There’s a bigger pool of taxes waiting to be tapped
Expunge sin from our taxes and we may finally get to that enormous pool of religion
A POST NUGENT Commission South Africa habits a different psychological poise to tax collection and how it views the administration of the revenue agency.
That comportment of will and resuscitation must as of necessity flow to influence the attitude of the government and the relevant policy making institutions of the republic.
None among us with a modicum of social consciousness can possibly ignore the urgency and humility of the learned judge when he said: “The commission has been perturbed by evidence it has heard of the current position at Sars, which is set to perpetuate ongoing loss of revenue if there is no immediate intervention.”
From my vantage, the description of taxation over some commodities as sin tax, even in jest, has more to do with lending moral judgment over the said commodities, so much so that those that are not so categorised always escape the pressures of Budget speech targeting.
The practice has self-perpetuated for so long that cigarettes and alcohol have tacitly resigned to the fate that they alone shall bear the burden of all other consumable silent killers, their sinning fellow travellers. But how did we get to this?
For some time now since the advent of our constitutional system, we have been grappling with two sets of revenue parameters which need addressing. The first is the politicisation of the revenue agency.
The Nugent Commission, if the authorities would oblige, has provided solutions to this vexing problem.
The honourable Nugent has reiterated in emphasis certain excerpts of the recommendations of the Davis Committee Report on Tax Administration, articulating at length the rudiments of the resolution of this first problem.
The golden test of the will of the administration whether or not it accepts and internalises the commission’s interim recommendations, shall be when the President accepts this first precept.
If the President proceeds to appoint a commissioner himself, the nobility of the Nugent endeavour will be reduced to a macadamian kerfuffle. And to avoid that, not only must the minister appoint, the board recommended to oversee the agency must equally be established.
The second parameter, which is destined to take longer to tackle, requiring as it does much resolve which our political polity may not adequately possess, must be the moralising of the revenue collection.
We can comfortably tax cigarettes and alcohol but we are morally restrained from taxing guns and bullets and firecrackers in kindred manner. Add unbeneficiated and semi-processed exported minerals to this list.
The genesis of our sin tax moralisation is the thesis that smoking and indulgence in alcoholic beverages equate to sin. They probably are. However, proclaiming them as such is an ecclesiastical responsibility and not the function of a democratic government whose mandate derives from representing all its people, religious and non-religious alike.
Besides, our revenue collecting agency has got no such moral obligation, at least not in terms of section 195 of the Constitution that justifies its existence.
Neither should the Treasury proceed from that premise. Such partiality in respect of some religious philosophy as opposed to others, has trapped it psychologically and has by extension, limited its options in search of expanded frontiers for revenue sources.
Down this path, certain commodities, legal as they may be, stand to be demonised as morally repugnant without any standard of measure to do so.
That level of bias is careless, egregious and harrowingly unjust. Sugar and sugar-based products, the modern flag bearers of sinful indulgence that kill people everyday, got a sweet deal. They have escaped with glee, while salt, the culprit busy clogging the arteries of our senior citizens, watches sceptically. It knows without equivocation that it is next.
The function of the tax authorities is relatively simple. They are the middleman in any transaction between persons both natural and juristic. The taxman equitably pronounces on the nature of the transaction and accordingly allocates the revenue payment obligations.
In their absence, purely by politicisation of collections, many taxable activities escape without scrutiny. The good news is that we have Tito Mboweni, the unflappable praetorian guard of the Treasury, and another. This is the Commission for the Protection of the Rights of Cultural and Linguistic Communities, a quaint constitutional creature that is reposed with great responsibilities.
Both this commission and our former Governor of the Reserve Bank have started flexing their muscles in respect of this second perplexing parameter. Mboweni went for sugar and carbon, and the commission went for Non-Profit Organisations.
It would be irresponsible not to talk about non-profit organisations, especially when seeking to debunk the untruth that non-profit creatures are not taxed.
They are taxed in so many other ways by taxes of general application like VAT and property tax. Their premises are subject to municipal dues and levies. Their employees are subject to income tax, and in kind, obligated to a host of other less pronounced ones. Their only claim to exceptionalism is that whatever activity they do which generates profit, such profit cannot and should not be taxable.
That might just as well be. There are rights and there are privileges. The former are enshrined in the Constitution, while the latter is a facet of our political machinations and are generally contained in the statute. The claim not to be taxed is a prayer for an absolute political privilege. Therefore, only provisions of a statute must regulate these privileges and their exceptions, consistent with the tenets of the enabling provisions of the constitution, I might add.
“Non-Profit Organisations” is a big group of taxable citizens. It includes churches, charitable organisations and academic institutions.
The only plea we have is that the peremptories of the Donations Tax must apply rigorously in respect of this category. When congregants give money to a church, it is a donation. And the donation tax is always a burden on the person making the donation.
In respect of churches, that arrangement must change urgently, lest the Bushiri nightmare will haunt us forever without respite. Hovering at 20 percent flat rate, no institution should be absolved from this tax. No such general law of application suffers it nor do any of the constitutional prescripts that govern us all provide for it.
To preserve some vestige of moralisations, however, the church should be exempt from certain taxes.
To a statutorily defined limit, these should be the House of God and the house of the parsonage. Anything beyond that is money laundering.
Mark Kingon, in his heroism, sought to slay the holy cows, and went straight for the churches and the transfer pricing lot. With the current titan at the Treasury, he has an admirable partner.
We will never know the end of it, however, until a commissioner of inland revenue is confirmed.
Perhaps by expunging sin from our taxes, we may finally get to that enormous taxable pool that must bulge our Treasury and feed the denizens.