YESTERDAY the SA Revenue Service (Sars) made public a strategy document that spells out how and where it is going to focus extra effort over the next five years to ensure a broader culture of tax and customs compliance in our society.
The Sars compliance programme highlights seven priority areas that were identified through research as lagging behind the generally high levels of tax and customs compliance in South Africa.
Many countries publish similar compliance programmes – including Australia, Brazil, Canada, Denmark, Netherlands, New Zealand, Poland, Spain, Sweden, Turkey, the US and the UK – and there are some common threads in the rationale for public disclosure of red-flag areas.
Publication allows a tax administration to be open and transparent about the compliance risks it faces and justifies the deployment of resources and capacity to certain areas. More importantly, it raises awareness among taxpayers of the issues to look out for and helps them to manage their own affairs to mitigate tax risk.
In a similar vein, the release of the Sars compliance programme is not about singling out scapegoats so that they alone get the message of compliance.
The compliance programme signals a concern that Sars wants to share with all South Africans, namely how to ensure that all citizens embrace tax and customs compliance as a fundamental requirement of the democratic order established in 1994.
The current sovereign debt crisis in Greece and other EU countries is a timely reminder of what can happen when tax compliance is eroded by a laissez-faire attitude towards meeting one’s social obligations.
A report by the Greek Central Bank in 2010 estimated that the gap between what Greek taxpayers owed and what they actually paid was about a third of total tax revenue – or equal to roughly the size of the country’s budget deficit.
The moral of the story is that if Greeks paid taxes willingly, honestly and on time, the country would not have so much debt.
South Africa cannot afford to learn such a hard and expensive lesson. The country has come a long way since 1994 when the apartheid legacy still strongly influenced attitudes to tax compliance.
Since the dawn of democracy, South Africa has made tremendous gains which speak volumes about the majority of citizens’ readiness to be compliant and make a contribution to a shared future.
Among the very visible signs of compliance gain has been the growth in the individual tax register from 1.7 million in 1994 to 6 million in 2010. The register has since doubled again following a policy change in 2011 to register all individuals in formal employment. And during the latest tax season, a record 5 million returns were filed on time – raising on-time filing by individual taxpayers to more than 83 percent. This rise in compliance, coupled with the country’s economic growth, has seen total revenue climb from R114 billion in 1994/95 to more than R730bn this year – an overall increase of almost 550 percent at an average increase of 11.6 percent a year.
However, we cannot take compliance for granted because the gains made so painstakingly, can be undone very quickly. As a human behaviour, compliance is continually influenced by a wide variety of social, economic, environmental and other factors. Maintaining and growing a culture of compliance therefore requires constant, systematic attention to encourage compliance and discourage non-compliance.
That is why every year we need to signal to all citizens through the compliance programme that the determination of Sars is to act decisively in those areas that it identifies as posing a significant compliance risk.
The tax system can only succeed if taxpayers see that it is based on fairness and integrity. Allowing a few unscrupulous individuals or organisations to get away with evasion, aggressive avoidance and other forms of non-compliance, undermines the integrity of the entire system.
That is a prospect everybody should work tirelessly to avoid, applying our minds to forge a widely accepted social compact with taxpayers and other stakeholders to make tax and customs compliance a cherished value so that it can underpin our social and economic development in a sustainable way.
This is not only the responsibility of Sars. Everybody has a very direct stake in improving levels of compliance. Higher levels of compliance enable the lowering of the overall tax burden we all share.
It provides the fiscal space to the government to further extend tax relief and it enables South Africa to manage its debt requirements responsibly without overburdening future generations.
Compliance starts with each person in making a conscious decision to do the right thing – to register for tax when required, to submit returns and declarations honestly and on time, to make payments on time and in full.
But it goes beyond behaviour. It requires bringing social pressure to bear on those who are shirking their obligations at everybody else’s expense.
The New Yorker magazine last year quoted a Greek tax official as saying: “The Greek people never learned to pay their taxes. And they never did because no one is punished. (Tax evasion) is a cavalier offence – like a gentleman not opening the door for a lady.”
I hope that never becomes our attitude to tax and customs compliance in South Africa. With your help and ongoing support it will not.
Oupa Magashula is commissioner of Sars.