Tax practitioners concerned about the wellbeing of the economy should make sure they pay as little tax as possible without breaking any laws, an economist has argued.
“One rand in your pocket is worth much more than R1 in the pocket of the civil servants,” Dawie Roodt, chief economist at the Efficient Group, told delegates at the 2016 Tax Indaba.
He stressed, however, that he was not advocating for a tax revolt, or that South Africans should stop paying taxes.
“Of course you have to pay your taxes, but nothing more.”
Roodt said based on the current political turmoil, trust in the South African economy would be under pressure and the rand would probably remain volatile.
Economic growth may turn negative this year and will probably be well below 1% in 2017.
“As far as I am concerned there’s a recession already.”
To turn this around, weak political leadership had to be addressed. One of the reasons for the significant increase in the wage bill was due to labour federation Cosatu pressuring the tripartite alliance and this had to be tackled. South Africa had an army of civil servants that were overpaid and underworked, he said.
State expenditure had to be reduced. The outlook for the economy was gloomy and it was the poor and the unemployed that would suffer most, he argued.
His comments came amid increasing warnings that the current political turmoil could push an already fragile economy over the edge. The SA Reserve Bank expects the economy to grow by 0% this year. This could place tax collection under pressure at a time when National Treasury is trying to close the budget deficit and avoid a sovereign credit rating downgrade. At the same time, there are also calls for reduced spending and warnings that taxpayers would be reluctant to pay their taxes if it is wasted.
Michael Sachs, DDG at National Treasury’s Budget Office, warned that while some kind of withholding of tax may sound popular, it is a very dangerous path to go down when considering the constitution, the public service and the future of the nation.
The real question in relation to the 1.2 million public servants, which include teachers, nurses and police officers, is not how much they are paid, but whether they are able to deliver high-quality public service in return for their pay. This is also a function of their management, he said.
“As we’re engaging in the politics of the moment, we must preserve the things that will sustain the nation in the future and fiscal citizenry is one of those things, and we should be very cautions about how we treat that,” Sachs said.
Tom Moyane, commissioner of the SA Revenue Service (Sars), warned that the revenue collection target of R1.175 trillion for the 2016/17 fiscal year was at risk, due to the country’s weak economic performance.
Other risks include currency volatility and the implications for inflation, the threat of a sovereign credit rating downgrade and its impact on borrowing cost.
Moyane emphasised that Sars must play a pivotal role in this regard as failure to collect taxes due enhances the risk of a downgrade.
He urged South Africans to pay their taxes honestly and timeously.
“Talk to Sars before we talk to you.”
Brought to you by Moneyweb