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Minister must turn promises into action to halt decline in tax

Minister must turn promises into action to halt decline in tax
 
In the run-up to the annual budget speech, the South African Institute of Professional Accountants (SAIPA) has warned that declining tax morality is one issue the Minister of Finance needs to address.
 
“The budget speech is one of the most important events of the political year because it shows not only where government is spending its money, but where that money is coming from,” says Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committees at SAIPA. “The trouble is that South Africa’s tax base remains worryingly constrained, so from the point of view of risk management, it’s important that existing individual and corporate tax payers remain broadly committed to meeting their tax obligations.”
 
It’s an unfortunate fact that this vital group is becoming increasingly disenchanted with the way that tax revenues are being spent. Corruption has become an unpalatable fact of life in South Africa, with huge sums wasted on fruitless and irregular expenditure annually, according to the Auditor General—R30.8 billion in the last financial year.
 
An added issue is that many taxpayers also feel that government is not ensuring it gets fair value for the money it does spend on projects. The delays at the Medupi power station and the ongoing textbook crisis are just two high-profile examples of the latter problem.
 
Retief argues that while nobody really wants to pay tax, most citizens accept the need to fund the public purse and that tax is required in a civilised society—but taxpayers need to be able to see that these revenues are being well spent. In today’s increasingly open and transparent society, ineffective spending (or worse) is well publicised and begins to erode taxpayer commitment. Also, many taxpayers still need to fund private schooling, security, and health care from after taxed earnings.
 
“Some commentators have started talking about a tax revolt along the lines of the e-toll saga, but I think we are far from that,” Retief observes. “For one thing, it involves considerable risk because SARS has become very effective at spotting non-compliance, and has been given quite sweeping powers to collect taxes even from unwilling payers. But what we could see is individuals and companies becoming much more creative about developing new ways for avoiding tax, which would in turn divert SARS’s focus and increase the cost of collection.”
 
He adds that one should not discount the possibility that taxpayer disenchantment could become something much more active in the future—especially given the erosion of ethical standards caused by corruption or perceived corruption at the highest levels.
 
With other issues, such as the unstable electricity supply, may even see an increase in highly skilled taxpayers exciting South Africa.
“Previous Ministers have promised action on corruption and poor government spending practices—now we need to see some progress.”