Edward Kieswetter is sitting with a massive problem
The South African Revenue Service (SARS) has a massive trust problem, with taxpayers lacking faith in the taxman because of strong perceptions that money is just getting wasted and looted by the government.
After a new survey showed that corporate and business taxpayers still lack faith in South Africa’s tax collector, individual taxpayers have added their voice to the mistrust of the taxman.
Civil action organisation Outa ran a public poll this last week, asking South African taxpayers how they felt about the South African Revenue Service.
PwC conducted a survey of corporates in October, which revealed that SARS is failing to win them over and regain their trust. When asked if their trust in SARS had increased in the last 12 months, close to 60% of respondents said no.
According to Outa, this same sentiment has been expressed by individual taxpayers who responded to its own flash poll across various social media platforms.
“(Taxpayers) were overwhelmingly critical of SARS as the collector of revenue who hands over these funds to what is strongly believed to be a corrupt government.
“Responders linked the distrust of SARS to government looting, even though, as several responders pointed out, SARS doesn’t control the spending, and the main problem lies with government misspending.”
Taxpayers expressed anger at the seemingly aggressive position of the taxman to collect as much revenue from South Africans as possible, while those in government appear to escape accountability, and money continues to get looted and wasted.
They pointed to the widespread misappropriation of funds, collapsing infrastructure and zero accountability by politicians as indications of taxpayer money going into a black hole.
Meanwhile, taxpayers get punished by feeling the squeeze from SARS while still having to source their own essential services like private security, private education, private healthcare and, increasingly, private power and water supply.
“Respondents to the Outa query called for lifestyle audits for politicians; investigations into high-profile people who had publicly been linked to dubious behaviour; accountability on spending; higher taxes for the super-rich; faster SARS refunds; and better communication with businesses over registering for VAT, PAYE and UIF,” Outa said.
“Of serious concern were calls to end tax evasion by illicit trading (- cigarette dealers being the most obvious – and a need for SARS to broaden the tax base, including in the taxi industry.”
There is also a view that SARS should go beyond our borders and also look for missing money in foreign countries (like the UAE).
Suggestions were also made for government, through SARS, to provide tax incentives for having to pay for extra security companies to make taxpayers feel safe; generating their own power; introducing water recycling systems; life-saving medical treatments that the government cannot provide, and school fees.
A matter of trust
SARS’s failure to win taxpayers over – corporate and individual – is a huge problem for its goals of boosting the country’s tax revenues, as tax morality (taxpayers’ voluntary payments based on duty) is vital for any tax authority.
The revenue service has been boosting its capacity to chase after taxpayers and has been recovering billions of rands from companies and individuals who are trying to dodge their tax obligations – but it needs to build trust with citizens at large to avoid wider ‘tax revolts’.
Several economists and think tanks already advocate for paying as little tax as legally possible, attributing this view to the massive wastage of the government.
South Africans have also demonstrated a penchant for avoiding legally mandated ‘tax’ obligations like TV licenses and e-tolls.
While a full tax revolt (withholding of rates and taxes) is unlikely given the regulatory powers of SARS to get the money it is owed – even directly from bank accounts – even the slightest hint of aggression from the revenue service has been met with immediate backlash.
Over time, a more aggressive taxman will simply lead to other forms of revolt – such as companies moving and headquartering their businesses offshore or wealthier taxpayers leaving the country altogether.
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