The South African Revenue Service is looking at a massive tax shortfall of R50-billion this year. From the way that SARS is behaving lately, it’s pretty clear that every cent counts. The solution? We’re looking at possible tax hikes, new taxes and stricter policies, of course.
Let’s get the worst bit of news out of the way. SARS is looking at new ways of drawing in revenue for the fiscus. One of these includes a wealth tax.
Unlike income tax, where taxes flow from earnings such as wages, salaries, profits, interest or rents, a wealth tax is largely understood to be a tax on the benefits resulting from asset ownership. The tax will be paid on the market value of the assets owned year on year. Whether those assets yield any sort of income doesn’t matter – this is a tax on unrealised income.
This has been tried before in other countries, and failed dismally. In France, for instance, the French Parliament issued a report estimating that over 500 people emigrated in 2006 as a product of the impôt de solidarité sur la fortune (ISF wealth tax).
Two main problems have been recognized by some of the countries that have already abolished wealth tax. The high compliance and administration costs associated with this tax are one reason. Another, as cited above, is the capital flight from the country.
It’s difficult to see how a wealth tax will assist in improving South Africa’s anaemic economic growth and high rate of unemployment. If the above is anything to go by, all it will do is incite a further flight of capital, thereby decreasing economic activity.
Even if everybody decides to stick around, which they won’t, experts caution that a wealth tax will unlikely cover even a quarter of the current R50-billion shortfall.
What this means is that an increase in VAT, in one form or another, is very likely.
SARS on the Run
Something strange is happening over at SARS. Perhaps they’re all so busy fainting over their copies of The President’s Keepers that they’ve forgotten they still have jobs to do.
Several tax practitioners, speaking to the City Press, stated that between 80% and 90% of regular, remunerated workers are now being audited. In the past, it was barely 20%.
Suspiciously, almost everybody due for repayment is now being audited. The stressed-out Revenue Service is forcing people to submit supporting documents such as medical contributions and annuities, etc. These are already indicated on IRP5s.
So, basically, the data is there. They already have everything they need.
They’ve also inexplicably changed the process length of verifying and auditing returns from 30 days to 30 working days. So, its 42 days then, isn’t it? Sneaky, sneaky, SARS, but you can’t fool us.
We know what you’re doing. You’re just trying to buy time.
In a recent statement, SARS claimed that most tax refunds were processed within 72 hours, and without an audit too. That must be just delightful.
They say that in the last seven months, up until the end of October, R120-billion was paid in tax refunds.
The Types Of Tax We Pay
“Without the revenue from tax, the government can’t do its job. The state needs your tax paid in rands to fund social and economic programmes, and to provide public goods and services, such as schools, universities, hospitals, clinics and roads, as well as defence and security.”
That’s from the SARS website.
By that, they must surely mean Nkandla security upgrades, the R700-mil p/year African Union fees, SA nuclear plans, SOE (SAA, Eskom, etc.) bailouts, corruption, Nando’s takeaways, expensive company cars, wrongful and wasted construction, parties and entertainment and transport for our Ministers and their family, SANRAL’s laughable e-toll failures, irregular and wasteful expenditure, PRASA bungling every single train purchase they have ever made and our absolutely pathetic education and healthcare systems. That’s just the tip of the iceberg.
People don’t pay their taxes because our government abuses the money. Government exploits the taxpayer. There’s a severe lack of responsibility and accountability. Millions of Rands are wasted every day by idiotic, unqualified and corrupt state officials. Even if income tax were to increase, the state still wouldn’t fulfil its primary responsibilities.
According to the SARS website, we already pay the following types of tax in South Africa:
- Air passenger tax;
- Capital Gains Tax (CGT);
- Corporate Income Tax;
- Customs Duties;
- Diamond Export Levy;
- Dividends Tax;
- Donations Tax;
- Estate duty;
- Excise duty;
- Income Tax;
- Mineral and Petroleum royalties;
- Pay As You Earn (PAYE);
- Provisional Tax;
- Skills Development Levy (SDL);
- Stamp duty;
- Transfer duty;
- Unemployment Insurance Fund (UIF);
- Value Added Tax (VAT);
- Withholding Tax on Interest.
May as well go ahead and add Wealth Tax to that list right now. They’ve basically already got their hands in our pockets.