Can SA survive given the following

[BusFact]

I personally believe that income tax is the problem!

The so called 5 million who contribute to the fiscus only contribute a small portion by way of personal tax.

Company tax and duties is the main contributor.

Now if some clever mathamatician did the calculation as to how much VAT should be increased by to take up the personal tax shortfall we would all pay tax equally according to our spendings, not our earnings, I would guess 20%?

Interesting concept. I would take it one step further though. Transaction tax. The problem with VAT is that it still requires admin and allows people to fiddle the calculations.

With a transaction tax, every single transaction passing through a bank account is taxed at a fixed rate at say 2%. So when you want to buy a R100 item at Pick n Pay on your card, you will in fact pay R100 + R2 (in a very similar way to the current bank charge system). Pick n Pay will receive R100 in their account but also be taxed R2 for receiving it. So effectively You pay R102, Pick n Pay receives R98 and SARS get R4.

This happens for every single transaction going through the bank system. It replaces Income tax, CGT, VAT and possibly even UIF, SDL, petrol tax and others.

- No more complicated tax returns. The beauty of this system is its simplicity. It all happens automatically behind the scenes.
- This makes avoiding tax very difficult and often not worth the effort.
- All collecting is done by the banks so SARS can monitor a dozen institutions instead of 5 million plus individuals.
- A fairer system in that taxes are in line with your use of the general economy. The more you spend / receive the more you are taxed.
- There would be no more need for company financials or accountants. You have the option of still doing so from a business efficiency point of view, but their is no tax need to do so.
- Loss making companies still contribute and so the profitable ones don't have to bear the full burden.
- No more panic because your cash flow does not allow for that VAT return payment or provisional payment, as all taxes are deducted on cash flow.
- Even criminals now pay more tax as they spend their proceeds.
- Certain industries can still be taxed more by requiring them to have licences which will make tax admin an issue only for them. Eg Mining, Luxury goods, Alcohol, Tobacco, etc.
- Instead of "zero rating" certain goods, rather provide rebates back to those industries. This keeps the system as simple as possible for the bulk of the public, with only a few entities having to keep detailed tax records.
- A larger tax base results as almost everyone is contributing.
- Cash is the obvious means for avoidance and this can be discouraged by making it expensive to withdraw, limiting amounts people may keep, limiting the amount of cash that can be received, limiting cash in the system and changing the notes every few years to force deposits, etc.

My only concern is the 2% assumption made in the beginning. For the system to work, it needs to be a low amount so that people find it reasonably insignificant per transaction which removes the incentive for avoidance. I'm not sure what the figure would be to get the same revenue for SARs as through their existing system, because I couldn't find what the annual total of transactions through our banks was in a year. So I had to use my personal experience and a few JSE listed companies to come to my figure.

Apparently Brazil tried such a system a while back, but info is scarce. It seems to have been reasonably successful, but I can't find any good reasons for them stopping it.

Wouldn't it be nice to have a hassle free tax system?

[Citizen X]

Diability grant and pension grant I actually support. I also support quality health care for all. Attitudes are changing, people on the grassroots level are not fools! All their violent and vociferous service delivery are directly at the anc gov. I think we've reached a point where people are realised that the anc gov, esp, leadership are living extravagant lives just like the king, queen and elite of France were in the months and years preceding the french rev. I think that the vast majority of SA's would much rather have a competetnt government that can use resourses wisely to address of many problems, manage the process of governace, deal with corrupt officials harshly, root out nepotism and tenderpreneurship and listen to what people are saying. I'm not so confident that the anc will do as well as they think they will do in the next election. People of all races, religions, cultures, subcultures, languages are sick and tired of this sorry song and dance the anc keeps giving us....

[Justloadit]

Transaction tax sounds great, but in my business, in some cases I make less than 0.5% profit on the sale, so the tax would eradicate my bottom line. This was the problem we had years ago with the municipal tax (I think it was called), where the local municipality use to make 1.5% of every transaction. They made more money than what we made, and we were doing all the work.

Secondly much business is made with cash money, so it does not even reach the bank account.

[Pap_sak]

Dave A

You right in certain regards - the job market has changed - no more typing pools!

But new "professions" have also pop up : IT, human resources, spin doctors, health & safety, project managers...hell I am sure there were not many fitness instructors 60 years ago!

[Blurock]

Dave A

You right in certain regards - the job market has changed - no more typing pools!

But new "professions" have also pop up : IT, human resources, spin doctors, health & safety, project managers...hell I am sure there were not many fitness instructors 60 years ago!

New technologies require new skills. Unfortunately our education is lagging and we have not been able to keep up with the rest of the world.

The new SKA kilometre array telescope will inject direct investment of more than EUR 1.5 billion into South Africa. Sadly, most of the scientists and skilled people required will come from other parts of the world as we just do not have the people to operate it.

When we think job creation, we think pick and shovel, we do not think of acquiring the necessary skills to move up the ladder. When you are at the base of the pyramid, you have to compete with many other building blocks and carry a heavy load. Remember, there is always room at the top, but it is a long way up!

[BusFact]

I'm not so confident that the anc will do as well as they think they will do in the next election. People of all races, religions, cultures, subcultures, languages are sick and tired of this sorry song and dance the anc keeps giving us....

I thought (hoped) that would happen in the last elections, but it didn't. I think they still have a very strong support base. If people become disillusioned with voting they seem to stop voting altogether rather than vote for the opposition.

[BusFact]

Transaction tax sounds great, but in my business, in some cases I make less than 0.5% profit on the sale, so the tax would eradicate my bottom line. This was the problem we had years ago with the municipal tax (I think it was called), where the local municipality use to make 1.5% of every transaction. They made more money than what we made, and we were doing all the work.

Regional services levy was the name of that darned thing. It still required you to fill in that bliksem form and make the monthly payment. The proposal I put forward wants this to happen automatically off the bank account so no paper work is required and no monthly payment. Instead it comes off each transaction through your account like a bank charge does now on some accounts.

I do agree that low margin businesses will be affected, but you (you and your competitors) will all be affected equally, so margins for you and your competitors would have to improve to 4,5%. The paradigm shift is to tax the activity of the business or person. High volume business (plastics, bitumen, concrete, steel, etc) use significant amounts of state infrastructure to transport (roads, ports, etc) and make (water for eg) their products, but if they are not profitable they pay reduced taxes and are in part therefore subsidised by profitable businesses who pay higher taxes.

Don't forget any VAT and PAYE that you are currently having to administer and pay will fall away.

Secondly much business is made with cash money, so it does not even reach the bank account.

And my assumption is that many cash businesses don't pay tax or fiddle the books to reduce tax anyway. By reducing cash in circulation, increasing costs of doing cash withdrawals, limiting cash that can be held by an individual or business and changing bank notes every few years to force deposits, together with making the use of cards much simpler and cost effective, we can continue moving away from a cash economy.

[Dave A]

And increase our dependance on banks - those bastions of integrity

I have to be honest, I'm not at all sure this is the best way to go. There are so many other options for collecting tax - less lopsided ones.

And it seems currently the problem is less about how we collect it, and a lot more about how government is spending it.

[vieome]

New technologies require new skills. Unfortunately our education is lagging and we have not been able to keep up with the rest of the world.

While I agree with your statement I would also like to point out the following, the Irony of it, is that much of the technologies that we use were developed by college drop outs. Many of the computer hackers(someone who makes a computer do what they want as opposed to crackers -people that break into computer systems) of this world are self taught. I think a better understanding of poverty and better ways of helping people escape the poverty trap will determine the future of the country.

If one is living below the poverty line and in an area for the below the poverty line, the kids will look to those who have managed to escape the poverty. If the escape was through education many will chase education. However in africa most that escape poverty is either through crime or corruption thus the society which has a larger amount of people below the poverty line, begin their evolution towards a more corrupt society. Corruption and Crime are faster ways to escape poverty, and once the corruption virus sets in, there is no stopping it. A whole generation of people are now created who believe that the only way they will ever get anywhere is through corruption, there are no examples of people who escaped through any other means.

[BusFact]

And increase our dependance on banks - those bastions of integrity
I have to be honest, I'm not at all sure this is the best way to go. There are so many other options for collecting tax - less lopsided ones.
And it seems currently the problem is less about how we collect it, and a lot more about how government is spending it.

I totally agree that how tax is spent is a major issue, but I spend so much unnecessary time collecting tax for the government (VAT and EMP), completing their forms
and trying to stay current on all the annual tax changes. It just seems such a waste of time and resources. The annual EMP501 really brings this concept to the fore each year. I really believe our tax system is just way too complicated. Accountants and lawyers spend can major at university in these fields and then you and I are somehow expected to also be compliant.

Are the other options you have in mind simple methods? Why do you say its "lop sided".

I don't see it as increasing our dependance on the banks. It becomes a service they render for SARS in the same way that they (and we) do their current VAT returns for example. SARS can then keep a beady eye on just a handful of organisations. It would actually be an extra cost to the banks to control and administer this tax system making their lives more difficult, but ours easier. Our current relationship (and I use that term loosely) with the banks does not change at all.