Tax avoidance glorified

Wiseman Nkuhlu’s essay on accountancy encourages the rediscovery of the ethical roots that once characterised all professions (Auditors and accountants have been given an integrity wake-up call, January 17).

However, the period 1976 to 1990, when Nkuhlu set a foundation for his professional standards, brought back painful memories, because in those years, accountants began laying another less-edifying foundation.

Coinciding with a punitive tax regime for companies and individuals that peaked in the 1980s were generous tax incentives to stimulate investment in fixed plant and machinery. These conditions created opportunities and prompted a feeding frenzy of tax avoidance.

Accountants, once the unseen backbone of probity in the oversight of business, found tax avoidance their new, most critical service. Schemes of increasing deviousness, often skirting the edge of the law, became widely available to other professions vulnerable to the tax regime.

Owning racehorses, unprofitable boutique farms, forestry, leasing of plant and machinery and even financing movies that were shot overseas but assembled here to gain South African provenance were “sold” to clients, mostly by their reputable accountants. With inflation at 20%25%, it barely made sense, but a rather risqué pleasure in beating the system overrode logic. Accountants were well rewarded.

So it is no surprise that the institution Nkuhlu joined in 1976 that led the oversight of high ethical standards upon which legislation could be based is now a body that specialises in finding and lubricating marginal compliance with company and tax legislation. And lately, it would appear, outright theft.

Legislators try constantly to play catch-up. But, overshadowed by a now widespread, possibly universal, sociopolitical environment where ethics is for sissies, there is much ground for Nkuhlu to make up.

RWT Lloyd

Cape Town