I have still not been able to find solid reasoning as to why a flat rate turnover/cash flow tax would not work. By this I don't mean the turnover tax we have for small companies. Instead I mean that every time money comes into any bank account a tax of around 2% is levied pretty much like a bank charge. Every time something gets paid out another say 2% is levied again.

So, you receive a salary of R10'000, but only R9'800 arrives in your account. The R200 is automatically rerouted to SARS by your bank. If you are like the vast majority, you immediately spend everything, which means you pay bills for R9'604 with R196 (2% of R9800) going off to SARS. The same thing happens with company accounts. This replaces VAT, PAYE, CGT and Income Tax . No tax returns required.

Advantages to SARS:
+ Only have to monitor a dozen or so banks instead instead of thousands of companies and millions of individuals. Bye bye easyfile and efiling.
+ Continual inflow of taxes every day.
+ No bad debts, as the tax gets paid in real time.
+ The simplicity makes it much harder to avoid paying tax as it does not rely on the tax payer to file returns and the accuracy there of.
+ The simplicity brings just about everyone into the tax net. Far more difficult to hide by hiding profits.
+ The more someone earns the more tax they pay.
+ All companies pay tax, so the profitable ones don't have to help finance the unprofitable ones.
+ Encourage profitable businesses, rather than penalising them.
+ People are less resistant to paying tax when its not in their face. Eg Etolls vs Petrol tax (one you get a nasty bill for every month to remind you, the other gets mixed up in the actual product you put in your car). PAYE vs VAT (The one stares at you on your payslip, the other is a single line entry near the end of a till slip which no one ever reads).
+ Internationals can't siphon off local profits to tax havens as any revenue generated in SA gets taxed here.
+ Some revenue can be generated from SA citizens paying for foreign products and services (Amazon, Apple, Ebay, and other online providers).
+ Could possible attract investment in SA by foreign companies with high margin products (think tech). A tax based on turnover would most likely be more beneficial to them than one based on profits.

Advantages to "the people":
+ No complicated tax returns
+ No having to pay an accountant to help you with your tax return, which you are ultimately responsible for anyway.
+ No tax shocks or penalties.
+ The appearance of a lower tax burden because of the lower apparent amount and because no action is required.
+ A sense of fairness because everyone pays, and those with more pay more, but only proportionally so.
+ There is added incentive for the Government to increase economic activity, rather than just trying to milk a select few.

Common issues raised:
- But high volume, low margin businesses will end up with much higher taxes! Answer: Indeed they will. The effect will be a 4% increase in say the price of bread, assuming the company never made any profits before. That does not seem unreasonable.
- But every one will just use cash! Answer: Cash is already being discouraged and can easily be discouraged further. It will continue to have a role for smaller transactions, but with a 4% charge, there really isn't much incentive to go through the hassle of protecting cash.
- But my company only has 3% margins as it is, the 4% tax will make me unprofitable! Answer: No it won't. Your margins will have to increase to 7% as will your competitors.
- But how can you expect the poor to pay the same rate as the rich! Answer: True they do pay the same rate, but obviously a smaller amount. However this can actually be a positive for the Government and their socialist tendencies. This tax system should generate more revenue than the existing one. Which will help allow them to provide free services to the poor a bit better than they do now. Rebates can also be provided to companies who provide staples (bread, milk, etc) for example.
- The Government loses some ability to manipulate markets. Answer: Not really. They can still tax certain industries like petrol, alcohol and cigarettes as they do already. Duties on imports can remain. So a minority of industries can remain a bit complicated, but the vast majority can adopt a simple system.

Effectively all companies will pay around 4% of their turnover and individuals 4% of their salary. I've used this number here as a bit of a guess. Trying to get actual bank activity numbers is really difficult. When I first did my calculations a while back, it seemed reasonable. In addition I believe VAT is the biggest tax generator at the moment, but 14% is not what the Government receives. Its only 14% of the difference between the company input and output - speaking loosely of course.

I'd really like some discussion from you critical lot, assuming of course that you managed to read the waffle above.