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  Well said. It is doable.....but how many taxpayers will come to light?...  

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Tax revolt: The frustration is growing

But Sars has the upper hand.

JOHANNESBURG – “Nothing but a tax revolt will turn this ship around.” 

This is the sentiment expressed by a Moneyweb reader below a recent article after two-and-a-half weeks of significant political and economic turmoil.

On Friday and Wednesday, large groups of protesters demanded that president Jacob Zuma step down. This followed after he fired his respected finance minister, Pravin Gordhan, a move that saw S&P Global Ratings and Fitch downgrade South Africa’s sovereign credit rating to junk. Although a stench of corruption has surrounded Zuma for years, he remains in power.

References to a tax revolt have surfaced on a number of occasions over the past two years, with prominent individuals in the tax community warning that tax morality could suffer if corruption wasn’t addressed. The greater the level of corruption, the higher the possibility of a tax revolt, the head of the committee tasked with a review of the tax system, Judge Dennis Davis, previously warned. The Tax Ombud, Judge Bernard Ngoepe, cautioned that if taxpayers got the impression that those charged with the administration of their money were unethical, they would not pay their taxes.

On Wednesday last week, Phuti Mahanyele, executive chairperson of Sigma Capital, wondered aloud what would happen if the roughly 10% of the population that paid income taxes, didn’t pay taxes for four weeks of the year.

“Now I’m not saying that we must, but what if? The reality is that we have got power and we need to stop giving it to somebody else to speak to us,” she said.

And it seems that some taxpayers are indeed saying enough is enough.

The Commissioner of the South African Revenue Service (Sars), Tom Moyane, sounded a word of caution last Monday when he said South Africa is “seeing the beginning of a disturbing trend whereby tax compliance levels are beginning to deteriorate”. A large number of provisional taxpayers seemed to have submitted nil returns in recent months.

Moyane unconvincingly attributed the development to negative media coverage and criticism against Sars.

But while the withholding of taxes will likely get a stamp of approval in populist circles, it is not something to be taken lightly. The role of the tax system and tax collection in ensuring public service, social stability and economic prosperity is often not appreciated enough.

Tax revolt

Although taxpayer unions have had some success with withholding their municipal taxes and paying it into trust accounts until services were provided, there are no provisions in the Income Tax Act or Tax Administration Act that would allow citizens or corporates to legally withhold their taxes from Sars, Piet Nel, head of the School of Applied Tax at the South African Institute of Tax Professionals (Sait), says.

Unlike e-tolls, where a new system had to be set up, arguably allowing individuals to refrain from registering or paying, the system that facilitates payment of personal and corporate income tax and VAT is already entrenched and will be difficult to circumvent in the long run.

Nel explains that where a provisional taxpayer stops submitting tax returns, Sars could create a tax debt by issuing an adjusted or estimated assessment. While Sars has to follow quite a lengthy process to collect this tax debt in the event of non-payment, it is ultimately entitled to collect the debt directly from a third party (for example the taxpayer’s bank account).

Against this background, taxpayers often rather choose to minimise their tax debt, as withholding tax can become a tedious, frustrating and expensive process, he says.

While Sars are also legally allowed to collect tax debts from third parties where the taxpayer is a corporate, taxpayers offering services to state institutions or who tender for government contracts may be unable to venture down this path as they are required to include tax clearance certificates when submitting a tender or invoice. These requirements affect a significant number of taxpayers, Nel says.

Although withholding payments would frustrate Sars’ revenue collection efforts, it ultimately has the upper hand, he adds.

Ferdie Schneider, national head of tax at BDO SA, questions whether a tax revolt is the right course of action. The tax system is not supposed to be an instrument to bring about political change.

If VAT vendors collected VAT from consumers but kept it in trust for the benefit of Sars, or adapted their systems and stopped collecting VAT altogether, it is likely that Sars would take the largest taxpayers, such as the retailers and banks, to court. As many of these companies are listed, court action would be detrimental to their shareholders, and would, as a result be something they would want to avoid, he says.

Sars and the courts would also act against employers that withhold employees’ tax and keep it in trust for Sars’ benefit or stop deducting these payments altogether. Whilst withholding company tax may practically be the easiest “revolt” option, the ramifications for boards or directors would make it unlikely that this route would find support, he says.

Schneider says against the background of South Africa’s sophisticated tax system, going offshore (either by way of a brain drain or capital outflows) is probably the only way to “revolt”. But while taxpayers remained South African tax residents, they would still be taxed on their worldwide income.

In the highly unlikely event that taxpayers revolt to such an extent that Sars don’t receive any tax revenue in the short term, services would come to a standstill, it would be too expensive for government to borrow more money following the downgrade to junk status and the economy would collapse, he says. 

 

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Mart-Marie de Jongh

Mart-Marie de Jongh

Gray Swan Financial Services (Pty) Ltd
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Great idea, in principle. Sadly I agree that the systems used today mitigate against it and the penalties will wreak havoc in people’s lives.

More marches, more public pressure, a successful ConCourt outcome that might help the ‘no confidence vote’, plus ACTION to open the LOGJAM that is holding back the cases against CLUELESS (783 charges, plus Enquiry recommended by Thuli) is the way to go. The best legal minds in the country need to get onto these cases with the Opposition and Civic Societies – they have dragged on for way, way too long – UNACCEPTABLE!

The press (including MoneyWeb) need to publish regular updates on these matters. I can’t recall when last I saw any info about what is happening, what is being done by whom, what avenues are being explored, etc. This is as important as the marches and hugely more important that always reading articles about what the ANC ‘Leaders’ say publicly (but are too cowardly to implement internally).

#CLUELESS(783)MUST GO.

Do not even dream of a tax revolt. Unless you seriously intend do donate your entire net worth to SARS – and by implication – to the thieves in charge of this kleptocratic ex-democracy.

The powers and levers available to SARS are truly draconian. SARS will penalise and litigate you into oblivion. And they will not even break a sweat in the process.

The only “revenge” – and this will be a Pyrrhic victory – is to take all your assets offshore and to stop earning any local income. Your offshore interest and dividends are taxed over there and you accordingly get tax relief in SA. That way, none of your money will prop up this profligate orgy of the unjust.

Sitting on the beach or braaiing in your lapa fulltime – that will work. Have a beer on me. Cheers.

SARS can’t prosecute 10 million people if all stop paying taxes. We are o so scared of mass (tax) action that we will gladly sit down quietly so our country could be looted by thieves and their friends. If the Guptas (that already run this country) officially take over we will just bow and say “how much (tax) do you now want us to pay, your homour?”

Yes they can.

Maybe a similar set of marches on SARS premier offices as we have seen recently agaisnt zuma?

Gerrit, SARS don’t have to prosecute 10m taxpayers. They do however, have the capacity to make third party appointments to your bank manager and clean out your bank account which they are already doing without any due cause. They can also wait for you to die. They can also wait until you sell property. The poor taxpayer just takes it on the chin as he can’t even put fuel in his car and drive to a SARS office. That’s the problem. If SARS was also subjected to the Constitution as is the case with all other legislation, you would have been 100% correct in your approach. If SARs do not participate in criminal activities or if it was possible to prosecute them in terms of the Criminal Procedure Act, you are correct, but they are a force all by themselves for themselves and their masters

Throttling taxes to SARS is easy. Individuals most stop spending. Especially on imported goods, fuel, cigarettes, liquor, property transfers and other highly taxed items.

Live frugally for a while, pay off debt or invest the money you save into tax efficient RA’s and TFSA’s.

Live frugally and spend cleverly. Buy your veggies from a non-registered vendor for example. Actively seek out non-regisitered vendors. Delay major expenditure – save as Eric Brown says.

Stop sending your tax return by email. Do it the old fashioned way and they will be stuffed.

When I pay taxes I am not donating a part of my income to government for the ruling elite to use as they please. Paying taxes is a transaction. For the tax I pay, I reasonably expect some service of equal value in return. When the taxpayer receives nothing but insults, rising crime rates, poor services, rampant corruption and racist remarks in exchange for his taxes, how long will it take before he realizes that he is the victim of extortion?

For how long will law-abiding citizens keep on enabling and supporting a criminal organisation that is the ANC government? With our taxes we are actually keeping the looters in power. If I support a criminal enterprise I am seen to be complicit.

“When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law.” – Frederic Bastiat

Sensei, very good argument and seemingly a very good base. I wonder how this case will fare in court? is this not a strong case to take government to court?

The irony is that Clueless and Clan is clearly ignorant of the fact that they are busy fiddling with the engine of the country. How stupid can one be to make your tax payers your enemy? They clearly do not realise who is actually paying their salaries.

People know that it’s just not worth getting your prov tax wrong. The reason for provisional tax nil returns is far more likely to be due to the nose-diving economy caused by our corrupt government.

And basically if we don’t pay our taxes – the looters will feed themselves first from whatever is paid and the poor will be placed in jeopardy again. So that is my only reason for paying taxes – with very long teeth mind you. Getting a tax clearance certificate? Ha! Ha! It takes months after the certificate has expired to get a new one because SARS crawls all over you trying to get every last crumb. It is not just government entities that ask for this certificate.

Was just about to say that. The ones we want to hurt with a tax revolt (i.e. the thieves in government) will just continue looting (PetroSA, SABC, local government or whatever the next big thing is) or set up a new avenue (nuclear, tenders etc) and the poor will suffer more.

Emigrating is a viable tax revolt option, but to what end? No, we need a change towards honest, intelligent, capable, and responsible leaders and then start right at the bottom: primary education. This will take decades. But a guy can dream.

what about switching the PAYE obligation from employer to employee? ie pay employees 100% and let them sort out how much tax to pay.

The law states that the employer has to deduct and pay the PAYE tax. If the employer would not do it the taxman would hit him like a ton of bricks. What you recommend would require changing the law.

Just a thought – what about gping to court first on the grounds that our constitional rights as taxpayers are abused. A massive class action case. Plenty of evidence. Afriforum, other big organisations, where are you?

Probably ‘easier said than done’
Pertinent question is whether the hassle, headaches, lawsuits, trips to court, possible doo-doo you might get yourself into etc.. will ultimately be worth it, and of course, somewhere in the back of my mind is a picture of all those old baba’s and mama’s who might starve to death without their grants because I haven’t played my part, no thanks !

Worth a shot, if you have the numbers and are able to orchestrate it in a measured and well structured manner, but you’re gonna need EVERYBODY to be on board (Highly-unlikely) because it can easily blow-up in your faces.

Great idea Paris, withholding tax must be legal first. Employees must legally be able to instruct employers to pay PAYE to a trust account till list of demands met, no. 1 being reinstatement of Mr. Gordhan. There is precedence with rates boycotts. OUTA, can you help?

“The tax system is not supposed to be an instrument to bring about political change.”

What planet are you living on Ferdie. That is EXCACTLY what cancer wnats to and has been doing.

A tax revolt might be the last and only option available to stem the tide of this evil black nationalist regime. Messrs. Nel an Schneider are cautioning against a tax revolt still believing that the current system is sustainable.Change will not happen by towing the line because you are currently financially comfortable and people are scared of this regime and organisations like SARS.We are already being taxed into oblivion,over regulated and treated as second rate citizens despite the fact that without the tax payer the country will implode.
A Tax revolt might just be what is required for democracy to become the fair system it was intended to be but that was never given the chance that it deserved under a black nationalist regime.

A good definition of a government – especially ours – is a criminal organisation with the law, the police and the army on it’s side.

It would be interesting to get opinion from an expert:

PAYE will not work as those are third party funds, so companies cannot just withhold on behalf of others

Public companies will be tough given the legal obligations of public officers and in any event companies are not voters

But what could work is provisional tax for private persons and with shareholder agreement, private companies?

So next big event on provisional tax is 31Aug for 2018 first payment. My suggestion:
1. People file their provisional tax returns but do not pay. Not filing is a whole additional offence and one needs a way to constructively prove that you are not simply an absconder / defaulter
2. SARS can try and sweep bank accounts but to my knowledge only the linked bank accounts. So if those do not have funds… also, I would like to see SARS go after 100,000 people considering next point
3. When you have filed but not paid you register the fact and amount with a civil society set up and administered by respected parties (helen suzman, retired judges, etc). This civic body launches constitutional court case seeking protection of tax revolters as being peaceful protest.

I’m game!

Well done! We need more constructive ideas like these and less reasons why a tax revolt cannot be implemented. Among us are some of the best entrepreneurs and strategists in the world. We cannot be outdone and outsmarted by a bunch of uneducated criminals in government positions merely because the system favours them. The “business model” of the ANC is based upon the assumption that law-abiding citizens are too intimidated and disorganized to enter into a tax-revolt. While they are criminal, they rely on the fact that we are not.

The time has arrived for civil society and shareholders of companies to appoint professionals to identify legal ways of depriving the ANC of it’s source of funding for bribes, corruption, maladministration and state-capture. We are even funding this criminal government while they implement strategies to nationalize our property – the very base of economic activity and taxes!

The aim of this action must be to ensure efficient service delivery to all citizens. How can this be a crime?

Let SARS collect PAYE from each individual. Why should we do SARS work? They do not pay us.

The bad publicity that such a move could make for the government could just swing it in the public’s favour, provided the vast majority of people registered for provisional tax follow the plan.
But the problem with not paying provisional tax is that it saves one nothing in the long term. It is not a separate tax, merely a device for the trough to be partially filled before the final tax return due sometime after the end of the tax year. There is the benefit of effectively using your money to obtain interest on it, (which in itself could be taxed!) rather than letting the trough-feeders use it until you make your tax return at year end, but whether this is worth the risk of SARS getting all nasty and uptight is doubtful. And I have found SARS in the last two or three years to be far less accommodating than previously.

SARS has become a legal criminal organisation. Look at the number 2 and they even have a money scam with outsourcing debt collection. Their systems are falling apart.
If you really want to do something then stop e-filling but send your return in paper format. They do not have the skills or people to do it manually anymore. But will you do it, or is e-filling just to easy?

Bit of a pain, but it has a lot of merit. Pretend your computer has been stolen so you’ll have to write in ink on paper asking them to send you an IT12 to complete. I wonder if the post office would be able to handle the volume, especially of completed forms being submitted, many of which may not be owing to interception in the mail by someone who thinks there might be a nice fat cheque included. 🙂

Agree with the paper format, SARS employee skill and knowledge mostly based on “artifice software intelligence”, a tick the box system, and the software do the rest.

Forcing a sudden 10mil paper returns, I can just imagine the reply’s of “uuuuh, how, unfortunately, due to, uuuuh, eish!” and than “sorry, come back tomorrow”,

yep, let them work for their pie.

A very good idea!? Stop using e-Filing and revert back to paper and pen filing via Post Office. SARS are losing so many good skills, it will take them years to process this manual backlog.

I can think of a number of ways, all difficult but doable on a small scale.
– Bartering. Bartering services for goods and vice-versa
– Payment in bitcoin … Essentially investment offshore and untraceable by sars.
– Cash, cash, cash……for that discount you know.
– Invest in alternative solutions for electricity….solar vs Eskom. It’s not only taxation that’s the problem but SOE that have monopoly.
– Fly other airlines other than SAA. In other words, boycott government wherever possible.
– Give up some of the luxury (as said already). A more frugal lifestyle = less big cash (read VAT) into gov pockets. Take a vehicle that is light on fuel for argument sake. A huge portion of fuel is taxed. Smaller capacity vehicles have a lower carbon tax.

Of course the fat cats in gov will continue to spend lavishly but an ever reducing tax base with an increasing spend by gov has only one outcome. If we accelerate this, we don’t prolong the inevitable outcome.

Lots of small scales equals a large scale. Look at the size of the informal economy, much of which doesn’t contribute to tax anyway. Become part of the informal economy.

The inevitable will naturally happen though, taxation will become more creative ….

I write these comment in a conflicted state. In principle, paying our taxes is part of living in a cooperative modern society but when the cooperative society no longer offers a return, then you’ve got to adapt or die (metaphorically speaking that is)

Well said. It is doable…..but how many taxpayers will come to light?

There is a legitimate way for companies to drastically reduce the amount of tax paid, but it comes with a cost. Donations to registered charities are tax deductible. (Red Cross Hospital, Sea Rescue Institute etc.) R 100 profit, R 40 to the tax man. R100 profit, R50 to charity leaves R50, only R20 to the tax man. Knock to the cash flow, but if all companies did this for one year Company tax revenue would be halved legally.

You did not complete your math. R100 profit, R40 to the taxman, R60 to you. R100 profit, R50 to charity, R20 to the taxman and ONLY R30 to you! How would the shareholders and the stockmarket react to a company reducing the after tax profit by 50%? Do it with your own personal income to show an example! Any donation to a registered charity reduces your (or the company’s) after tax income by the marginal tax rate.

That’s why I said it comes at a price. Either you hand over to the tax man, who steals half of it, or you donate it to where you can set tangible outcomes, and take the cash flow hit (nett after tax income). The amount of donation can be chosen to an agreeable percentage to suit your desire to reduce what the tax man receives and what the shareholders moral conscience will approve. Unfortunately, for most, when it comes to money out of your own pocket, morals take a back seat. The bottom line though, is that you can reduce what you hand over to the tax man legitimately.

All the discussion misses the real point.

A tax revolt is probably impossible to carry out effectively. Too much is collected by source-based deductions (VAT & PAYE, Customs) and would involve too much collusion, threatening companies’ own internal controls.

However, the “investment strike” has the same or worse effects. From Big Business sitting on cash piles instead of expanding to the sixty-something owner manager coasting in business rather than building it for his (it is mostly a male thing) grandchildren (who are in Atlanta or Adelaide) the foregone profits means foregone taxes.

Ditto the brain drain. This was illustrated by the last English cricket tour when SA’s southafricans took on the UK’s southafricans. These young sportspeoples’ earning offshore is mirrored by thousands of our best and brightest: we are loosing (black, white, Indian and Coloured) talent and future leadership hands over fist. And they are contributing to the tax base of their adopted homes instead of here.

During sANCtions, many businesses learned to set up fronts in non SA-jurisdictions (the entire clothing industry, for example, purchased their japanese made zips from a Swaziland company). These plans and skills are increasingly being dusted off. Yet again, SARS (and the economy as a whole) is loosing out.

One can blast WMC for being greedy/selfish/unpatriotic/etc until you are black in the face but it will not change the basic human need for survival. The only thing that will reverse the trend is for the government-of-the-day to drop its racism and for the country to introduce a less business-hostile environment.

A tax revolt is only an option if the effect is immediate and huge. Organising a few individual taxpayers is pointless. The only people capable of implementing a tax revolt are big business. Only the threat of the top 40 companies on the JSE withholding VAT and PAYE payments from the fiscus is going to get the Guptas attention. If you can get just these 40 CEO’s ( who are currently conspicuous by their absence with their lack of condemnation of corruption )to agree to stand together this will give ALL taxpayers the confidence to act. Then you have the potential for tax revolt.

SARS does not have the manpower or finances to prosecute 500 thousand taxpayers. Let alone 10M tax payers. The problem is to get a tax revolt organised. Pay little no provisional is one way to go/start a revolt. I am 100% for it.

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