Picture: ISTOCK
Picture: ISTOCK

South Africans have shown their disgruntlement with the government’s ineptitude to deliver the services they are entitled to by way of violent public protests.

Juxtaposed with disclosures emanating coming out of the various commissions of inquiry into wrongdoing at state entities, there seems to be a correlation between lack of service delivery in the disadvantaged communities and the blatant thievery taking place in government.

The blatant squandering of tax money has also had a devastating effect on the government’s ability to collect taxes. People have actively sought ways to pay as little tax as possible.

This leaves the government in a conundrum. How will it pay for the election promises without increasing the ire of its constituents by increasing taxes?

Johan Troskie, independent tax and commercial law specialist, says after years of state capture and state neglect the South African Revenue Service (Sars) is going to find it difficult, if not impossible to collect the R1.45-trillion income budgeted for the 2020 tax year.

“There is a significant correlation between tax morale and tax compliance in both developing and developed countries,” he says.

He refers to an earlier report on tax morality by the Organisation for Economic Co-operation and Development’s (OECD) committee on fiscal affairs.

The report found that many developing countries face challenges in increasing their revenue from domestic sources.

All those challenges are present in SA — a small tax base, a large informal sector, weak governance and administrative capacity, low levels of per capital income and possible tax avoidance by the “elite”.

Patricia Williams, tax partner at law firm Bowmans, says her impression of tax compliance in SA is that those who in the past were not paying their taxes properly, continue to be noncompliant. “There is no motivation to clean up their act or to start complying.”

Those who were compliant, continue to be legally compliant. However, they feel “cheated”, and they are more carefully considering ways to reduce their taxes.

The rot that eroded the trust South Africans had in Sars during the era of former president Jacob Zuma and former Sars commissioner Tom Moyane led to a significant drop in tax collections.

The state coffers had to be propped up with a percentage point increase in the VAT rate, and several stealth tax increases.

Honest taxpayers have since started to look for ways to pay as little as possible, as long as they do not “cross the line” into unlawful behaviour, Williams says.

Troskie says data from the OECD’s various regional surveys, but especially from Africa, point to a possible relationship between tax morale and corruption.

The study shows that there is “some evidence” to suggest that tax evasion is associated with perceptions of corruption in public institutions, particularly among tax officials. Higher levels of tax morale are reported when corruption is perceived to be under control.

The study also shows that citizens who perceive democracy to be the best system of government for their country tend to think that cheating on their taxes is unjustifiable.

“People who express trust in their national government display higher tax morale than people who do not,” the study shows.

“In my view, the longer state resources, taxpayers’ money, are seen to be squandered and looted in SA the lower our tax morale will remain and the longer that remains the status quo, the longer it will take for SA to become a growth state,” says Troskie.

There seems to be a “wait and see” approach by taxpayers, says Williams. Taxpayers are waiting to see what changes will take place under new Sars commissioner Edward Kieswetter, before making any structural changes to their tax affairs. 

“There is very limited patience among taxpayers, and taxpayers expect to see clear signals of positive change within this calendar year.”

Williams, who is vice-chair of the SA Institute of Tax Professionals’ tax administration work group, says much of our tax legislation is unbalanced.

“If Sars is indeed to be respected, rather than feared or despised, the tax legislation needs to be more balanced, and Sars needs to be careful not to be heavy-handed when applying the tax laws.”

The disgruntlement has also manifested in damage to infrastructure and private-sector assets worth millions of rand. According to a recent Business Day report, state-owned insurer the South African Special Risks Insurance Association (Sasria) received claims of more than R1.7bn in the 2018/2019 financial year, up from R800m in the 2017/2019 financial year.

Elias Masilela, executive chair of DNA Economics, says impact-investing is a global initiative where the government is not seen as the sole developer of infrastructure. Private capital is used — not only for commercial returns — but for economic returns where the absorptive capacity of labour and productivity are increased.

Globally the impact-investment market is set to grow from about $138bn in 2015, with assets under management purely with or through private impact investors, to $307bn by 2020. This implies a compound annual growth rate of more than 17.3%.

Masilela says initiatives that will make a difference in SA include access to reliable transport, affordable housing closer to areas of employment, rural malls and education.