You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
 Registered users can save articles to their personal articles list. Login here or sign up here

A theory of a tax revolt: Is South Africa on the brink?

South Africans seem increasingly restive about paying taxes to a government mired in corruption allegations.

Tax revolts date back to biblical times. Throughout the ages they have exhibited similar symptoms of a decline in taxpayer morale and confidence in a government’s ability to manage public finances for the greater good of its citizens.

Recent public outcries in South Africa signalling dissatisfaction and concerns over the management of public finances suggest that the country could be on the brink of a tax revolution.

While taxpayers have a civic duty to be tax compliant they are not donating taxes in an effort to be altruistic. There is an expectation of a return in some form. Recent events suggest that South Africans are becoming increasingly restive about paying taxes to a government mired in allegations of corruption. This explains why sentiments of a tax rebellion are growing.

The point at which compliance shifts to resistance

In a recently published paper I reviewed some of the literature on tax compliance. My aim was to establish the theoretical point where tax compliance shifts to resistance. I also extended my analysis to South Africa by extrapolating the legal implications of a tax revolt.

The study found that the fine line between tax compliance and resistance lies where government creates an equitable distribution between collective costs and benefits. Often the threat of a tax revolt is a measure to renegotiate the terms of a fair exchange and a mechanism to mobilise the association that disintegrated between taxpayers and government.

Perceptions about fairness

Governments use tax policy to achieve a number of objectives. These include steering economic growth, changing the behaviour of citizens and raising money to finance programmes.

Tax policy, and its implementation, is therefore the closest and most contentious interface between a citizen and a government.

People’s perceptions about the fairness of a fiscal regime are crucial.

Simply put, tax revolts arise when government receives tax payments but fails to deliver the perceived reciprocal benefits.

Society is not naturally motivated to pay tax. Voluntary compliance is fostered by establishing consent, trust and legitimacy in a fiscal regime. This means that government must ensure that compulsory taxes are acceptable, fair and beneficial to citizens.

One of the main motivations to rebel is when a tax regime is perceived to be unfair and oppressive. A tax revolt is effectively a mechanism for citizens to renegotiate the terms of exchange.

A tax revolution may not merely be based on a rejection of taxes. It may be a mechanism to seek restorative action to improve government performance.

Factors that drive compliance

At the outset tax compliance decisions are determined by an individual’s tax morale. The benefits of promoting tax morale hold immense potential for tax revenue generation. A taxpayer’s level of tax morale is a strong motivator to comply with – or resist – taxation. Countries demonstrating higher ratios of tax to gross domestic product have higher tax morale.

A combination of psychological and sociological factors influence tax morale. Public perception studies conducted by the OECD confirm that a citizen’s age, gender, religious beliefs, level of education and trustworthiness of government are determinants of tax morale.

Another factor affecting compliance is whether taxpayers believe that there’s a contractual agreement between them and government under which social security is exchanged for paying taxes.

Government’s credibility, or trustworthiness, plays an important role in this fiscal contract.

In South Africa, this contract has been under strain following instances of widespread corruption and wasteful expenditure by various state-owned enterprises and government institutions. These events have negatively affected both parties: government’s credibility and competency and citizens’ tax morale.

Under these circumstances of distrust and malaise, a taxpayer may question the rationale for paying taxes. After all, why should citizens make tax payments if it means they’re simply financing state corruption?

Reasons for revolt

South Africa’s current economic, political and social context presents many determinants of taxpayer resistance: a high tax burden; loss of confidence, credibility and competency in government; low taxpayer morale; and increased frustration from government’s lack of commitment to arrest the rampant corruption and misappropriation of tax funds.

But is a tax revolt the answer?

As a last resort, revoking one’s consent to tax and embarking on a full-scale tax revolt may seem like the only available option to restore the terms of the fiscal contract. However, historical accounts of tax revolt show that this type of action can expose citizens to the harshest and most repressive measures.

Embarking on a tax revolt is an act of civil disobedience and unlawful.

The penalties are harsh and the mechanisms available to the South African Revenue Service to enforce tax collection are far reaching. They include, for example, seizure and execution of property.

There are other consequences too. When taxpayers renege on their tax obligations it can lead to severe fiscal stress. Ultimately citizens bear the burden of disruption in government services, economic stagnation and inflationary pressures.

Solutions

An important step is to ensure transparent governance is fostered so that government can be held accountable for effective spending. This can be achieved by supporting civil society groups that challenge the suitability of government policies and the reciprocal spending of tax revenue.

A great deal of attention needs to be placed on restoring trust in government institutions. The fundamental starting position must be to address corruption, restore trust and legitimacy in government and ensure value is received for tax money. Only then can government start to rebuild its credibility and with it taxpayer morale, and restore a taxpayer’s consent to tax.The Conversation

Roshelle Ramfol, Senior Lecturer, University of South Africa

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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.

COMMENTS   71

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

The 7.5% of the population to do pay taxes are already forced to cater for their own security, education, healthcare, electricity, water, etc.
In other words we pay twice for the same service and at some point and quite rightly taxpayers will simply say no more.
Taxpayers, are the people with the capacity to survive.
The poor so beloved by the ANC when its time to vote, or time to justify repressive and discriminatory legislation (but forgotten at other times), are the ones who will suffer.
But then they already do since there is no service.

So in reality, in the SA context, the only class that will suffer from tax revolt with be the BEE-preneurs and civil servants.

The country will be finished but perhaps it is time to say c’est finis on this experiment.

Look north to Zim. Even the civil servants are not spared.

Only the politicians and their feeders win.

I disagree. The poor are numerous, they can riot and burn and make the lives of others quite miserable. I suspect that like in zim, police and army that aren’t being paid mobilize the masses to loot whatever is around.

The root of the problem is this idiotic political system where the group who can make the most babies rules the roost. Those
who don’t pay tax decide how the money will be spent and those who pay tax have no say in government. The USA tried their “democracy” system in Lybia and Iraq and it failed spectacularly. Sometimes the circumstances demand a different approach. It is time for a new system. This circus experiment is imploding fast.

I disagree the USA “Democracy” system is actually succeeding spectacularly just as the USA wants it. Look at Eskom and SASOL and the US involvement who are reaping billions in revenue for US companies. Same thing for Halliburton and the boys club in IRAQ and LIBYA. Go back to the US company United Fruit Company and you can see that the failure we call it in South Africa is by design to benefit the USA. Just look at how impoverished the central american countries are on the doorstep of the USA due to the United Fruit company and so forth. When Soviet union collapsed look at how many US companies plundered the Soviet companies. Ukraine too is now having its land stolen and being bought out by western people. South AFrica and the ANC are jsut another pawn of the US Masters pulling the strings. Other western countries like SWEDEN and NETHERLANDS reaped rewards from the ARMS deal etc. When Putin offered nuclear power to SA at R100 billion people were shocked but only later did it come out that ESKOM were actually already in the RED for R450 billion and we still got load shedding threats. The US engineers never designed Kusile and Medupie correctly. We had skills at home to do it like GROUP5 but they were not part of the intricate fraud and money laundering CLUB.Enough said! So why should i pay taxes to the CLUB so they can squander and enrich themselves? A contract is equal consideration for both parties. Tax payers give money and receive bad service no service and bad goods. ESKOM perfect example. They havent delivered on their side of the deal so they are in breach of contract. Simple isnt it?

@gopieter……you summed it up well enough

Tax payer morale? more like government morality or lack thereof.

There will never be an active revolt. Simply more and more people will evade and tax, avoid tax and contribute towards capital flight. The net result will be falling state revenues. The ANC’s response will be totally predictable: whatever measures they take will be short term populism which will further reduce confidence and exacerbate the situation leading to more capital flight and plunging state revenues.

People ultimately vote with their feet. Capitalism votes with capital allocation. The ANC /socialists electorate vote for a claim on others’ wealth. This cannot end well for them.

Well said Richardthe Great !! …most of our thoughts exactly

Still freaking me out though…like, are we in effect resigning ourselves to the inevitable…??

How does this end ? [ rhetorical question possibly ]

Just so…. so…. saddening !

SA I still believe one of the best countries in the world…but one could say I am suffering a side case of trauma, watching SA go down over the decades

You cant turn a blind eye to this anymore…..there are 5 stages as laid out by psychologists when dealing with trauma:

1] Shock…[ huh…who ?..what are you saying !?..etc ]
2] Denial…[ cant be…never !..etc ]
3] Anger ….[ why did they let this happen ?!…who is responsible !? etc]
4] Bargaining …[ please…if we can have one more chance..I’ll do anything…please etc ]
And finally…
5] Acceptance…

I’m probably still at Stage 3] ..!…

Its like watching a child drown, and you cant do anything

6] Move on….

Great comments RichardtheGreat & Realitybites.

Agree, we all are in the same boat (…what’s the name again of that notorious 1912 ship?)

As I now pay 15% VALUE ADDED TAX, I choke on that phrase. I guess I should consider myself lucky, I have running water (crisis coming) garbage pick up (constantly in strife) Electricity (now & then) soon gubment health care (life esidimeni,) a seriously faulty education system (keeping children unintelligent and reliant on the state, safeguarding the government jobs) and police protecting the electorate (ADT, Fidelity, Chubb, Nightguard etc…) There’s some real value for you ON TOP OF THE VALUE YOU PAY?? 3rd world

Ever been flagged at SARS? Not worth it. They will hound you forever. The Zuma’s and all the others go free.

Only tax payers should be allowed to vote, I object strongly to the freeloaders and thieves doing what they will with my tax.

As for the 4-7.5% that pay tax and have kept this lot running for 25 years, we should all get medals. Not many country’s can survive on a tax base of 7.5% supporting 50 odd million.

Have a little faith and patience :). I filed objections in 2018 and 2019 to some unilateral action on my returns by a SARS employee.

It took three visits to their office. In both cases I was re-assessed at the same rate as what I declared in e-filing.

Perhaps they will modify their behaviour going forward, we live in hope.

@pwgg. Well said.

Your last sentence, quote: “Not many countries can survive on a tax base of 7,5% supporting 50 mil”…

That’s my concern: WHO SAID THAT SA WILL SURVIVE IN THE END?? I think SA is DYING is slow long-term economic death, because of exactly that reason. The top taxpayers are very globally mobile….the ANC is oblivious to tax.

What SA need is 15% income tax on Indiv and Companies, no CGT nor any Estate Duty….then we may attract FDI like Mauritius.

@ MichaelfromKlerksdorp …yes..agreed !

Coming from someone who believes that tax in fact is legalized theft and we dont need tax as there is a whole better system regarding community etc [ beyond the scope of this thread ]

But, if we must have tax, then please…just make it SIMPLE for everyone to be compliant

FLAT 15%…thats it !…nothing else..!..

Then watch the money FLOW !…just like Monaco…Mauritius and everywhere tax is minimized…….or, here’s a simple analogy:

‘All boats float in a rising tide’

But the ANC is severely shortsighted…..the comprehension of time/investment and the ‘delayed gratification’ principle are impossible for them to grasp

Rather, they fall victim of the greed principle – take as much as possible now [ even if you take everybody down with you ], to h*ll with the rest

Just like the old saying goes: ‘If you want less of something, TAX it’

Period.

@Realitybites. You’re absolutely spot on.

What strike me about Mauritius (like many tax-friendly nations…Georgia is also one) is the simplicity of their tax system.

A New Zealand mate of mine (a tax lecturer in Hamilton) tells me that most NZ individuals does not need to file an annual tax return…..all the required tax is deducted via payroll, incl. rebates…and that’s that. It’s only upper-end HNWI individuals, like company directors / business owners, that really need to file Indiv tax return.

Welcome to SA with it’s complex compliance…

@pwgg…yes, I have suffered at hands of SARS..!!.long story short they continually used to make up sh*t/ things that were totally irrelevant…and we would jump the hoops, waste time, money and precious energy running around pulling all the necessary paperwork to avoid the draconian threats /fines etc sucked out of their thumb

My accountant would then submit everything..only for SARS to reopen the SAME thing months later..meaning they didnt even bother to acknowledge everything we supplied them !!?

Then, once, I am not kidding, SARS came after us for literally a few Rand…[ I recall something like R20 or so] hounded my bookkeeper for weeks..after my company had given them MILLIONS in taxes/vat over the decades !

But…. when they owed us…well, it was like pulling blood from a stone

Then, when my business went through a bad patch, they hounded me constantly from their call centre for a few thousand rand..every day.!!..threatening me even with the usual fines/penalties even jail time etc etc……after I had given them MILLIONs over the years….

Thats when I snapped !!..game over !

Since then, you can only guess what I think of them [ its not printable here, thats for sure ]

The tax-revolt has already begun when individuals structure their dealings in such a way as to limit profitability, to avoid taxes. To prevent paying Capital Gains Tax on their investments, investors are willing to take a capital loss rather than to sell at a profit. Capital Gains Tax prevents investors from realising their profits. Business owners take on debt, to buy equipment they do not need, to get the tax deductions. Entrepreneurs increase their risk and lower their profitability, simply to avoid paying taxes. The tax regime motivates entrepreneurs to take on unnecessary risks that they are not compensated for.

The entrepreneur considers the Income Tax, Capital Gains Tax, Municipal rates and taxes, electricity incompetence tax and estate duties and then decides that it is simply not worth it. The record-high unemployment figure is the consequence of an enormous tax revolt by entrepreneurs.
The low business activity and the high unemployment rate prove that this form of tax-revolt is strong and rising.

When Pakistani, Chinese, Somali and Nigerian merchants live in their rented shops and do not register their addresses or businesses with SARS, this is a tax-revolt. This form of tax-revolt is prevalent in every town in the country.

The tax regime is a penalty for doing business in a country. When the cost of emigration is lower than the tax bill for the individual, he simply buys a plane ticket. Therefore, the tax regime filters society. It motivates taxpayers to emigrate, and it causes the unemployed to stay.

We are underestimating the size of the active tax-revolt in this country. It is not as visual as visible the daily service delivery protests, but it is much bigger.

“It is not true that the legislator has absolute power over our persons and property. The existence of persons and property preceded the existence of the legislator, and his function is only to guarantee their safety.”
― Frederic Bastiat, The Law

@Sensei…ah, as always, on the button !..thank you sir

But I’ll take it further, and state that tax is nothing more than legalized theft

Two words for you :

Sovereign Right [ as in the human being, and its God given legitimate inherent right which overrules ANY man made regulations etc ]

Research this [ and why your name is spelt out in capital letters, how you become a government entity when they do this etc etc ]

The small taxpayer base has no way to revolt . Their tax is via PAYE , their employer compelled by law to pay , so the only out is literally out : Emigration.

That or quit one’s job =) no income no tax.
More seriously, yes the cleanest exit is emigration. Withholding taxes, protests, alternative currencies like usd or crypto, theyre all messy and end in violence. Emigration at least leaves you alive.
As an aside, one can live like an expat here, and have ones financial affairs offshore, but again its quite a high tax country, but cheap for property and those services that actually work compared to dev.markets.

Really? Garage service? Painting? Electrical? Car service? Plumbing? Roof repair? Tiling? Many will accept cash for a ‘discounted’ fee 🙂

With he famous bottom in sight, it is common practice to call that revolt. It is not. Modern tools are doing the job accounting perfect, unless outside hands [ Steinhof ] handle keyboards. On the way to become a true African state the last stage is blaming to.

It is fair to say that most citizens pay tax in one form or another, such as VAT or PAYE. However, it is abundantly clear that the bulk of the taxes come from PAYE, Provisional taxes, and Company taxes. That means that only a very small percentage of the population pays most of the taxes. Around 17 million grants (possibly more) are paid per month and only to people who at most only pay VAT on their purchases using this grant money, so it is not paid from earned income but from free handouts by the government using the receipts paid from contributing tax payers. Pensions are also paid to a selected portion of the elderly. If you were able to save money before your retirement age, or own a home, or have an income from a retirement fund which you paid for your self instead of wasting your money, then you are eliminated as a recipient of the government monthly pension. In most, if not all first world countries, every citizen can benefit from a monthly state pension – but not in SA. In SA we get very little back from the government in the form of basic provisions. Policing, health care, consistent electricity, safe water provision, proper education where the pass mark is 50% and not 30% are a few basics that come to mind.

So, if a tax revolt by that very small percentage of significant taxpayers occur, where will the government get the money to pay the 17 million monthly grants to that growing list of grant beneficiaries?

I am told that in a recent SAICA presentation it was claimed that 50% of SA’s tax was paid by 551 persons. If this is true it demonstrates that the tax base in SA is incredibly narrow. Furthermore I think that SARS should identify these people and make sure that they are well looked after because even a loss of a few of them will have significant tax implications.

A couple of years back, Mike Schussler calculated that 3.5 million South Africans pay 95% of all tax. Note, ALL TAX! That’s income tax, VAT, corporate tax, CGT and the hundreds of other stealth taxes the ANC imposes. Yet they still cherish the fond belief that Socialism can work in South Africa??? (And as for our Communist politicians, they do not seem to be able to comprehend that Communism has ruined – and been kicked out of – over 50 countries. West Germany staggered as it tried to absorb the poverty of E.Germany after reunification.) So the bottom line is that there is NO money to operate here as a Socialist govt. 57 million cannot live off 3.5 million people, full stop. The mathematics aren’t complicated. Only stupidity prevents people from understanding them.

Impossible. Only 40% of tax in SA is income tax. Would be very surpised if the 551 paid 50% of income taxes in SA. Total income tax in SA for 2018/19 was around R600bn, so your 551 guys would have to pay income tax of R500m each, which would mean income of R1bn plus…for reference Whitey Basson’s has ASSETS i.e. not income of R1.8 bn, and he is one of the 50 richest South Africans…

But I guess this is now being touted as a fact across many a braai around the country

SAICA is wrong. That figure is incorrect.

It is common knowledge that private enterprise can deliver products and services more efficiently than governments can. Why is this, when, in many instances, the shareholders of the businesses are the same people who work for the government? The reason for the difference in efficiency and productivity is simple. A company is not a democratic system. There is no one man one vote. You have a vote per share. The person who owns the most shares, who has the most skin in the game, has more rights to determine policy.

When people who do not have skin in the game, have the right to determine economic policy, the results can only be catastrophic. When the majority of voters do not own property and depend on handouts and grants, then democracy is a failure and a recipe for disaster. This is why the Chinese economy grew to be the biggest in the world. They are not democratic. People who do not have skin in the game cannot have the right to determine policy.

The tax rate in South Africa is determined by people who do not pay those taxes. This cannot end well.

@Sensei !….100% !

Voting rules as they should be:

1] Must be over 21 [ but 30 in fact the ideal age, as you need to acquire some life experience for goodness sake ]
2] Must be a registered TAX payer
3] Must have a minimum of a Grade 12 [ ideally though, a tertiary education ]

This is at the very least, the bare MINIMUM requirements when it comes to deciding on who will RULE over you…a very important, critical thing right ?

Well, based on the above, it would reduce the number of voters in this country to a few thousand [ probably the approx number of current taxpayers anyway ]

You would be grossly mistaken to assume that under 30s and those without tertiary education degrees don’t contribute meaningfully to the fiscus. What’s next? Must be a land owner and male? does any of this sound familiar.

Lofty actually raises very good points in answer here. One of the reasons we ended up where we are today, with zero qualifying criteria for voters beyond citizenship and minimum age, was in reaction to the initial restrictive voter criteria.

Remember, women have only had the vote in many countries for around 3 going on 4 generations.
The Cape like many other places used to allow only property owners to vote.
Outside SA the fear has been for a long time oppression by taxpayers of the poor and unfortunate. But here, taxpayers are the minority and oppressed. This is our one unique trait separating us of other so-called democracies.

But the interesting thing about democracy is that you have different votes and therefore you can allow for variation.
I would divide it roughly as:
Ward council — the residents vote, any person over 18.
Mayor — the ratepayers vote, property owners only
(In this scenario — municipal councils consist only of mayor and ward councillors. None of this additional freebie slots for political party nonsense).
Provincial and national assembly — the citizens vote. Similar to ward councillor, excluding murderers and rapists.
Premier and President — matriculants only. Voter age 21 at least. Call it the educated vote.
Upper house, our currently useless council of provinces which I would also recast as a constituency vote — the taxpayers vote.

Sensei while I broadly agree with what you’re saying and normally find your comments insighftul (if a bit jaded) the Chinese economy is not the largest in the world, not by some margin. What measure are you using?

Adjusting for purchasing parity, fine. Bit of a stretch though? The fact that GDP is itself measured in dollars tells us all we need to know.

In the context of the conversation, what is your point Lofty?

Hi Moneyweb, please refrain from censoring my comment here – I am replying in context to the OP, ‘Lofty’, thank you !!

@Lofty, who wrote:

“You would be grossly mistaken to assume that under 30s and those without tertiary education degrees don’t contribute meaningfully to the fiscus”

Read my comment again – I said minimum age of 21

That’s because voting isn’t just about your wealth input, but more important, a cerebral one too

And that something which can only come from life experience: Wisdom !

No doubt there are many economically active youths – but you will also find these are the same that vote for socialists and firebrands like Malema too !!…..

Lofy wrote : “What’s next? Must be a land owner and male?”

Well, unfortunately its coming to light that women vote ‘emotionally’

This is having dire consequences as a result – just look at whats happening in Europe, where the majority of women are voting and welcoming mass immigrants swarming in from the ME, Africa etc

We men see the potential dangers, as the majority of these soldiers who are bringing a very, lets just say to be PC,’different attitude’

Women look at all these 18-30 year olds swarming in, and say ag shame, lets take them into our homes to care for them

And look at the results [ PS Sweden is now the rape capital of Europe ! ]

What about the rise of Feminism, and how that power they yield now has all but destroyed family values, and further dividing the gender line

Or how women are the main supporters of ‘transgenderism’ too !

Tell us Lofty, how is all this turning out ?

Democracy is doomed it severely disenges authority and accountability.

Politicians steal from Productive people and Savers to buy the votes of those that don’t save or produce. Poor people end up voting for a living and more and more do so. Giving so much power to people who don’t contribute to decide how much people who do contribute must contribute is a recipe for disaster. Two wolves and a lamb voting what to eat for dinner.

The solution I believe is a meritocracy where merit is largely defined by how much tax you pay with everyone having some voting power but bigger tax payer having more voting power then smaller tax payer. (on a sliding scale).

I dont think a scheme where one buys votes is a smart of. That just leads to elites capturing the system, and I assure you the private sector is not benevolent…

But a vote tally system based on education, PHD = 10 votes, Masters = 8, degree equals 6 and matric equals 2.

Tax brackets highest = 10, then step that down.

So a well educated, well earning person, has say 20 to 30 times more say than uneducated and unemployed.

This line of reasoning will get us somewhere. I do not agree with giving voting points to academics and government employees. Those who live off the taxes of others cannot have the right to vote on that basis. Many naive academics support socialist ideologies. That means they are benevolent with other peoples money, never their own.

They will have the rights to vote according to their tax bill and the value of the property they own(municipal tax). Only those with skin in the game have the right to vote. Any system that gives people the power to spend other people’s money is doomed to fail.

Yebo Bru
If you have a problem with the buying and selling of votes you must voice objection to the payments of grants and the giving of food during electioneering. The private sector should not be judged by their intentions but by there actions. They do a massive amount of good and big tax payers do deserve to be treated as elites.

At the moment the system is captured by politicians stealing money from productive people and savers to buy the votes of those who sell there vote cheaply. This will always happen with a democracy. Democracy is doomed.

My scheme would mean that each additional votes would require more and more tax to be paid. (sliding scale) Those extra vote would become so expensive that almost everyone would rather not pay tax then get extra votes.
A vote tally based on because education qualification can be easily manipulated. Will you compare a English degree with an Engineering degree which is much harder to aquire. How will you stop Universities issuing degrees willy-nilly. There are many hard working rich clever uneducated people who contribute massively whereas there are also many educated people with no common sense. Education is not same as intelligence. As Sensei pointed out. Your link has huge holes in their arguments. Including there ridiculous assumption that each transaction has a loser. Almost every exchange has 2 winners.

Fully agree with the first two paragraphs…

But Ah Cattleman, an engineer at heart hey… I can never understand why people disparage the English Lit grads? You wouldn’t have decent TV programs or movies, if people didn’t follow that path. Stop putting engineers at the top of societies value add… Yes functionally they are super important, but by no means should we only have engineers being able to vote…

So you are saying, the top 50 companies, all gang up, buy an election deploy a candidate and vote them in, then for example sake destroy all structures holding them back from pillaging and plundering the environment is a good idea? I think not…

I dislike the government as much as the next guy, but to think a “corporatocracy” run system will be beneficial, is to forget that all humans are corruptible… It would a matter of time, before a tech giant ran your country for their profit….

I dont disagree that there are plenty of high earners that dont have formal qualifications. But a profiteers views should not be conceived as more valuable to a society than someone who studied, as you stated a lesser degree, such as social science and works as a social worker. Most of the wealthy I’ve encountered have generational wealth, they didnt earn it themselves but were fortunate, hereditary political power, sounds alot like the old governance structures. Everybody solves a problem, just because you like bridges, doesnt mean the person working to help aids victims is less valuable to our society and should have their views discarded.

My systems brings balance, you earn and pay taxes, extra votes for skin in the game, you have an education, great you can think, extra votes… Yours is very lobsided to financial flows and power. The money they have already means their problems are different or solvable, whereas government is there to work for those who cant….

@Cattleman who wrote:

“The solution I believe is a meritocracy where merit is largely defined by how much tax you pay with everyone having some voting power but bigger tax payer having more voting power then smaller tax payer. (on a sliding scale).”

On paper, that looks idealistic

Except ..there’s a major problem…:

Big Corp SA !

All the massive companies like Vodacom/MTN/Discovery/the banks etc etc who are ALL in bed with government !

Its called conflict of interest

Reality Bites.
The scheme I envisage would not allow corporations to vote because they are not not naturals humans. There shareholders however could vote based on there taxes paid and a sliding scale. The scheme I envisage would not be giving the bulk of its votes to the rich but to the middle class (because of a sliding scale).
How are the big corporations all in bed with the government. If they were in bed would they not opt to pay less tax.

If the ANC was a benevolent government that made decisions that advanced the lives of its citizens and raised the levels of eductaion, health and other necessity services , no one would worry if they were white, black, purple, blue , male, female a democracy or a dictatorship. Anothe point, is that we never pay tax, they take it from you.

No need to revolt.

Learn the Law, Apply the Law = Zero Income Tax; Zero CGT;

Anyone can do it, including salary earners.

Once you do this, SARS cannot touch you and the cANCer gets nothing from you to pocket.

I’d love to know how, currently my employer deducts PAYE and I have to fight to get some of it back. Tax directives are extremely difficult to get.

As a salaried individual, use S12J to get 100% tax refund.

What the he’ll are you talking about?

He is on the social grant. I don’t know what he doing here though.

A by-product of effective estate planning incorporating trusts and S12J is zero income tax & zero CGT.

@Myricals. Have such scheme using a combination of Trusts & S12J been tested by SARS audit or dispute as yet?

Under the TAX AVOIDANCE provisions of Sections 103(1) & Sctn 80, SARS can apply tax avoidance when:
(i) a transaction, operation or scheme has been entered into,
(ii) which had the effect of avoiding or postponing liability for the payment of any tax,
(iii) which fails the bona-fide business purpose test or the “abnormality” test (or abnormal rights & obligations test)
(iv) and was entered into / or carried out solely or mainly for the purpose of obtaining a tax benefit.

Section 80 provides a set of non-exclusive factors to determine “abnormality”.

If in doubt, kindly let me know & I can try to arrange you a SARS-visit to get further clarity 🙂

Interesting…
I can’t help but wonder why Johan Rupert with all his money and teams of experts doesn’t do that. What a fool he is for being the biggest tax payer in South Africa. I think you should go sell your nuggets of tax wisdom to him for a few millions. I won’t be able to afford you unfortunately, so I’ll keep paying my taxes like the idiot I am.

Myricals, ONLY if one’s employer can pay us in crypto (like Karatbars), there may be ways to hide it…zero tax 😉

Sorry chum, I can’t get past “Gross Income” definition of Section 1 the Act. If you apply your time/wit/skill it boils down to “doing work” = taxable.

If there’s a legal way, you and I can join up & form a consultancy to earn big-time. (…but as I know SARS/Treasury…once govt see they miss out, they’ll change the Act in their favour.) 🙁

…wait, there IS a way to pay zero tax in SA, but it’s rather tricky:

You’d have to comply with the “Ordinarily Resident” definition, and the “Physical Presence” test to be regarded as a Non-resident in the future. It boils down to….voting with your feet.

Estate planning’s sole purpose is the management/disposal of one’s estate during one’s life and after death. There are often favourable side effects of efficient estate planning such as asset protection, protection from creditors & tax mitigation.

Trusts are the most effective and beneficial tools to ensure sustainable benefits from one’s labour. The objective is never to avoid tax but to protect assets for the benefit of current & future generations.

Trusts pay taxes in many shapes and forms.
Income tax, VAT, CGT, municipal rates and taxes, the founder pays tax on the loan account and the beneficiaries pay tax in their personal capacity. You only score estate duties in a trust structure, and that is only a benefit if you do manage to get a substantial growth in the value of the assets after you created the trust. A trust does not hide your tax liabilities from SARS my friend. A trust merely creates a formal structure that can be tracked and scrutinised by SARS. The local Somali and Nigerian merchants don’t have trusts, and they don’t pay any taxes. A trust is a tax-trap so to speak.

Everyone pays VAT and rates & taxes if you own property. Trusts are not immune to these.

Of course if you operate a vendor registered business, you can recoup VAT, whether a company or a trust.

If you own property in a trust, the rates & taxes and all property related expenses are tax deductible if run it as a rental enterprise. So if you rent property from a trust, these deductions will apply.

Further expenses can be deducted in a trust if you hire equipment & vehicles from the trust e.g. depreciation, repair & maintenance.

A trust that has, say, 3 registered tax payer beneficiaries who do not earn an income can disburse R 230 000 (at current threshold) in income & capital gains with zero tax implication. So you have registered your kids aged 2, 5 & 7 as taxpayers, you can disburse to each R 78 000 tax free, both for the trust and individual taxpayer.

If you charge interest on loan account at the official rate, there is no tax implication for the trust, however, the interest will be reflected in your personal income. Every personal expense run through the trust is reduction of loan account and the target is to get loan accounts to zero.

Owning assets in trusts opens you up to scrutiny from SARS but if you operate a clean above board compliant trust, there is no need to fear; SARS will acknowledge this…they are only out to get you if you break the law. We have had 2 of our trusts audited by SARS and came out smiling because it reaffirmed that we were doing it right.

Reading statements like this on Business Day today make me want to halt paying taxes immediately : “Employees at troubled state airline SAA will be paid 50% of their November salary and 13th cheque on Wednesday”. What ??? A 13th Cheque when the company is in such dire straits. This confirms finally for me the total insanity of the ANC ! They are giving us taxpayers the proverbial middle finger at every turn.

A cadre is a financial miracle-worker, a Wizzard. They manage to pay bonuses out of losses, not profits. There is no cash flow, but somehow they squeeze out a bonus.

They don’t mind if they don’t get a salary or if they lose their jobs, as long as they get a bonus. Many taxpayers will not get bonuses this year, but those people who work for us, whose salaries we fund, extorts a bonus from us.

@Advisor1 – a 13th cheque is a contractually guaranteed payment unlike a bonus which is dependant on the performance of both employee and employer.

@Wendy Webb….”a 13th cheque is a contractually guaranteed payment”

No it isnt !!

Besides the fact that the 2 are very similar, just like a bonus it can be negotiated from the start

When I ran my companies, I always made sure of this when hiring – IF the company was profitable enough, and we could afford, we distributed this amongst my employees as a ’13th’, as stated in their contract

However, no profit, no 13th !

So, it was never guaranteed

And..if an employee was EXCEPTIONAL, and the company was showing profit, he got a ‘bonus’ too on top !

PS..looking back, I was too soft and sometimes still paid 13ths/bonuses even if the company made a LOSS, as I somehow couldn’t help not reward those who showed initiative [ and often forsook my own salary to do this ]

Instead, you have to be a miser like Amazon/WalMart etc who are on record for treating their employees like sh*t, and then you make gazzilions !

High time taxpayers (and not low to no tax-paying entities such as the union members) show this rotten Government that they are a force. We live in a warped country where tax-payers are treated like dirt yet non-tax paying voters, many living off tax-payer proceeds through things like social grants, get all the Government attention. You would think tax-payers and those who can influence Government the most would be one and the same but not in this mad-house.

Love these tax revolt articles. Could somebody please just explain to me how I and I assume at least some other MW readers that rely on a salary for our income can “revolt” exactly?

I sincerely doubt that my employer will comply with my request to stop deducting PAYE, nor do I believe will PnP be open to my wife only paying the before VAT bit when she does the monthly shop and funnily enough the bleeding lawyers insisted that I pay transfer duties when I bought my home.

Tax revolt, also known as tax evasion, is pretty much only open to people who run their own business. As an accountant I can assure you that, if my articles experience is anything to go by, if most of those chaps declare any less net taxable income they might just qualify for food stamps.

The scope for tax revolt is therefore pretty limited methinks…

There will be no tax revolt, period. One cannot earn any money in terms of Section 1 of the Income Tax Act that will ever be deemed tax free. If you save money, the erosion of the capital through the floating exchange rates, and inflation will gobble up any interest you’ve earned. You have two choices: Make the best of your life or leave as soon as you can. It has become even impossible to effectively fight a re-assessment, even if the proof of the inaccuracy hits SARS right on the nose. These guys remove money from clients’ bank accounts at will, they withhold compliance confirmations form other clients that get badly hurt through unsavoury BEE partners and they can obtain High Court judgments without the poor taxpayer even knowing that he owes money. It’s a force operating on its own steam in its own environment and in complete ignorance of the Constitution. If you can live with it, stay. If you can’t, leave. Nobody dares also make any statements regarding corruption within SARS. Oom Tom was the Sunday School kid as far as corruption is concerned. It was and still is much worse.

Find a tax loophole? not so easy. We may all think we’re cleverer that SARS, but SARS is not quite so dumb.

@Navigator….Mmm….compared to the quality of personnel in the old days, SARS has def got ‘dumber’, thats for sure..!.

But yes, for the big cases [ your Dave Kings etc ], they bring out the big guns !

The last straw was Mboweni suggesting in the mid term budget that tax will go up in Feb 2020. That after his party and union associates have nothing to show for their time in office except economic doom and more unemployment and poverty.

@LouiseBCook…agreed !

The irony is severely disturbing

Its getting to a point where we will all have to confront this elephant in the room, sooner or later :

When will the levee break ????

Load All 71 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: