Registered users can save articles to their personal articles list. Login here or sign up here

Taxpayers and their powerful vote

Tax system must apply pressure in the right places or may find its power eclipsed by that of a disillusioned taxpayer base.

South Africans are facing the difficult decision of who to vote for in the 2019 general and provincial elections.

Over the span of a few years, we have been utterly disillusioned by a barrage of news about the devastation of state capture and blatant squandering of taxpayer money.

This has led to violent protests due to the lack of service delivery from bankrupt municipalities and a shrinkage in tax revenue from a silent revolt by taxpayers.

Madeleine Stiglingh, head of accounting at the Economic and Management Sciences Faculty of the University of Pretoria, says one will never have “perfect” voluntary tax compliance, even in a “perfect world” where the state is honouring its obligations in the social contract between the state and its citizens. 

She says traditionally taxpayer behaviour – or compliance – was explained from an economic perspective and focused on factors such as perceived fairness of tax rates, audit probability and fines or penalties for non-compliance.

“But more recently tax compliance is viewed from a psychological perspective,” she says.

Taxpayers now have to balance their trust in the system with the power of the system.

‘Very little trust’

“It is public knowledge that there is very little trust [in the system],” says Stiglingh, adding that tax compliance is clearly driven by the perceived power of the tax authority. This is not a healthy tax compliance climate.

South Africa is probably nearing a tipping point, where feelings of powerlessness in this enforced tax compliance climate could be converted into a collective force of power that might become stronger than the perceived power of the tax authority, warns Stiglingh.

Read: Our heavy tax burden

Patricia Williams, vice chair of the tax administration work group of the South African Institute of Tax Professionals, says her impression is that those who in the past were not paying their taxes properly, continue to not pay their taxes properly. However, those who were paying their taxes properly continue to be legally compliant, but are more carefully considering ways to reduce their taxes. 

Stiglingh expresses some confidence that new South African Revenue Service (Sars) commissioner Edward Kieswetter may be able to address this lack of trust in the tax system.

Read: Sars: Now we start picking up the pieces

“Trust is never restored overnight. My opinion is that we already have a substantial increase in non-compliance.”

Tipping point

She warns that if Kieswetter’s focus falls too heavily on increased enforcement, without sufficient focus on the restoration of trust, he might force taxpayers over the tipping point.

Williams, who is also a tax partner at law firm Bowmans, agrees with Kieswetter when he says the darkness and despair surrounding Sars must be fixed by adding light and hope.

For Sars to be respected rather than feared, she says it will be critical for him to inspire the organisation with a commitment to constitutional and administrative justice legal values.

She adds that it is not right for Sars to force taxpayers who legally should have a suspension of payment (because they have applied for it) to pay the disputed tax anyway. It is not right to impose taxes on some, while letting others who are not paying their taxes properly get away “scot-free”.

Over-auditing is not the solution

“This contravenes our constitutional right to equality,” she says, adding that Sars must refrain from over-auditing compliant taxpayers and properly enforce tax registration and tax payment among the tax base as a whole.

Tax Ombud Judge Bernard Ngoepe says his office plays a pivotal role in ensuring that Sars applies tax legislation in a fair and appropriate manner by “facilitating the efficient resolution of complaints against the revenue authority”.

Read: Tax Ombud: ‘Systemic investigations the way forward’

The Office of the Tax Ombud signed a memorandum of understanding with Sars, seeking to streamline the relationship between the two institutions in various respects; most importantly, to resolve complaints in a more efficient and timely manner.

Investigate the real issues

It also signed a memorandum of understanding with The Office of The Public Protector. However, Williams raises concerns about the recent actions of the public protector, Busisiwe Mkhwebane, within the context of the tax industry.

She says given the real issues that need investigation, Mkhwebane’s current Sars ‘rogue unit’ rhetoric would be “astounding” in any jurisdiction other than South Africa.

Williams says the rogue unit narrative formed one of the bases of the destruction of an effective Sars, destroying various individuals’ personal and professional lives in the process.

“If this is what the public protector feels should be taking up her office’s time and resources now, it is very clear that the current public protector is no friend of the tax industry or the taxpayer.”

 

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   16

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Why should ordinary citizens pay tax when connected individuals do not? The theft and wastage due to incompetence is well known. I am unaware of any prosecution in well documented incidences of this. It seems the system is set up to take money from hard working taxpayers and move it into the pockets of the political elite. SARS us complicit in this crime. They are not to be trusted.

All this yammering about restoring trust in SARS is a lot of bunk. The ones not to trusted are the corrupt ANC politicians and friends looting. ANC is just the official arm of the looting ANC. SARS just abuse its powers to make life even more difficult for honest taxpayers. Eskom and Transnet and SAA do exactly the same. ANC looting.

All this yammering about restoring trust in SARS is a lot of bunk. The ones not to trusted are the corrupt ANC politicians and friends looting. ANC is just the official arm of the looting ANC. SARS just abuse its powers to make life even more difficult for honest taxpayers. Eskom and Transnet and SAA do exactly the same. ANC looting.xx

Taxpayers don’t have a powerful vote. They only represent about 5-10% of the population max.

The only power they have is a collective tax revolt which is hard to put together. The best revolt we’ve seen so far is people leaving our shores.

The government electorate and tax base are completely different. They have no interest in taking care of taxpayers which is why they’ll continue to dodge and leave.

INCOME taxpayers represent 5-10% of taxpayers. The other 2/3 of tax comes from VAT (paid by most) and corporate tax (ultimately paid for by customers, again most of the population). We miss an opportunity to convince the majority of people that political thieving affects ALL South Africans when we claim victimhood for only income tax payers.

True on VAT – however the government grants system helps subsidize the VAT paid by the masses in day to day transactions.

The majority don’t know how this works. They think the grants are coming from ANC coffers and that’s what politicians want them to think.

As Aunt Margie said – Socialism all good and well until you run out of other peoples money. Once Peter has been robbed to breaking point to pay Paul, we revert back to the African mean. The walls are closing in by the day – watch the rand.. it doesn’t lie.

I’m confident that RM Kieswetter is a competent person. However, one has to consider the fact that he is a recycled SARS official. The ANC once again deployed somebody that will do their bidding. I’m not holding my breath that things will ever improve. I have cases on my records that now run unresolved for over 20 years. The problem starts with SARS discretionary powers. I have record of taxpayers that used to owe SARS millions and one of them even got away with not rendering the returns after said company was criminally charged for not rendering returns in the first place. The company and public officer walked away scot free. I have another case where we lost a client that owed SARS millions but a connected accountant got the debt to be literally journalised (yes I have the proof for this as well) and he walked. In another instance a taxpayer just got a new VAT number and the old one vanished. As I am not prepared to do things like this I constantly have to transfer clients to other accountants that can. Therefore, the next minister that call me a “rogue accountant” will have he jaw broken

@Corrie1: That is very interesting. The fact that you have direct knowledge and in some cases documentary proof that this is happening suggests that you are not alone among the honest tax accountants. In addition the fact that you are aware other accountants exist that aid this evasion suggests that there is a vast and massive overall amount of illegal activity. It may be worthwhile, on behalf of honest taxpayers, who are victims of this rampant theft, for a class action of theft, corruption and negligence to be laid against government, its tax department and officials who are complicit. Perhaps you would consider approaching OUTA, who’s main mandate is to fight tax abuse, and see if something can be arranged along those lines? I would certainly sign a petition in support for such an action if called upon. I also contribute a small monthly amount to OUTA, which might be considered by other like minded readers who do not yet do so.

@Paining and @Experienced. Just as one State President cannot ensure clean state administration one Tax official even if he is the Commissioner, can’t ensure a clean administration. I reported some of my findings a few years ago to the CEO of a prominent accountancy/tax body. The reply I got was to persist in fighting corruption but at the same time also accept the fact that SARS is a “very big machine and can do anything it wants to…” I don’t support organisations such as OUTA as they propagate a system of tax revolt (see e-Tolls) while I’m from a culture where you never accept anything for free; if you use it you pay for it. The fact that the money gets stolen is the real fight and not the fact that one needs to pay for it. I refuse to adhere to the current South African culture of entitlement. I believe that white collar crime is the cause for more financial losses than anything else. The joke is that in some cases the very same individuals that write our tax legislation are part of larger private organisations that have no problem in causing this country harm that will in all probability never be healed.

The name of the Revenue Service is still the same as before 1994, but its mission statement and purpose changed completely. It is a totally different organization. SARS, under ANC rule, has become the arm of the state that extorts money from those with an income, to fund the looting by cadres. SARS has become the primary vehicle for the looting of the employed minority. SARS is the conduit for the redistribution of property. It expropriates the assets of businesses by stealth, in order to fund the vote-buying process of the ANC.

It is impossible to “restore trust” in a system of legalised theft. There cannot be any justification for “tax morality” if the law that governs tax compliance is corrupt. A moral, justifiable tax, is a transaction between the taxpayer and the state. The taxpayer should get value for his money if the system is fair and just. When the taxpayer spends money on taxes and receives nothing in return, it is not a transaction but a charitable donation.

Therefore, SARS is an arm of Luthuli House that extorts charitable donations from the minority. This is a proven recipe to expatriate the tax base.

@ Sensei: A donation indeed , but certainly involuntary. An extorted involuntary donation. The charitable portion forms only a part, as the poor certainly do not see the full potential of the donation that they should.

Mr. Kieswetter could perhaps (at least theoretically) restore some trust is SARS, but he cannot restore the taxpayers’ trust in our government all on his own. Members of this government will in any event continue to destroy trust as time goes by. While criminals are in power this will not change. To believe that ‘Light and hope at SARS’ will have any effect at all is naïve in the extreme and not expected from a vice chair of a tax professionals group and a partner at a law firm! One would expect such an esteemed person to be closer to reality. I and most tax payers are.

Speaking of reality, if criminal Zuma is forced to pay the R64million plus interest that he owes in taxes on benefits received from his employer(re. Nkandla), or alternatively goes to jail like any other delinquent tax payer would, I’d start seeing light and hope. Until then…

We still don’t know if the previous state president ever submitted a tax return.

The taxpayer’s vote is indeed powerful, when they have (i) two feet (ii) a passport.

We’ve lost count how many skilled people left SA for other countries to gain from. They certainly have voted! (…and the impact was hard on SA)

Wonder why economic growth in Mzansi has been so low the past few years? Few people seem to do their jobs right the first time around. In part, fewer skills lead to poor economic growth, with similarly poor tax collections. Mix it with poor national political leadership, and the current economic scenario comes as no surprize.

Load All 16 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2