BUSINESS NEWS - Over the last week the merits and weaknesses of a tax revolt have been debated at length.
The debate is not new but gained newfound momentum after Western Cape premier Helen Zille said she would organise a tax revolt if the individuals implicated in state capture are not prosecuted and jailed.
Critics were quick to point out that a tax revolt would undermine democracy and social stability, and reprimanded Zille for suggesting that citizens should do something illegal.
If nothing else, the debate highlighted that there are wide-ranging views about the definition of a tax revolt. Would it include legal avenues of minimising one’s tax liability? Zille seems to think so. In a follow-up opinion piece for Daily Maverick, she expressed support for investments in Section 12J companies, which allow investors to get up to 45% immediate tax relief.
Read: There’s more to Section 12J than ‘45% immediate tax relief’
Below the surface of the premier’s initial comment, however, there seems to be an almost tangible anger and despondency about the lack of accountability around corruption and state capture.
While the revelations around Bosasa and its alleged corrupt dealings at the Zondo commission of inquiry have left many South Africans asking how deep the rot really runs, the allegations are not new. Newspapers were writing about it years before state capture became a buzzword, yet no prosecutions followed.
It is difficult to quantify what corruption and state capture has cost the fiscus over the last few years. The notion that the Vat rate hike was a direct result of corruption and state capture is one that is easy to accept at face value but hides the intricate workings of a tax system and the factors that may have an impact on these numbers.
Yet wasteful expenditure had an impact and one can understand the frustration of upper-middle and higher-income earners who have been hard hit by tax hikes. But it is poor and low-income households that are paying the highest price. This is money that could have been used for service delivery – most notably perhaps, high quality basic education.
Redesigning the system
What is it that drives people’s actions? Is it their values? Perhaps. Is it their circumstances? Possibly.
It is an important question to contemplate if one hopes to improve on past failings. Incentives are a powerful motivator – in corporate organisations and in government.
If bonuses depend on meeting a six-month sales target, executive decisions will be taken with this in mind, even if it might be detrimental to the company in the long run.
The same goes for government officials.
But because incentives may drive the wrong behaviour, and because humans are fallible, even when presented with the right incentives, there should be accountability for unethical or illegal behaviour, whether from regulators, prosecutors or parliament.
It is the weaknesses of a system that is supposed to ensure accountability that have left many taxpayers feeling despondent and wondering whether a tax revolt may be the answer.
In realising the challenges of a country struggling with unemployment, poverty and inequality, many taxpayers realise that the reality of life in South Africa requires a relatively higher tax burden.
It is the lack of accountability in how the money is spent that is fuelling the frustration, not the tax itself.
On Thursday night, president Cyril Ramaphosa will present the country with his view of the State of the Nation. The most pressing issue the president has to deal with is how government plans to address the problems at Eskom, in particular its debt. To get buy-in from South Africans on any decisions around Eskom – particularly where it affects their pockets through taxes or higher tariffs – the president will need to show that officials are held accountable.
Thus far, measures taken have largely included the suspension or dismissal of officials in key positions at Eskom and other entities, and appointing new individuals in their posts. This is a first step, but it is not accountability.
One key appointment has been that of the new national director of public prosecutions, Shamila Batohi – who, upon assuming her new position on Friday, announced that a specialised unit would prosecute those involved in state capture. One can only hope that this process gets underway quickly.
Of course, one swallow doesn’t make a summer and accountability will need to filter through to other state departments, also with regards to government spending.
Because when the incentives are off the mark and accountability is lacking, it is a slippery slope.
