It had been a long hot Friday afternoon. As I drove home, towards the shacks of Zandspruit in Johannesburg, I could see black smoke. The voice on the radio warned of a service delivery protest as I drove into it. Women and men chanted and blocked the road. Words flew; then rocks, then bricks. A rock smashed into the face of one of the police officers, blood poured.
This is one of the many faces of discontent across Africa. Poor and rich alike feel short-changed in these tough economic times. The poor fight with rocks; the middle class with their bank accounts. People no longer want to pay. Their hard-earned cash, they complain, is wasted by politicians.
A tax revolt is rising. It may be in its infancy, but in South Africa, the threat is being taken seriously enough for Judge Dennis Davis to issue a warning.
In many ways, Davis is Mr Tax. He is head of the Davis Tax Committee, appointed by the Finance Minister to examine how revenue generated by the South African Revenue Service (SARS) can be used to improve the economy. He was a Technical Advisor to the Constitutional Assembly where the negotiations for South Africa’s interim and final constitutions were formulated and concluded.
“It’s a question of where government spends the money. People want to see results with their taxes. If they are not satisfied, they may choose to just stop paying. The greater the level of corruption, the less we will have tax integrity and the greater the possibility of a tax revolt,” says Davis.
Expenditure is through the roof in South Africa. According to Auditor-General Kimi Makwetu in his report for the 2014/2015 financial year, irregular expenditure amounted to R5.68 billion ($355 million). The report says 45% of this was spent by the Education, Health and Public Works departments. Irregular expenditure more than doubled from the previous year in Mpumalanga, a province in eastern South Africa, bordering Swaziland and Mozambique.
“Of the R936 million ($58.5 million) in fruitless and wasteful expenditure incurred in the year under review, R32 million ($2 million) was incurred to prevent further fruitless and irregular expenditure or losses. This normally relates to the cost of cancelling irregular contracts or contracts of non-performers,” says Makwetu in the report.
Due to overspending the budget, unauthorised expenditure amounted to R1.64 billion ($100 million). This is money emptied from the already lean pockets of people in a country where 12 million live in extreme poverty and top earners pay up to 41% in tax. On top of that, over the past decade, residents have been burdened with increases in property, electricity, toll and vehicle licencing fees; yet, potholes and power cuts persist. This is laced with accusations of corruption, an issue which has drawn the ire of veteran champion of the people Wayne Duvenage. He made his name standing up against Gauteng’s infamous e-toll tariffs. He is chairman of the Organisation Undoing Tax Abuse (OUTA), which says its aim is to challenge unfit taxation or the squandering of money.
“The public have become justifiably angry over the squandering and waste of their taxes. [A tax revolt is likely] but is however not a situation I would want or wish for our country and we should do everything possible to prevent such a situation from developing. This is why the Minister of Finance is calling for a positive and participative approach to resolving our problems. The issue, however, is that while a corrupt leadership remains prevalent and connected to the head of state, and other key positions within government and its state owned entities, very little can be done to mobilize a positive approach to addressing the key issues of corruption, cronyism and service delivery. This is what is driving the negative sentiment,” he says.
It appears many other people have also had enough. A survey by NGO, AfriForum, says none of the respondents say they are getting their tax money’s worth; 24% say they only pay tax because they are compelled to and 42% question why they should pay tax at all. AfriForum runs a viral #whatarewepayingfor campaign to hold government responsible for the misappropriation of money.
Monique Taute, National Campaign Coordinator at AfriForum, says the government promised to improve education, yet the national pass rate for Grade 12 students declined from 75.8% in 2014 to 70.7% in 2015. It promised to improve security, public order and safety, yet the crime rate increased by 0.09% from 2014 to 2015. It promised to decrease unemployment, yet the International Labour Organisation (ILO) announced in January 2015 that South Africa has the 8th highest unemployment rate in the world. The unemployment rate stood at 25.5% in the third quarter of 2015, an increase of 1.2% from 2014.
“It is clear that the government failed in all three objectives. Taxpayers should have the right to know what they are paying for. From what we see, in the consolidated general report on national and provincial audit outcomes as well as from 2015 statistics, it is clear that government once again failed to fulfil its responsibilities in the 2015/2016 fiscal year. Government is abusing taxpayers’ money. Even though taxes are increased, government does not fulfil its primary responsibilities,” says Taute.
CEO of the SA Institute of Tax Professionals, Keith Engel says people are at a breaking point.
“It is more about expenditure than anything else. People are saying, ‘yes we are paying tax but what are we getting for it?’” he says.
According to Engel, if entrepreneurs reach breaking point, they could play hide and seek with the revenue services.
“[You] won’t do that with the attorneys or accountants, because you will [lie] to your accountants and give them a different set of books to work from. So people can keep two sets of books. In small businesses, the employer might make a deal with you were he says ‘I am going to give you R300,000 but I will give you another R200,000 that we will not tell the revenue services about,” he says.
Alex Poole* (not his real name) who runs a tax revolt Facebook page, followed by 21,000 people, says: “Most people can sense that they’re being [robbed]… I believe all forms of mandatory income taxation are theft. The things its being spent on is so obviously not in the best interest of the country’s needs, people feel more and more ripped off. It now feels like the theft that it is. And the people are rightfully angry about it.”
Engel, however, commended Minister of Finance Pravin Gordhan for his 2016 budget.
“The budget was more about expenditure than it was tax. You can see very clearly they didn’t want to break the backs of the taxpayer. He spoke about cutting wages and a lot of government expense which made people a bit at ease,” he says.
SARS doesn’t think a tax revolt is likely. It says its compliance model is designed to foster voluntary compliance and says there is high tax integrity in the country.
“SARS has found the vast majority of taxpayers are fully tax compliant. This is testament to the patriotic and compliant culture of South Africans. In the very odd cases of intentional non-compliance, SARS recoups the taxes, as per the provisions of tax and customs legislation,” says an employee at SARS who asked to remain anonymous.
If Gordhan’s budget cuts don’t show in the numbers, South Africans may think the best form of defence is no tax.