South Africans working abroad are in the frontline of a looming tax revolt as they cut their tax ties with this country to avoid punitive taxes that come into force from next year.
According to a tax expert, this is “giving Sars heart palpitations” as it tries to make up billions of rands in revenue collection.
Senior tax attorney at Tax Consulting SA Jean du Toit said the reality – while former Western Cape premier Helen Zille and many others were thinking about the feasibility of a tax revolt – was that it was already too late to close the stable door.
“On a small scale, [a legal tax revolt] may be achieved by consuming zero-rated goods only, or by kicking your smoking habit and adopting a teetotaller lifestyle, thereby depriving the state of VAT and sin taxes,” he said.
Excise duties on alcohol and tobacco products is hardly small change, estimated to bring in an added R400 and R600 million, over and above what they were previously bringing in, into the state coffers this financial year.
“A more drastic and far more effective, yet legal, act of defiance would be to cease your tax residency, in which case Sars would no longer have a claim to your worldwide income and capital gains,” Du Toit said.
“Arguably, it is this manifestation of a tax revolt that is currently most prevalent and the one giving Sars heart palpitations.”
An economy barely keeping its nose above water has many looking abroad.
“The expat landscape changed when the amendment to the Income Tax Act was promulgated, which means that, from March 1 2020, expats would be liable for tax in South Africa on their foreign employment income insofar as it exceeds R1 million,” Du Toit said.
“National Treasury and Sars forged ahead with the amendment, despite being forewarned of the possible consequences.
This forced the hand of many expats, who have now decided to cease their tax residency, specifically to avoid being caught by the amendment,” Du Toit said.
That a thinning herd of irate taxpayers are fed up with decades of funding the gravy train is evident in the numbers.
According to Sars, SA has 21 million individuals registered for income tax according to its latest (2018) stats on its website.
However, in February Treasury predicted a shortfall of R42.8 billion, R15.4 billion more than the R27.4 billion shortfall predicted last year.
Sars head Edward Kieswetter acknowledged last week that South Africans were withholding the taxman’s cut – which could see SA shaking a tin at the door of the International Monetary Fund.
Kieswetter said falling trust in the collector, by individuals and companies, had led to rising levels of tax avoidance and fraud, bleeding billions from government.
“When public trust wanes, as is the current case, then taxpayers feel morally justified to withhold or manipulate their taxes,” Kieswetter said.
“When revenue collection is undermined, it traps us in a vicious cycle of revenue decline … and consequently the need to go with begging bowls to borrow money, which effectively mortgages our future.
“The taxpayers who seem to be leaving our shores are some of those relatively high earners on whom Sars relies quite heavily,” Kieswetter said.