees, there is
no pay to withhold these Don't forget sales taxes for items you sell online, which
taxes from, so self- many states now are requiring for specific types of
employment tax is the sellers (like affiliates). 
alternative. 

LLC owners also must also
pay self-employment tax.
Owners of corporations
who work as employees do
not have to pay self-
employment tax. This
article explains how self-
employment tax works. 

WHAT'S IN THIS Employment Taxes (Payroll Taxes)
ISSUE? Paid on Employee Earnings

Showrooms - 2 Employment taxes are those paid by the
Market Report - 3 owner of a business for several types of
taxes based on the gross pay of
employees. These taxes include FICA
taxes (for social security/medicare),
federal/state unemployment, and
federal/state worker's compensation
taxes. How all of these taxes work is
explained in this article.

Some of these taxes (unemployment tax,
for example) aren't collected from
employees, and they must be paid
completely by the employer. 

How Each Business Type
Pays Income Tax

All businesses must pay tax on their income; that is, the
business must pay tax on the profit of the company (the
income of the business less deductible expenses). How
that tax is paid depends on the form of the business.

Small businesses (sole proprietors and single-member
LLCs), partners in partnerships, and S corporation owners
pay taxes through their personal income tax returns. The
concept is the same for all of these business types, but
the process is different. 

Sole proprietors and single-member LLC members pay
taxes by filing a Schedule C included with their personal
return, while partners in partnerships and multiple-
member LLC members file a business return but pay on
their share of the income of the business, including this
income in their personal returns.

Excise Taxes on Use
or Consumption

Excise taxes are those
paid by a business for
certain types of use or
consumption (like fuels)
and activities
(transportation and
communications, for
example).

Gross Receipts Tax on Businesses in
Some States

Most states have a state income tax for businesses. But some states impose a gross
receipts tax on businesses instead of a state income tax. In these states, gross
receipts (revenues) of the business are taxed. Some states allow deductions for this
tax and some types of businesses are exempt in some states.

Sole proprietor businesses are usually exempt from paying gross receipts taxes, but
not from state income tax.

Corporations and sometimes LLC's are most likely to pay gross receipts taxes.
photographs.

Pre-Loved Furniture What about Self-employment Tax for
Owners of a Corporation?

As an owner of a corporation, you receive income from dividends. This income
is not considered self-employment income and is not subject to self-
employment tax. You may also receive compensation from your corporation,
but this amount is considered employment income, not self-employment.
Income from employment with a corporation is paid as FICA taxes at the
employee rate, not the self-employed rate.

Self-employment Tax for a 3. Self-employment tax is then
Partnership or Multiple- calculated using Schedule SE and
member LLC the total self-employment tax
liability is included on line 57 of
Partners in a partnership and members in an LLC Form 1040 for the individual
are considered self-employed individuals (not partner..
employees).

To calculate each partner's self-employment tax
due:

1. First, the partnership completes an information
return on Form 1065. This return shows the total
net income of the partnership as a whole.

2. Then each partner's share of that net income is
determined, based on his or her share of the
partnership income. Partnership income share is
determined by the partnership agreement. Partner
share is shown on a Schedule K-1 that is completed
for each partner,

What Are the Tax Benefits of
Incorporating a Business?

Deducting Losses Social Security Tax
Deduction
If your incorporated business does
not make money, you can deduct If you are self-employed, you can
the losses from your income tax. incorporate your business so all
This is especially helpful in the business income is not viewed as
early stages of running a business, salary or personal income.
when costs are high and income Instead of paying Social Security
may not offset all of the expenses taxes on the entire amount of
you are incurring. Being able to business income you earn, you
write off inventory that has become only pay Social Security taxes on
dated or damaged, as well as the portion of the business
writing off items sold at a full or income you take as salary.
partial loss, is an excellent way to
decrease your overall tax liability

Bernd Schlenther, (2013) "The taxing business of money TAXING
laundering:    South Africa", Journal of Money IN
Laundering Control, Vol. 16 Issue: 2, pp.126-141, BUSINESS
https://doi.org/10.1108/13685201311318485