Sars’ extraction mills gear up

In a globalised financial system there’s no guarantee those with the option of being rolling stones will stay to be squeezed.

President Jacob Zuma’s administration hit South Africa with the brutal intensity of a gang of armed robbers. And as is typical of law enforcement in this country, the cops are nowhere to be seen.

The Zupta heist has been aggressive, deliberately disorienting and utterly ruthless. When the thugs eventually make their escape, they will leave the entire nation not only substantially poorer, but also suffering from post-traumatic stress.

The ANC has abandoned any pretence at governance. Instead, the end days of this government revolve around ever more audacious acts of looting, ever more brazen indifference to the people it swore to serve.

For years, an angry citizenry has been casting around for ways to resist the pillage.

An option increasingly mooted is that of a tax revolt. Government is alert to the mutterings, with Finance Minister Gigaba speaking of “weakening tax morality”. He warns withholding taxes will be dealt with harshly and a sign of the worry is the hastily appointed inquiry into tax administration.

Government is wise to be worried and not only because there is massive R50 billion hole in the tax revenue net this year. For, although the SA Revenue Service has draconian powers, there are alternatives to a bruising revolt.

SA’s personal taxpayers are powerful. Although only one in 14 of 56 million people pay any personal taxes, almost 40% of tax revenue comes from their pockets.

A minuscule 1% of individual taxpayers pay 61% of income tax. Passive resistance is a real option and it is already happening. Tax evasion is illegal but in creasing.

Safer is the legal option of avoidance, which is exercising the minds of many. Sars cannot force people to keep their assets onshore and despite it taxing overseas income, dual taxation agreements mean potentially significant tax losses.

That disaster would be compounded by further slowing local economic growth, as assets are exported.

There have already been successful attempts by ratepayer groups to compel improved local government by withholding rates but keeping the funds in a trust account for future disbursement, conditional on performance.

Dysfunctional municipalities that lack financial reserves and spend most of their revenue on salaries are vulnerable to any cashflow disruption.

It’s slowly beginning to dawn on Sars and the Zuma government that taxation is not only about laws. It is about a social compact between government and citizens that, at best, makes compliance voluntary.

It was not only better economic conditions and more efficient collection that enabled Sars to initially post regular revenue surpluses, post-1994.

There was, then, a real sense of obligation to contribute to fixing a broken country. This social compact has been trashed by the Zupta mobsters.

The allegations in Jacque Pauw’s new book, The President’s Keepers, sketches the scale of that betrayal: an entire class of politically connected, super-wealthy who scoff at paying taxes with the apparent connivance of Sars.

Tax authorities pride themselves on their ability to squeeze blood from a stone. But in a globalised financial system there’s no guarantee those with the option of being rolling stones will stay to be squeezed.