Corruption and bad laws ravage SA’s tax base

‘Sars is absolutely critical to the future of South Africa because if Sars fails, the country fails’: Mark Silberman, Accfin Software director and vice-chair of the Saica tax technology subcommittee.

AMANDA VISSER: After much anticipation, Minister of Finance Tito Mboweni delivered his 2021 budget speech yesterday [Wednesday, March 24]. South Africa is facing some of the biggest challenges in decades. The most serious ones remain high unemployment, poverty and inequality. Government needs revenue to fulfil its obligations in terms of service delivery.

However, the South African Revenue Service [Sars] is fighting its own battles in terms of skills and technology, stemming from its years of capture under the former commissioner, Tom Moyane.

I am Amanda Visser and with me is Mark Silberman, founder of Accfin Software and vice-chair of the South African Institute of Chartered Accountants [Saica] tax technology subcommittee, to unpack some of the issues facing us.

Mark, you are closely involved with filing of tax returns and helping to keep taxpayers compliant through their tax practitioners. What’s your view on our current tax base?

MARK SILBERMAN: Probably since 2008 we’ve been filing tax returns through our systems. You may remember the time when everybody used to say that Sars was the most efficient government service. But with the change in the commissioner, and Tom Moyane becoming the commissioner, Sars actually got a hospital pass because what’s happened now is they’ve lost probably thousands of people – skilled people who are needed to help the country process and do audits on tax returns. I think at this point Sars is limping along as the only thing it can really do is focus on collections.

If you consider that if they’ve lost a thousand people at five hours a day, it means they’re losing 5 000 hours a day. It’s really not good. And I think I need to just tell everybody that Sars is absolutely critical to the future of South Africa because if Sars fails, the country fails. And then of course we’ve also got the situation of state capture, which impacts the ability of taxpayers to pay.

What Sars has [reportedly] is 21 million registered individuals, and those individuals pay PAYE [over] from about 552 000 employees. There’s something wrong with these numbers. I pulled this from the latest stats – and there are 3.2 million companies. Now, it’s expected that 6.5 million will file returns of the 21 million, and [900 000], maybe nearly a million, companies will file tax returns. That’s expected. But these numbers were produced at the beginning of 2020, before the pandemic. We are talking about at least a million people who’ve lost their jobs, so the numbers are going to be reduced by that. As for companies – there are claims that 42% of all small businesses have gone insolvent or can’t continue. So it doesn’t really look good as far as keeping the tax base intact. It’s smaller; it’s going to get smaller. Government has to do something from an economic point of view, and keep the promises recently made.

AMANDA VISSER: Mark, on that we have seen in recent months that residents in smaller municipalities have gone to court to take control over the services that they are no longer getting. And there has been a lot of talk about a tax revolt. What’s your experience in terms of what’s happening on the ground?

MARK SILBERMAN: Alright. I communicate with tax practitioners on a weekly basis. I run webinars virtually every week and in a recent poll that I did to tax practitioners 80% of them said “yes” to the question – that there is a tax revolt taking place. So, people are loath [to paying taxes].

And one has to look at what happens in South Africa. We’ve got e-tolls, no one’s paying; we’ve got SABC, no one much [is paying]. It’s because taxpayers and people who can pay don’t want to give money towards something that they think is really wrong. And as far as the municipalities are concerned, the money is just being stolen. That’s what people see, and that’s why there is this tax revolt. [It’s] nothing that Sars does. It’s the whole system that’s in place.

AMANDA VISSER: There’s also been an amendment to the Tax Administration Act that will increase the instances where taxpayers can be criminally charged if they wilfully or negligently make an error, even if it’s a simple administrative oversight. What is your view on this amendment?

MARK SILBERMAN: It’s really wrong. I think there’s just not much you can do that won’t land you up in jail if Sars has the will to put you in jail. There were a whole lot of things listed – some simple things – like get your address right on your tax return, or make sure that you tell Sars who the public officer is, the person who represents the company in all matters. And if you don’t do these things, the act actually says “wilfully or negligently”, and then lists about 11 things. There’s a big outcry about this. It’s going to be challenged. It is definitely going to be challenged. It’s unconstitutional.

I would just like to say a lot of the laws come down from the finance department, Treasury, and then they are kind of laid on Sars. I don’t think Sars would really want to carry this out. They will if they need to, but can you imagine us having to set up another jail for non-compliant taxpayers – just for tax charges?

AMANDA VISSER: What is your experience with Sars, given what you’ve just said, if it is to shake off the effects of being captured and losing all those important technical skills?

MARK SILBERMAN: My view is that Sars really wants to be successful. As I said, a hospital pass. It is trying to deal with a situation that it didn’t make. I think management is really trying hard. The new commissioner, by all accounts, is excellent and he does have a team around him – and I deal with one or two of the people there. They really try hard. But I think sometimes their hands are tied and they need some help. Maybe institutions like Saica and Accountancy Retired can go and help, because this is in the interest of everyone in this country and the whole of South Africa. This Sars has to work.

AMANDA VISSER: And, given our current situation where taxpayers – and that’s individuals and corporates – are really struggling to keep financially afloat, is there some advice that you have for government and for Sars in that respect?

MARK SILBERMAN: Well, I was reading a very interesting article produced by the head of tax at Price Waterhouse in England, and the writer referred to what happened after the Second World War, the Bretton Woods Agreement, when all the countries got together, and they had to find common ground to make the world work. That’s what we’ve got to do now in tax. It doesn’t apply only to South Africa. It applies to the world. Business, taxpayers, Sars and government have got to find a way of working together that makes the system work.

I can tell you now, all taxpayers want to pay the right amount of tax. They believe it’s fair, and they’re happy to do that, but they don’t want to fund bad regulations because there was a cigarette ban or a liquor ban. They don’t want to pay extra for that, and we’ve got to find a way around these things.

Take, for example, the Covid relief provisions. There was R200 billion that government guaranteed to give to businesses that needed funds. Of that R200 billion, only 18% has been taken up because it was just too difficult – with too many problems in trying to get the banks to give out that money. So there’s got to be some kind of mechanism that we can work together, because the most important thing, if you lose a job or if someone loses a job, is no tax is going to be paid. If a business goes insolvent, there is going to be no PAYE and there’s going to be no Vat. Some people just don’t understand this.

And we get bad regulations, bad actions, and people don’t want to pay tax. So, there’s got to be some kind of educational plan to make things work.

AMANDA VISSER: That was Mark Silberman, founder of Accfin Software and vice-chair of the South African Institute of Chartered Accountants’ tax technology subcommittee.

Brought to you by the South African Institute of Chartered Accountants (Saica).

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