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Is incentivising tax noncompliance taking its toll?

14th August 2015

By: Riaan de Lange

  

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Why provide a tax amnesty for noncompliance, but no similar or equit- able dispensation for compliance? In addition to the tax amnesty, why then also grant a discount and preferential payment terms for the tax liability?

A ‘tax amnesty’ implies a limited-time opportunity granted to a specified group of taxpayers to pay a defined amount in exchange for the ‘forgiveness’ of a tax liability, including interest and penalties, relating to a specific tax period or periods and without the fear of criminal prosecution. A ‘toll’ levied on the use of a road is considered a user charge or tax.

In May, following the recommendation of an advisory panel, Deputy President Cyril Ramaphosa announced in Parliament ‘massive’ cuts to the Gauteng Freeway Improvement Project (GFIP) toll, also known as the Gauteng e-toll or simply e-toll. The cut included a 60% discount on money owed to the South African National Roads Agency Limited (Sanral). In addition, those currently in arrears will be granted six months to pay. (This is the carrot provided under the new dispensation.) Outstanding e-toll fees will be linked to the licence renewal system, and road users will have to settle the amounts owing to Sanral before new licence discs can be issued. (And this the stick.) Whether this is legal and enforceable is another matter.

The e-toll remains an emotional and divisive issue across all walks of life, particularly for those in Gauteng. While government (at both national and provincial level) contends that nonpayment constitutes civil disobedience, a public coalition known as the Opposition to Urban Tolling Alliance (Outa) launched initia- tives to frustrate the e-toll implementation, such as claiming its introduction to be unlawful. An added complication in its enforcement is that owning an e-toll disc is not compulsory.

The e-toll ruckus is not envisaged to abate any time soon, owing in part to the irreconcilliable views the two opposing parties hold. While Outa believes that e-tolling is unlawful, Finance Minister Nhlanhla Nene has indicated that cost recovery from road users will continue to be the principal financing mechanism for the GFIP.

Back to Ramaphosa’s announcement; it ignored a very important constituent – the compliant taxpayer. What reward is there for this constituent – individuals or companies? Are they but the simple fools? What are they to make of all this? What reward is there for them in being tax compliant and, most importantly, in remaining law-abiding citizens? Where is the equity and equality?
Those who did not pay their e-tolls are now afforded a 60% discount and six months to pay. Why are those who paid not also afforded a 60% refund on the e-tolls they paid or, if not that, a 60% credit to offset against future e-tolls? Or is the message simply that, if you are tax compliant, expect no reward, but if you are not, well, you just wait.

Did you know that, internationally, taxpayers are incentivised for tax compliance? Japan offers to have your picture taken with the Emperor if you are found to be ‘honest’. The Philippines puts your name into a lottery if compliant with respect to value-added tax. South Korea considers allowing access to airport VIP rooms and free parking in public parking facilities. In Finland, tax credits earned for tax compliance can be used for different purposes, including nursing homes.

The revised e-toll fee structure will no doubt lead to a funding shortfall for Sanral that will have to be supplemented by transfers from government, and then from revenue derived from compliant taxpayers. The bell seems to toll for the tax compliant. What if their days are numbered?

For the record, the author and his family have no outstanding e-toll accounts, which, as with others compliant, has negatively impacted on their disposable income, with no reward. My retort to the argument that my family and I have benefited from the improved roads in Gauteng is that, well, so have the noncompliant.

General Note B.4
On July 31, the South African Revenue Service (Sars) informed of an amendment to the General Note to Schedule No 1 of the Customs and Excise Act, which reads: “By the substitution of General Note 4 to Schedule No 1 to the Act with the following:’ A rate of duty applicable under any heading or tariff item to any unit of mass, measure, quantity or any other characteristic shall, unless otherwise provided for in such heading or tariff item, apply proportionately to any part of such unit except in the case of a unit of quantity described in the statistical column in Part 1 of Schedule No 1 as ‘u’ (number of units).’ It should in fact be for ‘General Note B.4’ – under subheading ‘B. DUTY ASSESSMENT.”

Amended Tariff Investigations Regulations
Economic Development Minister Ebrahim Patel informed on July 31 of the amendment of the tariff investigations regulations, which was first published on May 18, 2006.

Exportation of Scrap Guidelines
The International Trade Administration Commission of South Africa (Itac) published on July 31 the proposed amendment to the Price Preference System (PPS) Policy Guidelines (scrap metal exports), for which comment is due by August 14.

Stainless-Steel Sinks
On July 31, Sars informed of the amendment of the antidumping duties on stainless-steel sinks, following Itac’s conclusion of its sunset review and Trade and Industry Minister Dr Rob Davies’ acceptance of Itac’s recommendations.

Have you spoted something interesting in the tariff amendment? For one, there is no longer an exclusion for Malaysia’s Central Aluminium Manufactory, which simply means that no Malaysian company participated in the sunset review investigation. Secondly, Taijing Chuanger Metal Products, of China, is excluded. This means that you can import from that company without the payment of antidumping duties of 62.41%.

Grape Marc
Sars informed on July 31 of the deletion of Rebate Item 621.13/104.23.03/ 01.01, relating to “spirits obtained by distilling grape wine or grape marc”, and the insertion of Rebate Item 621.13/104.21.01/ 01.01, relating to “undenatured ethyl alcohol of an alcoholic strength by volume of 80% or higher, obtained by distilling grape wine or grape marc”, and Rebate Item 621.13/104.23.03/02.01, relating to “spirits obtained by distilling grape wine or grape marc”.

The tariff amendment, to provide for a new rebate item for spirits obtained by distilling grape wine or grape marc of an alcoholic strength by volume of 80% or higher for the use in the manufacture of fortified wine, follows the publication on June 11 for which comment was due on June 25.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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