The South African Revenue Services (SARS) have implemented draconian laws in an attempt to recover taxes from companies and individuals. The law gives SARS the right to take money from a bank account without permission from the account holder. It is a harsh code of laws that can have detrimental effects on people who already struggle to cope with the high cost of living.
South Africa has a population of approximately 53 million people, and it is estimated that 11 million people file tax returns annually. A staggering four million of the registered taxpayers are exempt from tax due to the tax threshold, leaving the burden of tax payable on nearly six million people. Of course, the collection tactics are severe considering the low number of taxable people in South Africa.
In South Africa, informal traders, such as street hawkers and taxi drivers evade the tax system. Although evasion is not limited to the informal sector, a moderate number of high-income earners and business owners have options to bypass the taxation. Small business owners claim that business and individual tax are one of a kind does span across both formal and informal taxpayers.
Jacob Zuma, the president of South Africa has mentioned that taxes will increase, and there are indications that high-income earners will bear the highest tax burden. The informal sector growth will continue to find a way of avoiding the rule of tax by neither breaking the law, but rather will use an intelligent attempt to circumvent the tax plan. The strict labor laws and lowering of personal taxes can close the widening gap between the formal and informal taxpayers.
The power of certain SARS officials allows for searches without warrants, collecting information from banks, estate agents, medical funds and lawyers. SARS can exercise an aggressive approach in dealing with tax avoidance or tax evasion. The amount of information SARS can demand are staggering since the new regulations have been passed. The dynamic approach used by SARS is to tighten the net of non taxpayers and tax evasion in South Africa.
The balance between the powerful actions of SARS officials and the taxpayers’ rights to constitutional protection and just administrative action is not clearly defined. It is the aggressive measures of ensuring tax debts are settled in a reasonable period that allows SARS to roar even louder and more viciously.
The New Tax Ombudsman introduced recently to settle disputes that may arise does not have an aggressive approach used by SARS. Although the news is welcoming for individuals and companies to refer a dispute, ultimately it is SARS that will win the argument. The ombudsman will demand respect from both SARS and individuals when dealing with referral cases. How much respect will be given by SARS is ultimately difficult to guess based on the antagonistic structure maintained by that department. The favorable news for ordinary taxpayers who have legitimate grievances with SARS is that the Ombudsman will offer help to take on the mighty SARS.
The new draconian tax collection laws of SARS show the true colors of greed. Hard working taxpayers have difficulties maneuvering through time consuming tax codes and procedures in an attempt to pay taxes honestly and receive no encouragement for integrity. The trust between taxpayers and SARS gradually diminish, with the unconstitutional laws and systems. The invasion of privacy remains a constant concern and can result in people having to deal with the SARS officials.
The culture of distrust, pillage, spying liken SARS to the ranks of criminals when all the time citizens considered this department to be the most legitimate part of the government. Criminals do not pay tax and neither does drug lords. Is this another reason for tax evasion?
The current rumors are circulating that the African National Congress (ANC) ruling party of South Africa is bankrupt remain a cause for concern. Although the ANC deny such reports, the current aggressive approach by SARS to collect taxes raise a worry of whether such statements are indeed accurate. The draconian laws implement to ensure tax compliance are astounding, not so much for service delivery.
Opinion by Laura Oneale