Sars gears up mills to squeeze blood from stone

Weekend Argus (Saturday Edition) - - FRONT PAGE -

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 na­tion not only poorer, but also suf­fer­ing from post­trau­matic stress.

Un­for­tu­nately, un­til Zuma’s term ends in 2019 or he is ousted, things will get worse.

This 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, a frus­trated and an­gry cit­i­zenry has been cast­ing around for ways to re­sist the pil­lage. An op­tion in­creas­ingly mooted around the braai fires of those whose pock­ets are be­ing emp­tied, is that of a tax re­volt.

Judge Den­nis Davis, who heads a com­mit­tee tasked with tax sys­tem re­view, warns that the greater the state cor­rup­tion, the greater the pos­si­bil­i­ties of a tax re­volt.

Tax Om­bud Judge Bernard Ngoepe cau­tions that if tax­pay­ers come to be­lieve that those charged with the ad­min­is­tra­tion of their money are un­eth­i­cal, they will stop pay­ing.

Gov­ern­ment is alert to the mut­ter­ings, with Fi­nance Min­is­ter Malusi Gi­gaba speak­ing of a “weak­en­ing tax moral­ity”. He warns that any at­tempt to with­hold taxes will be dealt with harshly and a sign of the con­cern is this week’s hastily ap­pointed in­quiry into tax ad­min­is­tra­tion.

Gov­ern­ment is wise to be wor­ried and not only be­cause there is a mas­sive R50 bil­lion hole in the tax rev­enue net this year. For, al­though SA Rev­enue Ser­vice has dra­co­nian pow­ers – it can con­fis­cate from bank ac­counts money it has de­creed as owing and with vir­tual im­punity levy hefty penal­ties for non-pay­ment of taxes or non­sub­mis­sion of re­turns – there are al­ter­na­tives to a bruis­ing di­rect re­volt.

South Africa’s per­sonal tax­pay­ers are uniquely pow­er­ful. Al­though only one in 14 of 56 mil­lion peo­ple pay any per­sonal taxes, al­most 40% of tax rev­enue comes out their pock­ets. A mi­nus­cule 1% of in­di­vid­ual tax­pay­ers pay 61% of in­come tax.

This ac­cords them lever­age that negates some­what the leg­isla­tive ar­mour in which Sars is clad. Just a rel­a­tively small num­ber of tax­pay­ers need to sus­pend or cut their tax con­tri­bu­tions for the coun­try’s fis­cus to be in trou­ble.

It doesn’t even have to be overt. Pas­sive re­sis­tance is a real op­tion and it is al­ready hap­pen­ing.

Tax eva­sion is il­le­gal but ap­pears to be in­creas­ing. 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 – as well as the prob­lems of over­sight at a dis­tance – mean po­ten­tially sig­nif­i­cant tax losses. That dis­as­ter would be com­pounded by fur­ther slow­ing lo­cal eco­nomic growth, as as­sets are ex­ported.

There is some po­ten­tial for di­rect ac­tion. Sars can legally plun­der pri­vate bank ac­counts but the lo­cal mu­nic­i­pal­ity can­not act with the same im­punity.

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

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

So far, at­tempts to get ju­di­cial bless­ing for such ratepayer re­volts have been met with short shrift. But the law is a nat­u­rally slow process that can, as our pres­i­dent has demon­strated, be vir­tu­ally im­mo­bilised by pro­ce­dural tar­di­ness and – in those cases – by some cre­ative ar­gu­ments on the con­sti­tu­tion­al­ity of tax ex­trac­tion by un­apolo­get­i­cally cor­rupt and waste­ful state en­ti­ties.

What is slowly be­gin­ning to dawn on Sars and the Zuma gov­ern­ment, is that tax­a­tion is not only about laws. It is about a so­cial com­pact be­tween gov­ern­ment and its ci­ti­zens that, at its 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 among large swathes of those priv­i­leged to have wealth, that they should will­ingly con­trib­ute to fix­ing a bro­ken coun­try.

This so­cial com­pact has been trashed by the Zupta mob­sters. The al­le­ga­tions in Jacques Pauw’s newly pub­lished book, The Pres­i­dent’s Keep­ers, sketches the po­ten­tial scale of that be­trayal: an en­tire class of po­lit­i­cally con­nected su­per-wealthy that scoffs 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 that those with the op­tion of be­ing rolling stones are go­ing to stick around to be squeezed.

Fol­low WSM on Twit­ter @ TheJaun­dicedEye.

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