This post is a response to questions that came up in response to the other day’s piece about “load-shedding taxes”. I’ve realized that I need to expand on the background and concept.
I use the definition loosely but there is a “tax gap” in some countries partially because many of its peoples live simple lives (of varying levels of quality) in which bartering goods and services is the normal method of exchanging value. Cash transactions involving till slips are rare.
It’s in every government’s best interest to ensure that all its citizens have jobs, mostly outside government, are well-educated, have access to user-friendly technology and are willing and able to participate meaningfully in the taxable economy.
To whatever degree a government is too short-sighted to empower, inform and encourage citizens to play a robust role in the taxable economy, to that degree it has set the trap for its own demise.
To keep itself in power, our government’s ruling party needs a tax-paying base and a voting base. There are overlaps. And while each citizen votes once, some tax-payers may pay taxes that are proportionally bigger than their reliance on the State, arguably subsidizing those who rely more fully on the State. Come voting season, the ruling party will advertise everything the government has done, but the posters, billboards and slogans will echo the colours and rhetoric of the ruling party more than of the government. Throw struggle history into the mix, and the ruling party has a potent recipe for staying in government without sincerely governing.
And this works, so long as the discourse is around voting. Voting for the opposition would lead to the dreaded “return of apartheid”, it is said. Whether voters truly believe this or whether they have ulterior motives for wishing to keep the same power in place is beyond my knowledge.
What would happen if the discussion suddenly changed from voting to tax-paying? What would happen if the tax-paying base suddenly decided to simplify its living standards and turn to barter instead of cash, in barter networks that grow faster than the law can be modified to keep up? The government takes it for granted that people who can afford to pay cash for goods and services will continue to do so “until Jesus returns”, which is how it will stay in power indefinitely. But if your neighbor decides to take ingredients from her backyard to cook your meals in exchange for your painting her house and fixing her yard, or cutting her hair, will you really put this act of everyday neighborly kindness down on your tax returns? It may depend on whether your neighbor has a registered business as a backyard goods’ grower or meal-cooker, and whether you are a professional painter and yard-fixer. Then the market value of the transaction matters and probably should be declared as a transaction that affected your respective “turnovers” as businesses.
But what if you’re both just being handy and neighborly, and you’re not businesses at all? Or what if you’re both unemployed (on paper)? Or what if backyard plant-growing/meal-making and house-painting are just serious hobbies that people call you to practice on their behalf? Is it your fault that one person’s hobby is another person’s livelihood? Also, wouldn’t you have to be trained tax experts to be accountable to the nth degree for the tax ramifications of these transactions?
Think what the net effect would be if everyone just decided to be really self-sufficient person and a good neighbor, linking up as a network of DIY-ey persons who can make their own solar-powered panels out of scrap, recycle their own water and do other things off the grid? Where is the line? Has our government not told us numerous times to save?
Look It Up If You Don’t Believe Me, But “Tax Evasion” and “Tax Avoidance” Are Not The Same Thing
Tax evasion is when someone unlawfully and knowingly skirts tax law. Tax avoidance is the legal use of the tax regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law. SARS has rules against tax avoidance, but to be effective or meaningful at the level of people’s private lives and networks, those rules would have to overstep many Constitutional rights and violate people’s privacy. The laws are more readily applicable to businesses than they are to civilians. I’m advocating that people shift more of their interactions from the visible, taxable business economy to which these rules do readily apply, to the more ambiguous, puzzling informal economy, in order to dry up the revenues that fund corrpution. On private citizens’ turf, the law can so easily be brought into conflict with itself.
More profoundly, when so many government officials have no respect for the law, why should the citizens not consider following their example?
During apartheid, people broke the system by being arrested simultaneously, or showing up at places all at once, coordinating their behavior and using their numbers. That’s easier to do now that we have mobile technology. E-filing? How do you use automated e-filing if there’s no power and internet is expensive? Get together with ALL your friends, neighbors, acquaintances, and their friends and relatives – your whole “network” – and rock up at SARS. Daunt them with your unprecedented numbers and tweet them out if they can’t provide reasonably good service to ALL of you.
A man stood at a SARS queue not knowing it was the wrong one. When he reached the end, the clerk there assisted him and then told him the right queue to stand, for future reference. The man then joined that queue and when he reached the teller at its end, he asked for “future reference”. The first clerk had thrown the phrase out assuming he knew what it meant.
My purpose isn’t to make fun of this gentleman. It is to point out that the way you dress, carry yourself, speak and appear can insulate you from many realities all around you. You’ll never know the kinds of queries that SARS personnel normally deal with because, based on their first impression of you they’ll know what to expect from you. You’d never tell it, but moments before dealing with you they had a client who was searching for “future reference”.
If you and hundreds of people from your “bartering network” all suddenly had difficulty understanding the tax system or what “reasonable market value” even means, it could take hours to explain to ALL of you exactly why, and how, you could measure how much bartering has brought to or taken from you in currency. How do you work out how much you owe the Taxman if the government has not made absolutely certain that everyone has had the sufficient education to understand what can appear to be an infinitely complex taxation system?
Now, the record may show that you’ve filled out tax returns before. Just remind the teller of how extensively she had to assist you the last time. Wasn’t it her? Snap, it looked like her. It may have been a colleague of hers. It was so long ago. Or tell her how closely someone else had to explain every step while you were doing it online that other time, and how that person has moved away. Play dumb, and play dumb in vast, unbearable numbers.
Earlier, I asked whether government had done everything in its power to ensure that everyone has had sufficient education to understand the tax system. Brief workshops don’t cut it: if the government wants a taxable citizenry, then the government has to have done the groundwork of proper life-long education, not just sent SARS agents at the 11th hour to teach people Tax 101, presuming on their preexisting vocabulary and general knowledge. The government takes if for granted that you’ve educated yourself enough for SARS to send agents to complete your education where you haven’t made yourself sufficiently taxable, in order to help you cooperate with and contribute to your taxation and rebating. But the whole thing reeks of exploitation. When last did SARS need a bail-out? It is the most effective, effecient parastatal I know of. Nowhere else have I seen the government perform as in SARS. Through it, the government that refuses people a decent education is willing to give us a slightly better education so we can do a slightly better job at ensuring perfect tax returns, and on the whole, perfect revenue. Ha.
If the ruling party wants any of us to rely wholly on the State to spoon-feed us, then we must ALL turn into babies. And if any of SARS’ staff fails to show infinite patience towards you and your needs, throw the CPA, a Charlize Theron and a lawsuit at them. That knowledge, you can suddenly have. What? If Oscar and Shrien could run circles around the system, why can’t we ALL do it?
I imagine some people would want to barter, but would want to be scrupulously honest about every minute transaction. Assuming “they” can process ALL of the documentation from ALL the people who’ve turned to barter, how will “they” know that you are being completely honest, even if you are? Load-shedding your taxes isn’t about cutting back on your taxes; it’s about cutting back on visibly taxable transactions – or making the market value of your transactions more difficult to ascertain – in order to give the Taxman endless days and sleepless nights. This will force the government to make it easier for more people to participate in the taxable economy as informed, empowered citizens. The point of load-shedding taxes isn’t to evade tax; it’s for citizens to demonstrate control over it and over government. WE make, and can unmake, any existing system. Even if you choose to be totally honest with your taxes, the mere act of getting into a barter network is a subversive statement: it’s a reminder of who has real power.
Other citizens will probably lie about their barter “income”. As a currency, barter is more flexible and available than cash, if not always as transferable. If your landlord is willing to provide your board, lodging and meals in exchange for you helping with his business’ graphic design and copywriting, you won’t have to wait until his business has liquid cash before availing your services to him or being compensated in kind. The temptation there is that you may lie to SARS about the market value of the transaction, or pretend it never happened.
The bigger temptation, if you’re part of an informal bartering network, is that your businesses won’t have to even exist insofar as the government is concerned. No CK documents, no tax clearance, no BEE certificate, no receipts – nothing, except word of mouth, neighborly trust and constant practice at social media. No cash, either, if your network is strong enough.
I’m not advocating this way of life; I’m pointing out that everyone is already using it or elements of it though not many people have aggressively used it to bring the government to breaking point.
I don’t know what tools the government has at its disposal to audit that every existing business and taxable entity is making strides to fall within the taxable economy. I’m just a blogger. But if you are faced with the temptation to totally bamboozle the system, take Thuli Madonsela’s advice to Former President Jacob Zuma: where you have “unduly benefitted” from loopholes in the structure, “pay back a reasonable amount” of your gains in cash.
That is if you have any cash in these difficult, difficult times.
So while I would neither advocate nor condemn maintaining invisibility towards the taxable economy, I will remark on how flexible it would be to exchange goods and services instead of saving cash up to pay for the services of someone outside of your bartering network.
Indeed, this is how, you know, people did things before governments and taxes existed? And they lived, in some cases, in great peace and luxury.
Now that’s what I’d call returning to our roots.