{"id":482845,"date":"2021-04-13T17:00:28","date_gmt":"2021-04-13T15:00:28","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=482845"},"modified":"2021-04-13T16:02:42","modified_gmt":"2021-04-13T14:02:42","slug":"why-south-africa-needs-the-al-capone-strategy-to-fix-its-tax-problem","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/482845\/why-south-africa-needs-the-al-capone-strategy-to-fix-its-tax-problem\/","title":{"rendered":"Why South Africa needs the ‘Al Capone’ strategy to fix its tax problem"},"content":{"rendered":"

South Africa\u2019s tax issues are a serious problem that need to be resolved urgently before the country can move forward to achieve its potential, says Judge Dennis Davis, who was speaking at PSG\u2019s Think Big<\/em> webinar on Tuesday<\/a>.<\/p>\n

Low economic growth is not helping matters, he said, but an inefficient tax system further complicates South Africa\u2019s tax revenue challenge. Solving this, however, will solve other issues too.<\/p>\n

\u201cWhile many South Africans pay their fair share, many are also guilty of tax evasion, making the tax base far smaller than it should be and putting a higher burden on those who do pay their fair share,\u201d he said.<\/p>\n

\u201cEvery time I talk about this topic, people worry that I\u2019m coming after them,\u201d said Davis. \u201cBut if you are paying your fair share of tax, and your neighbour is paying absolutely nothing, aren\u2019t you worried about that too?\u201d<\/p>\n

\u201cThere is a significant number of people and companies who are completely exploiting the system, whether it be evasion of customs duty, the manipulation of the VAT system or simple evasion of tax or transfer pricing and similar shenanigans which companies deal with. That’s where the real problem lies,\u201d said Davis.<\/p>\n

\u201cAccording to our tax tables there are only 5,000 people who have taxable income over R5 million a year in South Africa. Now if you just drive around and count the houses in suburbs like Sandton, Bryanston and Bishopscourt, you\u2019ll quickly realise that something doesn\u2019t add up,\u201d said Davis.<\/p>\n

He believes that ordinary South Africans who are tax compliant should be supporting any moves to overhaul and rehabilitate the country’s tax system, including lifestyle audits for those who are purchasing big-ticket items like Ferraris or expensive properties.<\/p>\n

Where lifestyles and spending don\u2019t match up to declared earnings, we need to investigate, and we need to prosecute where needed. Davis believes that making an example out of a few prominent individuals, and ultimately having them end up in jail, would be a highly effective deterrent to illegal tax evasion.<\/p>\n

\u201cAs a constitutional lawyer who is concerned about corruption, I am absolutely convinced that the Al Capone strategy is the best way to deal with this,\u201d said Davis.<\/p>\n

The Al Capone strategy is basically that you need just one or two provable facts. For example, if you look at somebody\u2019s bank statement and there is an element of cash flow that can\u2019t be explained, you know a crime has been committed. In the case of Al Capone, it was tax evasion, rather than his other crimes, that eventually landed him in jail.<\/p>\n

\u201cIf you have people in the revenue committee who are deeply committed to honouring the right principles – which there are – it\u2019s absolutely possible to make this strategy work in SA,\u201d said Davis.<\/p>\n

\u201cThe other thing that always comes up when we talk about increasing tax revenue collection is the issue of state corruption,\u201d he said.<\/p>\n

\u201cI would like to think that the vast majority of South Africans understand the levels of inequality in our country and will gladly pay tax to help bridge the divide, provided the money goes towards the upliftment of the people who really need it. Therein lies a big problem,\u201d said Davis.<\/p>\n

As the extent of state corruption is revealed, people are more likely to say, \u2018why should I hand over my money to government, it\u2019s just going to be stolen anyway, so it is better off with me\u2019.<\/em><\/p>\n

\u201cThe only way to change that mindset is through improved service delivery,\u201d he said.<\/p>\n

Despite the challenges, Davis remains optimistic and believes that The South African Revenue Service under Edward Kieswetter is going to make a positive difference to the country.<\/p>\n

The webinar was hosted by Gerhardt Meyer, head of technical support within PSG\u2019s distribution team. Meyer said there is a big need for the country to have a comprehensive and trusted tax plan in place and that it needs to be a plan that can be properly executed and policed when necessary<\/p>\n

\n

Read: SARS can fine or jail you for these tax filing mistakes<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa\u2019s tax issues are a serious problem that need to be resolved urgently before the country can move forward to achieve its potential, says Judge Dennis Davis, who was speaking at PSG\u2019s Think Big webinar on Tuesday.<\/p>\n","protected":false},"author":10,"featured_media":478959,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[26,11522],"class_list":["post-482845","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-headline","tag-psg-asset-management"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/482845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=482845"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/482845\/revisions"}],"predecessor-version":[{"id":482867,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/482845\/revisions\/482867"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/478959"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=482845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=482845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=482845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}