You know it’s election season when normally moderately sensible politicians start making silly statements.
This weekend it was Western Cape premier Helen Zille’s turn when she conditionally endorsed a tax revolt. Even on the most favourable interpretation, it’s hard to credit, and DA leader Mmusi Maimane rightly distanced himself from it.
Zille’s argument that if after a time no-one is arrested and charged for the “industrial-scale” corruption we hear about daily from the Zondo commission and elsewhere, South Africans will be duty-bound to seek an alternative.
The problems with the argument are many.
First, it obviates the logic of democracy for a portion of the population to decide whether it is justified to refuse to comply with the law.
Second, in the SA context, Zille’s argument would only really work if there had been no changes in government in response to corruption. But the past 10 months have seen some enormous changes, starting of course with the early departure of the previous president. There are many still in government who are suspect. But the argument that we have reached the point where citizens have no alternative but to resort to the most extreme action is not justified.
If the election comes and goes, and time passes and nobody in government is arrested and jailed, then arguments about a tax revolt may not be so easily dismissed.
Third, as many politicians have pointed out, the people whom a tax revolt will hurt most are not corrupt politicians, but citizens who need state support most.
Yet, it must be acknowledged that there is more to the tax revolt argument than immediately meets the eye. For a start, as Zille points out, there are a huge number of tax revolts taking place already. Large numbers of South Africans don’t pay their electricity bills, and that is effectively a tax revolt. There are also other sporadic quasi-tax revolts taking place, including the e-tolls debacle and the avoidance of paying SABC licence fees.
In fact, it’s even more insidious than this. In 2017, the maximum marginal rate of personal income tax was increased to 45%, which affected about 100,000 taxpayers who earn more than R1.5m a year. The following year, it was revealed that this increase had effectively backfired, since the total personal income tax take increased, but at a lower rate than overall government income.
The government was then forced to respond in the only way it could by increasing VAT, which is less susceptible to tax avoidance. However, VAT is a regressive tax so it was a less-than-ideal outcome.
Quite why the increase to the maximum marginal rate backfired is not clear. It did coincide with large organisational changes at the SA Revenue Service. It could also have been the result of something called the Laffer curve, which is the theory that higher taxes don’t always result in proportionally more tax income.
It could also have been a bit of both, combined with a growing sense of frustration among taxpayers that their money was being used carelessly. SA’s tax buoyancy, as it’s known, has been high, meaning tax increases did result in predictable income increases. But that is fading.
Zille’s objections do point to a weakness in SA’s politics. It’s often claimed that SA has 7-million taxpayers and 26-million registered voters. By this argument, DA supporters pay for government spending and ANC supporters are not affected as much. ANC voters, therefore, are broadly supportive of expenditure increases because they don’t have to pay for them.
SA has, in fact, 14-million registered taxpayers, but about half are very poor and fall below the tax-paying threshold. And. of course, everybody pays VAT, and since consumption expenditure tends to be higher the poorer you are, effectively the poor bear a higher proportional VAT burden.
Still, there is a disconnect between expansive government policies and voter demographics. In this sense, it’s up to the ANC, not the DA, to protect taxpayer morality, and it can only do so by running a clean administration.
Zille might be easy to ignore now. But if the election comes and goes, and time passes and nobody is jailed, arguments about a tax revolt may not be so easily dismissed.