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We will, we will, tax you

7th August 2015

By: Riaan de Lange

  

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Have you ever thought of an appropriate song to reflect South Africa’s current approach to taxation? If you are young at heart, you might recall a song by arguably the world’s most famous band, Rolling Stones. The song, Revolver, is from the band’s August 1966 album and Rolling Stones fans voted it the greatest album of all time in 2002.

It was also the last album to have different versions for the US and the UK. The first single on side one of the album was inspired by the fact that The Beatles made so much money that their tax rate was about 95%. The song is Taxman, with lyrics you might identify with: “If you drive a car, I’ll tax the street; If you try to sit, I’ll tax your seat; If you get too cold, I’ll tax the heat; If you take a walk, I’ll tax your feet.” The song concludes: “And you’re working for no one but me; Taxman!”

A song that has nothing to do with taxation, but which can easily be adapted to reflect the South African tax situation, might be better known to you. Remember the 1980s Sun City advertisement to the Queen song? It went: “We will, we will, rock you”, and concluded with these mortal words: “Even if you’ve a heart of stone, Sun City will rock you like you have never been rocked before.” Adapting the advertisement’s words to “We will, we will, tax you; even if you have a heart of stone, we will tax you like you have never been taxed before”, will be apt, given the tax situation in South Africa.


Have you ever thought of how many types of taxes South Africans – you – pay? Well, the South African Revenue Service (Sars) has a dedicated Web page titled ‘What kinds of tax do we pay?’, with an introductory paragraph that reads: “Here in South Africa, we pay various taxes. We don’t pay all of these taxes all of the time but here is a comprehensive list. Some of these have been repealed but some people still like to have information on them – we have marked these with an *: air passenger tax; capital gains tax; corporate income tax; diamond export levy; dividends tax; donations tax; estate duty; excise duty; income tax; mineral and petroleum royalties; pay as you earn; provisional tax; retirement funds tax; secondary tax on companies*; securities transfer tax*; skills development levy; stamp duty; transfer duty; uncertificated securities tax*; Unemployment Insurance Fund levy; and value-added tax (VAT).”

There are obvious omissions from this list, such as customs duty – ordinary, ad valorem and specific; since excise duty is listed. There are also environmental levies (plastic bag levy, filament lamp levy, electricity levy and carbon dioxide (CO2) emissions levy), fuel levy, and the Road Accident Fund levy, and we are also awaiting the introduction in 2016 of a carbon tax. The Sars list also excludes provincial taxes, such as e-tolls, and municipal rates and taxes. Further, South Africa is considering several environmental taxes, including a landfill tax, and might also consider so-called fat taxes in the future.

What is of concern, particularly with respect to the imposition of environmental taxes and other taxes ostensibly aimed at internalising external costs, is that the proceeds are not ringfenced. As a consequence, these taxes are purely fiscal measures, though their premise is moral and unquestionable. An article by BDO South Africa, which appeared on www.taxtalk.co.za on July 13 and was titled ‘Carbon Tax’, states: “With no real focus on behaviour change, CO2 Tax is just another taxation scheme to make up for the national Budget deficit.”

According to a joint Sars and National Treasury publication, ‘2014 Tax Statistics’, South Africa’s tax-to-gross domestic product ratio increased from 25.4% in 2012/13 to 26.1% in 2013/14. Given the possibility of increases in VAT and other taxes, including personal income tax, and mooted taxes like the carbon tax, this ratio is expected to increase.

So, how much tax do South Africans pay? As any economist worth his salt would answer, it depends on the individual taxpayer and company, owing to the employment of deductions and other provisions.

Are you familiar with ‘Tax Freedom Day’? It is a crude measure of determining when the average taxpayer stops paying tax and starts putting his or her earnings into his or her pocket. According to research conducted for the Free Market Foundation earlier this year, each year, every cent that the average South African earns for working up to and including May 20 goes to the taxman – from May 31 onwards, taxpayers will be paying themselves. This equates to 140 days of working exclusively for the taxman.

In light of South Africa’s declining economic growth, persisting high levels of unemployment, government’s increasing social commitments (various grants), government’s infrastructure expenditure, Southern African Customs Union payments, government’s debt repayment and increasing international lending costs, taxation remains government’s revenue preference and will, no doubt, remain so for the foreseeable future.

Itac Nominations
On July 24, the Economic Development Department called for nominations by July 31 of people to serve as International Trade Administration Commission of South Africa members (commissioners).

Draft Taxation Laws
On July 22, the National Treasury published for public comment the 2015 draft Taxation Laws Amendment Bill (TLAB) and the 2015 draft Tax Administration Laws Amendment Bill (TALAB). Those wishing to make an input must submit their comments by August 24.

The TLAB contains proposed amendments (Section 20 of the Customs and Excise Act, 1964, relating to goods in customs and excise warehouses) and amendment or withdrawal of, or insertion in Schedules No 1 to 6, 8 and to the Act made during the period from September 1, 2014 up to September 30.

The TALAB contains proposed amendments to the Act (Sections 1, 4, 4D, 27 and 99); to the Tax Administration Act, 2011 (Sections 68 and 69); to the Customs Duty Act, 2014 (Sections 1, 24, 25, 39, 67, 88, 182 and 202); and to the Customs Control Act, 2014 (Sections 1, 21, 49, 65, 67, 69, 71, 110, 112, 113, 115, 171, 205, 211, 214, 233, 235, 259, 299, 313, 332, 350, 359, 368, 373, 396, 418, 421, 432, 439, 444, 452, 458, 460, 580, 581, 590, 600, 626, 627, 695, 761, 762, 780, 789, 823, 825, 832, 877, 896, 913).

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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