Reckless driving and tax avoidance bear an uncomfortable resemblance to more widespread ills, say Alexander Hazen and Sabine Siller.
Johannesburg - South Africa’s taxi industry is a hot and divisive topic. In our first article last week (link at bottom of this article - IOL), we hoped to provide an “outsider’s perspective” on South Africa’s taxi industry, arguing that many South Africans seem to undervalue this uniquely entrepreneurial, strategically vital, and economically important sector.
Thank you to the readers who left over 130 online comments. In response to many who took exception to the positive light we shone on the industry, this week we focus on exploring two of the most common complaints: taxis are a hazard on the road, and they contribute little to South Africa in terms of tax.
The vast majority of the comments were concerned specifically with safety, like the one by Stomers: “Taxi drivers kill thousands of commuters each year through reckless driving and poor vehicle maintenance.”
Every month 1 200 South Africans are killed on the road, a shocking statistic when compared with other countries. South Africa ranks second on the continent, behind Nigeria, for road fatalities, and is four times higher than our home country, Italy.
The popular belief is that taxi drivers’ behaviour – their aggressive driving and disdain for the rules – provides an intuitive and logical explanation for why South Africa’s roads are so dangerous. On first look, the data supports this: taxis account for three times more fatalities than cars (27 compared to nine deaths per 10 000 vehicles respectively). Taken alone, one might conclude that you are three times more likely to die in a taxi than a private vehicle – right?
Wrong – when we consider that taxis carry on average far more passengers (15 versus between 1 to 4 for a private vehicle) we see that the risk of dying in a taxi is actually lower than a private car.
This is born out by the overall fatality figures. In 2010, the Road Traffic Management Corporation revealed that, out of the 13 923 people who died on South Africa’s roads, only 602 were taxi related while 6 729 people died in car accidents. Thus, taxis are responsible for less than 5 percent of the overall fatalities while car accidents account for almost half of road deaths. Light delivery vehicles and bakkies account for about 20 percent, while trucks and other unspecified vehicles are responsible for roughly 10 percent each. Minibuses not used for public transport (ie not taxis) account for 7 percent. The remaining road deaths are caused by buses, motorcycles and bicycles.
If these large numbers make your head spin faster than a taxi overtaking in the emergency lane, consider this: 60 percent of road deaths occur on the weekend. This is exactly when taxis are least active and when many private drivers may also be drinkers (nearly 60 percent of road fatalities are related to drunken driving).
In a nutshell, all the data suggests that we should be cautious before accusing taxis of being the main contributor to the annual road deaths in this country. However, there is certainly room for improvement. But the data suggests we have to take a long, sober look at the other causes of road deaths. Taxis may be reckless, but it seems many other South African road users are at least as bad, if not worse, especially on weekends.
Another popular belief is that taxis don’t pay taxes, as highlighted by comments like the one from Clinton: “These b**gers don’t pay taxes.”
The industry’s informal structure results in a lack of transparency and criticism that it doesn’t pay tax. This has been used to justify the lack of subsidy allocation and investments in the industry by the government.
In his comment, Warren PS challenged: “Why subsidise something if it doesn’t add directly to the economy?” In fact the industry’s economic contribution is significant.
Estimates by the government are about R40 billion a year and 600 000 jobs for drivers, rank managers and associated service providers.
Before digging into tax, we think it’s useful to understand the bigger picture of money flows in the industry. We visited various taxi ranks in Gauteng, and interviewed 40 drivers. Based on our interviews, a driver generates on average R750 revenue a day.
About R450 of this is paid as rent to the taxi owner, while the remaining amount covers petrol and some extra income for the driver.
The industry strongly disagrees with accusations that it doesn’t pay tax. “We contribute more to the tax base than anyone understands,” says James Chapman, general manager of Taxi Choice, the business arm of the South African National Taxi Council (Santaco). Let us explain.
As the biggest purchaser of fuel in the country, according to Taxi Choice, taxi operators and drivers pay significant indirect taxes – the “fuel levy” imposed on petrol and diesel sales, not to mention the value added tax (VAT) on vehicle purchases and spare parts.
Through our interviews with drivers we uncovered that, on average, a driver spends about R340 a day on fuel. Given a national fleet of 200 000 vehicles, we estimate that R68 million is spent on fuel every day, of which about R20m is tax. In addition, 5 percent of the total fuel price paid at the pump goes to the Road Accident Fund.
So while the data suggests that the taxi industry contributes only a small proportion of road deaths, it is, in fact, a major contributor to the Road Accident Fund (R3.4m a day).
In terms of income tax, contrary to widespread opinion, it is impossible for a registered taxi operator to avoid at least registering for tax. In order to get or renew their annual taxi operating licence, the applicant must have a valid South African Revenue Service (Sars) tax clearance certificate.
The industry does acknowledge that only about 60 percent of taxis have valid operating licences. However, operators not registered are not members of associations, and considered pariahs to the industry. The industry thus confidently, and correctly, states that all their members are registered for tax. The existence of a large number of illegal operators is a broader problem of law enforcement, and actually to the detriment of the industry and its members, says Taxi Choice.
One can argue that being an entirely cash-based business, with no records of either income or expenses, there is no visibility of actual revenue and profit. Thus, even tax-registered operators can under-declare their income. Ever vigilant, Sars has installed a mechanism of “deemed” taxation. To deal with the disclosure problem, Sars collects tax from taxi operators based on estimates by geographic area, with assumptions of the profitability of the relevant taxi routes. This may underestimate their real income, but the fact is that the industry’s members are forced to be tax compliant.
“Whether they are paying their full tax, I don’t know, I can’t lie to you, but I know that they are tax-paying South Africans,” says Bonisile Makubalo, corporate affairs director at SA Taxi.
Perhaps the taxi industry is more of a mirror than many South Africans care to admit. Reckless driving and tax avoidance, two of the most common negative perceptions of the industry, bear an uncomfortable resemblance to more widespread ills: an unfortunately high incidence of lawless behaviour such as drunken driving, speeding, and corruption. Makubalo puts it bluntly: “I would not say it is exclusively the taxi industry, it is the society in general, don’t you think?”
* Hazen and Siller are students from Bocconi University in Milan, Italy. They are doing fieldwork in South Africa as part of a research project into promoting entrepreneurship in Africa’s taxi industry. Follow their research on www.hakunamatatu.com.
** The views expressed here are not necessarily those of Independent Newspapers.