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