‘Communities in South Africa are actively investigating tax revolts’

Civil society group Afriforum says that government will need to take steps against corrupt officials or face a revolt from taxpayers.

The comments come after the Special Investigating Unit announced an investigation into associates of health minister Dr Zweli Mkhize, who scored an irregular contract worth R150 million from the department.

Mkhize confirmed the contract amounted to irregular and wasteful expenditure, but denied wrongdoing on his part, and said he would not step aside.

Afriforum warned that taxpayers are growing increasingly disillusioned with this kind of corruption.

“Taxpayers are at breaking point yet are confronted daily with reports of new looting sprees by ANC officials,” said Johan Kruger, head of community development at AfriForum. “The ANC government clearly does not realise what levels of frustration exist among taxpayers.”

“AfriForum is inundated by perplexed communities who are actively investigating tax revolts,” he said.

Kruger said that the serious allegations of corruption also do not bode well for the National Health Insurance (NHI).

“The looting of resources at the first opportunity during a pandemic does indeed predict what can be expected when resources are managed centrally if and when NHI becomes a reality.”

Revolt

Experts have highlighted that, due to South Africa’s tax laws, the collection capabilities of SARS, and the way VAT and other taxes are ingrained into so many things, it’s impossible for South Africans to stage a ‘full’ tax revolt by withholding tax from the government.

However, smaller forms of tax revolt have already been demonstrated in the country, such as the refusal to pay e-tolls, or diverting rates from municipalities to private groups who actually deliver promised services.

On the more extreme end of ‘legal’ tax revolts, wealthier individuals are simply packing up and leaving the country.

In a memorandum sent to president Cyril Ramaphosa in March, the Institute of Race Relations (IRR) pointed to the high number of South Africans who have left and stopped being tax residents – a fact bemoaned by SARS and Treasury, as they lose out on tax revenue from high-net-worth individuals.

The IRR warned that South Africans who remain in the country will also increasingly turn away from government and municipal services, instead relying on their own and community efforts to deliver services.

“Diminishing confidence in the government, as your best tax advisors have already advised, translates directly into lower government revenues. But we don’t think this is the end game.

“Rather, we think that further slippage in the legitimacy of the state will see communities begin to engage in a tax and investment revolt which is something that that government has not yet experienced on any significant scale,” it said.

Professional services firm PwC has also warned that South Africa is relying too heavily on income and direct taxes – most of which are coming from a declining base of taxpayers.

“It is estimated that just 25% of those who pay income tax pay 80% of all personal income tax that is collected. Over the past few years, a smaller proportion of taxpayers has become responsible for an increasingly large portion of total personal income tax payable,” it said.

The IRR said that tax revolts could take several forms:

  • Taxpayers and ratepayers circumvent the government by paying dues into trust accounts or third parties and then finance their own service delivery and community-building efforts;
  • The private sector sets up its own initiatives to address social problems such as crime, deficient healthcare and education. This is funded by donations which is revenue diverted away from the state;
  • Communities completely cut government out of their lives – relying on grid-generated electricity and building their own schools. They will then stop paying the state for these services;
  • Taxpayers lobby government for rebates where they have been forced to pay above their stipulated taxes for services.

The private sector has already started stepping in, with companies and individuals are increasingly launching initiatives to help the government address South Africa’s ageing infrastructure.

The most significant announcement came at the end of April when major insurance companies Discovery and Dialdirect announced a partnership with the City of Johannesburg to fix potholes across the city.

In May, telecommunications company Vox said that it was working with the city of Makhanda through its subsidiary Grahamstown Wi-Fi to help repair potholes.

Private citizens and neighbourhood groups are also fixing road infrastructure in areas where they feel that the municipality has failed them.

Moneyweb recently reported of such a case in Roodepoort which started because of the perceived ineptitude of the local municipality. As the Panorama Residents Association (PRA) did not receive the assistance of the Johannesburg Roads Agency, it spent R10,000 on its own pre-mixed tar to fix the roads.


Read: The trick to maximising medical aid benefits on your SARS tax return – and how much money you can claim

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‘Communities in South Africa are actively investigating tax revolts’