A large-scale tax revolt would require a highly concerted and coordinated effort, which would be difficult to institute successfully given the significant powers of collection the South African Revenue Service (Sars) already has, a tax expert has argued.
The idea of a tax revolt is not new. High-level individuals – including the head of the committee tasked with a review of South Africa’s tax system, Judge Dennis Davis, and tax ombud Judge Bernard Ngoepe – have previously warned that South Africans won’t continue paying their taxes if the money is wasted.
Although Sars has refrained from calling the slippage in compliance it experienced in the 2017/18 tax year a “revolt”, it did note that tax compliance levels were starting to deteriorate and that many provisional taxpayers submitted nil returns.
The issue of a tax revolt has gained new impetus after Western Cape premier Helen Zille took to Twitter and suggested that a tax revolt might be the only way to root out corruption in government in the absence of accountability under the law.
I'm waiting to see how many ppl get prosecuted and land in jail in a reasonable amount of time after the Zondo commission. If they do not, just watch me. I will be organising the #TaxRevolt. I have tried the electoral route for years. Voters seem to like voting for corruption. https://t.co/WNvDpPKND1
— Helen Zille (@helenzille) January 26, 2019
The tweet caused quite a stir, with critics warning that it would undermine democracy and social stability.
Recent tax hikes have been controversial in the face of corruption and state capture, and many citizens have used social media and online forums to support some form of tax revolt, following the apparent success e-toll dissenters have enjoyed.
While there are various forms a tax revolt could take – including non-payment of e-tolls or TV licences – personal income tax, value-added tax (VAT) and corporate income tax accounts for about 80% of South Africa’s overall tax revenue, and these would be the most vulnerable areas for government.
Speaking on Tuesday at a tax briefing in Cape Town ahead of the February 20 Budget Speech, Bernard Sacks, senior tax partner at Mazars, said most personal income tax was collected by way of the employers’ tax system. For a company to withhold employees’ tax and not pay it to Sars, there would have to be coordination between the employee and the employer, and the money would have to be paid into a trust account.
“It is not something that would work particularly easily.”
The same applies to VAT. For a shopkeeper to not pay the R15 of VAT levied on most purchases of R115 over to Sars, there would have to be a coordinated effort between the shopkeeper and the customer.
The collection thereof is already entrenched, which makes these systems more difficult to circumvent than a new system like the one set up for e-tolls.
Sars has ‘wide powers’
Sacks says income tax and VAT are administered by the commissioner of Sars in terms of the Tax Administration Act, which gives the commissioner wide powers to appoint a third party as an agent (to collect tax).
Even if employees sign an agreement with their employer that employees’ tax should not be paid over to Sars and the funds are paid into a trust account, Sars may still appoint the employer’s banker as an agent, effectively helping itself to an amount equivalent to the average employees’ tax.
A tax revolt would practically be quite difficult to implement, but if the public gets upset enough and widespread dissatisfaction starts creeping in, it may weigh on the country’s finances, given that personal income tax and VAT represent such a substantial amount of the overall revenue, says Sacks.
“If you see inroads into those two, it could create difficulties for the fiscus … Personally, I don’t think it is going to happen.”
* Mazars paid for the journalist’s flight to Cape Town.
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