University of Johannesburg: Taxing taxis: It’s high time the minibus sector renders unto Caesar what is Caesar’s

Professor Letlhokwa George Mpedi is the Deputy Vice-Chancellor: Academic (Designate) and former Executive Dean: Faculty of Law, University of Johannesburg. He recently penned an opinion article that first appeared in the Daily Maverick on 23 May 2021.

The subject of tax and the concomitant question of whether it should be paid or not is as old as hills. The Bible in Matthew Chapter 22 verses 13-22 speaks about paying taxes to Caesar. The Pharisees and Herodians, in their quest to snare Jesus in His own words, asked: “Is it lawful to pay taxes to Caesar or not? Should we pay them or not?” In His response, Jesus told them to “give to Caesar what is Caesar’s”.

I am certain that despite the guidance of the Holy scripture, many of us give the tax authorities their due begrudgingly. They are unpopular and understandably so. The thing is that the consequences of the laws they work with are invariably harsh. Al Capone, the infamous American gangster, learnt the hard way. In 1931 he was sentenced to 11 years in federal prison upon being found guilty of several counts of tax evasion, among other things.

Here at home, we have a long history of tax laws, and their consequences for non-compliance are well known. We had all sorts of taxes, including hut tax. Yes, the same hut tax that Malebogo, Chief of the Bahananwa, fiercely opposed in the late 1890s. We may not have a hut tax in the true sense anymore, but tax is tax, and it is here to stay. As indicated by Benjamin Franklin, “in this world, nothing is certain except death and taxes”.

Many South Africans have stories to tell about the wrath of the South African Revenue Service (SARS). More recently, the internet was ablaze with reports that tax authorities were investigating how some individuals who flaunted their wealth on social media became rich and, most importantly, whether their tax affairs were in order.

That is well and good, but what about the minibus taxi sector? It is an open secret that this sector does not give much to tax authorities, at least not directly. Minister of Finance Tito Mboweni recently reported that despite generating an annual revenue of about R90-billion, SARS only manages to collect a minuscule R5-million in annual corporate income tax from the taxi operators. This is a shame and a sin, those who religiously pay their taxes might be tempted to say. The question is, can the taxpayers find solace in the minister’s words that SARS is working on the issue and the process will be concluded at the end of the financial year?

I suspect that the taxpayers are not that gullible. The point is that there are red flags that are hard to ignore. First, it is reported that the plan that is being crafted by SARS will “encourage voluntary compliance”. This does not hold much promise, especially when one considers the sector’s predilection for defiance and non-compliance with laws, rules and regulations. The fact that most taxi drivers pay little or no respect to traffic and road safety rules and regulations is abundantly clear and well documented. It is often argued that this is largely due to the pressure that they work under, such as daily revenue targets colloquially known as “checking”. The situation is compounded by, as the Discussion Document on the Taxi Industry Regulation (2020) puts it, the “involvement of government officials and officials responsible for law enforcement like traffic and police in the taxi business”.

It should be recalled that the taxi sector never hesitated in the past to mount bitter protests against anyone or anything that it does not find palatable. The refusal to pay e-tolls and the demonstrations against the Covid-19 regulations on the maximum number of passengers that taxis can ferry are just some of the cases in point. The quick capitulation by the relevant authorities has somewhat covered this sector with a cloak of invincibility. This makes the likelihood of the recalcitrant taxi operators paying taxes, especially back taxes with interest, a remote possibility.

Furthermore, there have been some media reports that the industry is awaiting some meaningful engagement with the authorities on the tax matter. Although this is understandable, it creates an impression that paying taxes is generally a negotiated act, almost akin to a salary increment after a collective bargaining process.

While it is a given that tax collection has its challenges considering the informality and cash-based nature of the sector, tax authorities should be careful not to set an untenable precedent by treating that industry with kid gloves.

In the same breath, any success with the collection of tax from the taxi industry will inevitably be met with a hike in fares which will negatively affect already hard-pressed commuters. So, every step taken by the authorities will need to be well calculated, especially during these difficult Covid-19 times.

Moreover, it is argued in some quarters that the taxi industry contributes indirectly to the fiscus through, for instance, VAT on the sale of vehicles they use and fuel levies. While this contribution is to be welcomed, it should not be glamourised. The truth of the matter is that there are sectors that contribute in the same fashion, probably more, and still comply with their tax obligations. Any unwarranted differentiated treatment between sectors is likely to invoke sentiments articulated by George Orwell in his metaphorical novel Animal Farm that “all animals are equal, but some animals are more equal than others”. That is a perfect formula for fomenting a tax rebellion.

As pointed out by Johan Cruyff, a Dutch footballer, “every disadvantage has its advantage”. Successful integration of the taxi sector in the tax system can yield positive results beyond the obvious ones such as increasing state revenue. This should not be difficult to do, given the Fourth Industrial Revolution technologies available today. Due to previous experiences with the taxi industry, it is almost certain that it will not tolerate any wastefulness with taxpayers’ money.

Bringing the minibus taxi sector fully into the SARS fold is a necessary and long-overdue step. The taxi industry needs to reinvent itself and move with the times. For instance, it must recognise that cash is no longer king and adopt new forms of payment, systems and technologies. Therefore, the view expressed in the National Taxi Lekgotla 2020 Declaration about the “introduction of an electronic fare collection system in order to reduce the handling of cash” is to be welcomed. This is not new. For example, some minibus taxi operators in Gauteng and Cape Town piloted and abandoned cashless fare-collection initiatives in the past. The minibus taxi industry does not need to reinvent the wheel on that score. There are successful cashless fare-collection approaches that are based on a cellphone application in West and East Africa that they can learn from.

Switching to an electronic fare-collection system will shepherd the sector to the formal banking institutions and systems. Such a step will make the sector easy to tax and so forth. While this may be a disincentive to the wayward operators, the sector must take a broader view on the matter. Working with and within formal systems will advance the formalisation of the industry, particularly the employment relationship between taxi owners and drivers. This will enable the drivers to enjoy the safety net provided by social and employment protection. Formalised employment relationships will mean that the taxi drivers would be able to prove their employment status to, for example, secure loans and enter into hire purchase agreements.

It should be noted that there is a Sectoral Determination 11: Taxi Sector which regulates the minimum wages, particulars of employment, hours of work, leave, prohibition of employment of children and forced labour, and termination of employment. In addition, the Sectoral Determination extended the scope of coverage of the Unemployment Insurance Act to the taxi industry. However, there is room for improvement.

Inasmuch as tax collection is important, and as apparent from the preceding assertion, there are a variety of issues plaguing the taxi sector. In the end, they must be dealt with holistically. Consequently, the transitional arrangements for taxi formalisation contained in the Directions Issued in terms of Regulation 4(7) of the Regulations made under Section 27(2) of the Disaster Management Act, 2002: The Taxi Relief Fund to Mitigate the Impact of Covid-19 in the Taxi Industry are a right step in the right direction. Such arrangements include the registration of companies; registration of employees to the company and with the Skills Development Levy, Unemployment Insurance Fund, Compensation Fund, and compliance with the Sectoral Wage Determination.

As they say, it is better late than never. However, only time will tell how things will pan out.