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Is SA heading for a tax revolt?

Taxpayers fume about wastage and corruption, but large-scale evasion seems unlikely.

JOHANNESBURG – There seems to be increasing concern that South Africa could be heading for a tax revolt.

This comes amid an outcry against corruption, wastage of taxpayer money and the fact that the country’s deteriorating fiscal situation will in all likelihood trigger tax hikes next year.

In November, judge Dennis Davis, who heads up the committee tasked with a comprehensive review of South Africa’s tax system, warned that the greater the level of corruption in South Africa, the less tax integrity the country would have and the greater the possibility of a tax revolt.

Kyle Mandy, tax policy leader for PwC South Africa, says while there is always a risk of a tax revolt, one also has to face the facts: A tax revolt is not an event and does not happen overnight.

“It is a creeping trend that starts to happen in terms of a breakdown in tax morality and reduced levels of compliance and it will happen as a process over a period of time, if it happens at all,” he says.

But whether the country is really heading for a tax revolt, may be a question of semantics. For some, taxpayers speaking out against corruption and wastage already hint at the start of a tax revolt, while others believe taxpayers would have to engage in large-scale tax evasion or stop paying taxes altogether for it to really be considered a tax revolt.

Of course, in a system where most individuals’ taxes are withheld by employers and paid to the South African Revenue Service (Sars) on their behalf there is limited scope to really take significant action. Considering the potential reputational damage corporates could face in the wake of such a step they will most likely be highly reluctant to engage in any concerted effort to intentionally stop paying taxes – even on behalf of others in the case of employees’ tax or value-added tax (VAT).

The system that facilitates payment of personal and corporate income tax and VAT is already entrenched, and will be difficult to circumvent. This makes it different from the e-Toll system, which had to be set up afresh, arguably making it easier to boycott from day one.

Efforts by global revenue authorities to facilitate the automatic exchange of taxpayer information also mean that taxpayers may soon have nowhere to hide.

But taxpayers are progressively being squeezed by economic pressures and any potential tax hikes in an environment where there seems to be limited political will to address wastage and corruption will only add insult to injury.

Mandy says on the one hand taxpayers face an increasing tax burden and on the other there is a growing concern around how tax revenues are being spent.

“Naturally there would be a risk that compliance levels will decrease as a result. Where is it likely to happen? It is not going to happen in big business. Big business as a general proposition will comply with all tax law.”

Where reduced levels of tax compliance is likely to materialise, if it happens at all, is in relation to small and medium business, he says.

While there has been a significant focus on base erosion and profit shifting (BEPS) and the role multinationals have played in contributing to the tax gap by shifting profits from South Africa, Mandy says in his view this is not where the major tax gap lies, but rather with small and medium business and in the informal cash economy.

Mandy says because some of these businesses in many respects fly below the radar, it may be relatively easier for them to evade tax. It is more difficult for large corporates because they are visible, Sars knows where they are and how to find them. Large corporates also tend to have up-to-date records, which may not exist in the informal economy.

Nazrien Kader, Deloitte Africa tax leader, does not expect a full-blown tax revolt.

A small pool of high net worth individuals that generally account for the biggest portion of revenue from personal income tax is unlikely to engage in active protests. Kader says to her a tax revolt suggests that taxpayers stop paying tax until they get the delivery they demand and it is unlikely that it will come to that.

“On the other hand a tax revolt, which is just a voice demanding certain things, that is happening as we speak.”

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This article is pretty pointless isn’t it ?
Your headline refers to ” tax revolt ” and then you spend the entire article telling is why it will never happen ….
Why did you bother to print it?

Not so easy to rise tax,not so easy to avoid tax.But easier to hunt the top 50 in the pack of cards and the Joker. (like Iraq war) .The ANC can start doing it for us ,otherwise the corrupt government must fall.After the fall the hunt must carry on till they find the Joker and the pack of wolfs….

It is time for big business to grow a pair. They can engage government through their associations and say enough is enough. The corruption and waste is also having a huge impact on their businesses. That is why they are mostly trying to move off shore. If government will not fix the holes what is the point of putting more money in the bucket, first fix the holes!

The only place where there is a bit of space is small/medium enterprises. In Greece for example, many small business simply do not accept credit cards and everything is strictly cash and therefore the merchants don’t pay taxes. When you reach that tipping point and critical mass of small/medium enterprises which do not pay tax it can make quite a dent in your tax collections. In SA I have heard many stories about Chinese businesses which do not accept credit cards and only takes cash.

Correctly so tax is deducted at source, as for high net worth individuals as long as their advisers save more than they cost them…zero sum game… where the slide will happen will be tax erosion from the self employed/work from home/sole props & the really small cc’s….Already there’s a move towards cash. Now that would be a more pertinent article.

Inge, a more interesting take would be talk to the lawyers and accountants specializing in HNW emigration – pretty sure they’ll tell you it’s on the up. They prefer to revolt with their feet.

Taxation is an interesting concept when analysed critically. Firstly it is unilateral with no input as to how it is spent or misappropriated as the case may be. There is no contract between the taxpayer and the regime. One is forced to work to simply survive and the regime expropriates by force or threat of force a percentage of this after deciding what you need to live. This is in essence a form of extortion- nothing less. Maybe part time slavery, if you like. SARS is the extortion arm of the ANC regime- the only arm of the state that works. The concept of tax “morality” from the taxpayer’s point of view is therefore nonsensical.

The ANC may not be unique in its approach to taxation but it is certainly in the top tier when it comes to squandering, theft and misappropriation of tax money. This, as we well know, goes all the way to the top.

Most people have limited options when deciding on their country of residence. Fortunately for many of those qualified and earning a reasonable amount one does have the choice of to whom one pays tax. This can be seen by the emigration of over one million citizens during the ANC regime’s tenure thus far. Likewise divestment and off shoring money by commercial entities, as well as the paucity of FDI, simply reflects the ANC’s failure to develop a modern industrial state, in fact their aptitude for unravelling the one they inherited.

No, SA is not heading for a tax revolt this has been happening for the last two decades. Few and fewer people are willing to render unto the criminal regime their blood sweat and tears.

Well, I would say the fact that less than more than 80% of people are refusing to pay etolls points to a tax revolt. People are simply gatvol of a bloated, corrupt and inefficient government taking more than 60% of our money with nothing to show for it. The current state of affair is unstable and cannot continue. Many HNWI’s have already emigrated. The ones that stay behind will eventually buckle and the whole system will implode. The poor will be the losers in the end.

You mention Greece, how about the UK where you can get a discount of 20% from any tradesman for payment in cash with no invoice (20% being the VAT amount on any work). Soon to happen here? Paperwork occurs only when someone wants it to reduce their tax bill.

The minibus taxi industry is cash. How much gets paid over to SARS? Very little, I suggest, and there’s not much SARS can do about it.

I always find it fascinating that whenever there is a discussion about tax the focus is on the taxpayer and what the taxpayer does and doesn’t do. For many years now my office identified outright fraud by the South African Revenue Services and even though Section 11 of the TAA have been adopted there seems to be no way in which these people can be held responsible. Even the Revenue laws only focus on procedures and penalties to be applied to taxpayers not doing what they have to do. I’ve been revolting against SARS corruption for 24 years and got nowhere apart from the fact that they love to give me grief. The fact that the government is guilty of corruption has been disclosed way past the point where one could argue it. However, everybody seems to be too scared to take on the real corrupt guys and believe me it’s not the lady manning the client services desk at the local branch. The Sunday Times tried to get the message over but they’ve been criticised as being untruthful in their reports. Let me make the following statement: If you have the correct political connections in South Africa, you don’t have to pay tax. Now, prove me wrong.

Now that Nene has been removed / sacked the degree of tax revolt will rise a few notches. All he did was to reverse an idiotic decision by the teacher in charge of SAA. Said teacher being “well in” with our inglorious leader.

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