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SA's perfect storm for a tax revolt

Cape Town - The subject of a possible tax revolt continues to be a compelling topic among Fin24 users responding to a recent article.

READ: Tax revolt threat: heed the signs

Eric Wiebols says that ANC top brass "either do not understand the long-term impact of the perception/reality of corruption and wasteful state expenditure, or simply don’t care. I believe it’s the latter". He expresses concern over South Africa's small tax base: "Our tax base for private income tax collection is very small per capita, and within this the pyramid is very steep".

This, he says, creates a "perfect storm for a tax revolt". Wiebols lists the following factors to support his argument:
• Corruption or perceived corruption in government
• Relatively overtaxed economically active (read wealthy) population that receive very little value
• Very steep tax curve based on contributions
• Loss of trust with revenue authorities.

A tax revolt can take many forms, says Wiebols. He considers a full-blown organised redirecting of tax funds into a coordinated fund controlled by trust attorney as highly unlikely. A more probable scenario is "the wealthy spending more of their time/money on creative ways to legally pay less and on some occasions crossing the legal line".

He continues: "If we assume that the top 5% who pay 50% (of taxes) can creatively trim their contribution by say 15%, this will have the effect of taking 7% to 8% off personal tax collections. SARS (the South African Revenue Service) would need to add another 6-8 million taxpayers to the bottom of the bracket to compensate. This means there will be little to compensate for the inevitable and currently occurring phenomenon."

What we can do

So what can stretched-to-the-limit taxpayers do? Wiebols makes his suggestions:

"The solution as always is not simple but these points stand out for me:
• Demand and pressure government to address corruption.
• Do not allow government to dodge the corruption issue by playing the race card… in other words, fight corruption no matter who it is detrimental to, and keep the criticism fact-based.
• Address the race tensions by not pretending they do not exist. The majority of South Africans feel the real effects of racism every day and saying it no longer exists because of the 1994 elections is simply daft.
• Do you your best as individuals to give the deserving a chance at success. You can never help everyone, but you can always someone.
• Create an environment that lets every South African have a piece of the pie - it will never be equally held, but should at least be shared as fairly as is practically possible."

Wiebols makes a suggestion he believes would be "a great way to make taxpayers feel they get value. For all those who earn enough to have to complete a tax return, give them the option to vote where a small percentage of their tax money goes".

In other words, taxpayers get to say what this percentage should be used for, whether education, healthcare or rural development. This should lie outside the minister's jurisdiction. "The effect of this would be interesting at least and I believe invaluable," says Wiebols.

Disclaimer: All articles and letters published on Fin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.
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