Follow Your Money: Taxes; The Uninvited Guests of Personal Finance.

Issue 7: Consumption Taxes + Mastercard Foundation Scholarship + South Africa Escapes Recession.

Jun 13, 2023

Hi friends,

Happy Tuesday and welcome to Issue 7. 👋🏾

Last week, we talked about staying motivated and building your debit score. 👌🏾

This week, we’re diving into an unpopular terrain—taxes. ✨🚀

TAXES

The Uninvited Guests of Personal Finance.

Here’s an open secret 🤌🏾: While you might not be earning enough to pay taxes, you my friend, are definitely spending enough to pay taxes. 😩

You see, taxes are like those Instagram Ads. Even though we didn’t ask for them, we just can’t escape them 😩😩. When we choose to use Instagram, we are also choosing to see those Ads. 😆

Similarly, taxes are often the result of our financial decisions 🙂. When we actively choose to spend or earn 😋, we are inactively choosing to pay taxes, and pay taxes, we must. 🤝

There are multiple bits and pieces when it comes to taxes, but for this newsletter, we’ll focus on understanding your Personal Income Tax✨ and your Consumption Tax✨ and how to strike a healthy balance between the duo.💯

This week, we double down on Consumption Tax with a few bullet points. 👌🏾

Simply put, consumption tax is a type of tax levied on goods and services that you purchase. 🎯
Value Added Tax (VAT) and Sales Tax are popular forms of consumption tax. 🎯
Important note: VATs are paid at every point of a supply chain. VATs are charged respectively by the producer, manufacturer, wholesaler, and retailer, and you and I do the honor of carrying all that weight when we choose to break our budget. 🎯
Sales Tax on the other hand is charged at the point of sale.🎯
Most VAT and Sales Tax are percentages of your total purchases i.e. the higher you spend, the higher you pay in tax. 🎯
A key difference: While your Value-Added Tax is a summation of all the different taxes levied at other points of production, your Sales Tax is levied at the point of sales, once and for all. 🎯
It is possible to pay Sales Tax and VAT tax at the same time but so far rare. 🎯
Different countries have different preferences and most countries adopt either the VAT system or the Sales Tax system. 🎯

So here’s the catch 🤌🏾: when we stick with our budget, we get to save more 😇. But when we don’t, not only do we get to spend more and break our account but we also pay a high price through taxes. 💁🏾‍♂️

Final takeaway: 👉🏾 Remember, my friend, that we live in a world where we are inspired to build credit scores 😩, motivated to increase our spending habits , and rewarded by the system through high VAT. 🙅🏾‍♂️

In the next issue, we’ll dive into Personal Income Tax and what this means for students already earning income and/or soon to start earning. 💯

👉🏾 That’s a wrap on Issue 7.

FINANCIAL NEWS & TRENDS in AFRICA

connecting the dots across frontier markets.

South Africa Escapes Recession (narrowly) & the economy remains bigger than it was pre-pandemic. 🏋🏾✨

Takeaway: South Africa remains the second-largest economy in Africa and this narrow escape might have just saved the country from losing its place ✨. But beyond that, this feat is an invitation to make peace with our debit score and spending habits. 🎯

Ordinarily, this could be a sign of a stable economy but before we bask in euphoria, load shedding reminds us that we still have a long way to go. 🙅🏾‍♂️

Nigeria subjects Cryptocurrencies and NFTs to a 10% Tax. 💁🏾‍♂️

Takeaway: In the recently released Finance Bill, the government introduced digital assets as eligible for Capital Gains Tax (CGT) 🙂. What this means is that any proceeds made from disposing of your digital assets will be subjected to tax, by 10% 😩

Can we talk about the increasing interests of African governments in digital earnings 🤔? Kenya led the movement with its tax levy on influencers and not too long, Nigeria followed suit. 👈🏾

👉🏾 If two of the five biggest economies in Africa are paying keen attention to our digital lives, we shouldn’t be too surprised when other countries follow. It’s only a matter of when not if. 🎯

Ghana leads gold production in Africa, with a 32% increase.

Takeaway: G for Gold and Ghana! 🔥 Take it from a country that’s been racing to outlive its debt, this doesn't come as a surprise but a sheer reminder that African countries do have incredible mineral resources at their disposal. 💫

Given that gold makes up nearly 5% of Ghana’s GDP ✨, the hope is that this development will bring some level of economic stability to the country, no matter how small. 🎯

MONEY TRIVIA

You decided to break your budget to buy a new pair of Adidas sneakers. They cost $150 and your receipt says 15% VAT. What’s the original price of the sneakers? 🎯
A customer goes to a retail store and purchases a pair of shoes for $50. At the cash register, an additional 7% tax is added to the total amount. Is this tax a sales tax or a VAT? 🎯
A manufacturer sells a laptop to a retailer for $800. The retailer then sells the laptop to a customer for $1,200. The retailer charges an additional 20% tax on the selling price. Is this tax a sales tax or a VAT? 🎯

RESOURCE LIBRARY.