The South African Revenue Service (SARS) will focus on the taxi industry in the coming financial year as it embarks on major compliance drive, says finance minister Tito Mboweni.
Answering in a written parliamentary Q&A, Mboweni said that SARS collected approximately R5 million in Corporate Income Tax (CIT) from taxi operators. However, this amount includes tax collected from their employment income, he said.
“This is because the industry does not correctly disclose income from taxi business on their CIT returns but included under a generic income source code. We were not able to determine income solely from taxi operations.
Our analysis indicates that the majority of the taxi industry is declaring a nil return or are having a refund due to them.”
Mboweni said that SARS is concerned about tax avoidance across the tax ecosystem in general – with the taxi industry seen as a point of contention. To this end, SARS is adopting a number of targeted interventions.
The key intervention is promoting voluntary compliance by making sure stakeholders know exactly who is expected to pay, and making the process of paying easier.
“The interventions are aimed at achieving the SARS strategic intent of building a tax and customs system that is premised on voluntary compliance,” he said.
“The strategic intent is achieved through the creation of clarity and certainty of tax obligations, making it simple, easy and seamless to meet tax obligations and ultimately by creating a credible threat of detection whilst making it hard and costly to remain non-compliant.”
Mboweni said that SARS also has a unit dedicated to improving compliance of SMMEs, which includes the taxi industry.
“We had various engagements with the industry bodies in the year 2020/21 to create alignment as well as to educate. Furthermore, SARS has worked in collaboration with the Department of Transport to share data on work on their taxi industry transformation agenda.”
In response to the perceived non-compliance by the Taxi industry, Mboweni said that SARS has commenced a process of developing a compliance plan for the taxi industry to encourage voluntary compliance and potentially propose the appropriate tax regime specifically for the industry.
“This work will be concluded in the 2021/22 financial year. The working with and through stakeholders as one of the stated strategic objectives is crucial and informs the stakeholder engagements as detailed above.”
Data published by SA Taxi owner, Transaction Capital, showed that South Africa has 250,000 taxis operating nationally in 2020.
These taxis are primarily in Gauteng (30%), and Kwa Zulu-Natal (21%) and each minibus averages 6,000km per month, or 72,000km a year.
Over shorter-distance routes (like a 23km trip between Soweto and Johannesburg), operator profits are around R25,000 a month, while longer distance trips (like the 595km trip between Joburg and Durban) can lead to profits of around R37,000 per month, the group said.
The minimum monthly profit recorded by the group was R6,000 a month, as per its credit profiles on loans on book.
The average taxi operator in South Africa has 1.2 vehicles per customer, with a vehicle age of around 3.6 years, Transaction Capital’s data showed.
Citing data from the Mail & Guardian, the Democratic Alliance said that taxi industry revenues in 2019 were close to R90 billion a year.
“This means that the vast majority of taxi operators and owners are declaring no corporate tax income at all, and are not paying payroll tax for their drivers and employees,” the party said.
“It is illegal to under-declare income and to evade paying taxes. This is a crime under the Tax Administration Amendment Act, carrying a possible prison sentence of two years.
Update: An image previously used with this article was removed at request of the Western Cape Transport Department and replaced.