A tax revolt will hit everyone's pocket - analyst | Fin24
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A tax revolt will hit everyone's pocket - analyst

Oct 23 2019 06:00
Lameez Omarjee

While public frustration may spark a tax revolt - and perhaps draw attention to matters of public concern in the short term - the long-term impact of this method of protest is questionable, a tax expert has warned.

According to Mazars tax partner Bernard Sacks, not paying taxes is ultimately detrimental to the fiscus.

Sacks was speaking at a briefing ahead of the mini budget, set to be tabled in parliament by Finance Minister Tito Mboweni later this month. Among the predictions shared on the mini budget, Sacks also weighed in on the possible impact of a tax revolt.

Taxpayers will still pay

Using the example of motorists not paying e-tolls, Sacks said ultimately the cost of e-tolls would be funded by the fiscus – essentially, everybody.

"If a group of taxpayers doesn't pay e-tolls, we [all] effectively have to pay for it," he said.  If a group of taxpayers does not pay duties, ultimately the shortfall will have to be funded through other taxes, Sacks added.

"In a long term macro-economic space, I do not think that a tax revolt is ultimately successful," he said.

Revolt through emigration

Sacks also argued that individuals were engaging in a tax revolt through emigration.

One kind of emigrant is someone who enjoys working abroad and is not subject to income tax, he explained. But another is someone who has left the country for "greener pastures" because they have "had it" with high tax rates, crime, corruption, and load shedding. The latter is more worrying, Sacks said.

Where high income earners (those earning more than R1.5m annually) choose to leave the country, it leaves a dent in the fiscus, as they contribute to 28% of tax.

Tax partner Graham Molyneux echoed these views, saying that if a "few on top" leave, it will be "devastating" for tax revenue.

Such high earners are often big spenders in the economy, Sacks commented.

This means if they leave, VAT will also go down, and if they move their businesses abroad, this will also leave a hole in corporate income taxes.

"So corporate income tax will go down and employment would go down," he warned. "We're not just losing personal income tax, it [emigration] will have a ripple effect through the economy."

Mazars national head of tax services Mike Teuchert added that a lot of these emigrants have investments, and rental properties on which they pay taxes. "By alienating those people and then changing their tax residency, we will lose investment… we're potentially losing tax on other income they can generate," Teuchert said.

tito mboweni  |  tax revolt  |  tax  |  mini budget 2019


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