EDITORIAL: Ominous tax threat should rattle government
The National Liquor Traders Council, the Liquor Brandowners Association, the Beer Association of SA and Vinpro say they can’t afford to pay R5bn in ‘sin taxes’ for July and August on alcohol that’s sitting in limbo in warehouses across the country
If any industry had grounds for a tax revolt, it would be SA’s liquor sector, now under the boot of an indefinite, unexpected and unexplained sales ban. The National Liquor Traders Council, the Liquor Brandowners Association, the Beer Association of SA and Vinpro say they can’t afford to pay R5bn in "sin taxes" for July and August on alcohol that’s sitting in limbo in warehouses across the country. They have asked that these duties be "deferred".
You can understand their desperation: already dealt a major blow by the five-week sales shutdown, which coincided with SA’s hard lockdown, the liquor industry is now losing an estimated R300m a week. And, thanks to an increasingly unaccountable executive, there has been no communication from either the presidency or the national coronavirus command council on how long this ban will endure.
It comes at a time when the wine industry has to gear up for the 2021 wine season — which requires major investment.
The tax threat may appear to be a minor administrative quibble — but don’t be fooled: the implications for the country, for the strained compact between the government and society, and for civil compliance can’t be overestimated.
Consider a parallel example, set weeks ago by SA’s taxi industry. In mid-June, the SA National Taxi Council decided it would willingly breach the level 3 lockdown regulations by loading passengers at 100% capacity, rather than the permissable 70%, and resume interprovincial travel without permits. The taxi industry’s argument was simple: since the government had failed to deliver the subsidy operators required, it would be impossible for them to survive without breaking the law.
It was the government that blinked.
Even as President Cyril Ramaphosa tightened the lockdown rules, forbidding people to see their families, he allowed taxis to return to operating at 100% capacity. Rather than taxi operators facing sanction, their civil disobedience paid off spectacularly.
While the alcohol industry’s plea to withhold taxes doesn’t amount to either a "tax revolt" or outright "civil disobedience", there is a sense that business is increasingly weary of paying tax when this is routinely abused. And paying a government that has closed down your business is especially galling.
The deeper concern is whether there is likely to be a greater move towards civil disobedience on taxes. Already, you see this on social media, where people grumble about having to pay tax to finance another money-guzzling airline, or pay salaries for unaccountable civil servants who should have been fired for illegally diverting municipal money to VBS Mutual Bank.
Last year, tax practitioner BDO asked on its website whether a tax revolt is "practical" (hint: it’s not, really). But BDO makes the point that even in the "highly unlikely" event that taxpayers were to formally revolt, it would put heavy pressure on a state already battling to raise funds to keep itself afloat.
The fact is, SA can’t afford to lose a taxpayer cent, and yet the government risks doing that by implementing disingenuous rules with little grounding in rationality. The tobacco ban — which has made criminals out of smokers — is an example. And by failing to explain its rules, the government is shredding taxpayer morality as fast as it’s fanning an illicit economy.
The alcohol industry’s response to the destruction of its sales should be a wake-up call to the government of just how precarious its social licence is right now. Business doesn’t expect all decisions to be perfect, but it does expect the government to be accountable for them.
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