Tax evasion not so easily justified

by Willem Landman: Founding CEO and Executive Director of the Ethics Institute of South Africa, www.ethicsa.org
It is again time for us to get our documents for our tax returns in order.

It would appear, however, from informal conversations that tax payers are increasingly swallowing hard on this responsibility and are looking for methods to evade tax. That is probably nothing new, and it will always be so.

But I am sensing dissatisfaction, not so much with the tax obligation in itself, but fulfilling that obligation in our current political dispensation.

My observation is of course not scientific. It is none the less instructive to look at the reasons for this dissatisfaction. They should serve as a warning for the authorities.

Chipping away at the trust of the 6 million people who feed the state coffers does not bode well.

Because of their dissatisfaction, some tax payers want to protest about the dereliction of duty by and indifference of the government and the public service, and they are of the opinion that targeted tax evasion is ethically justifiable even if it is a criminal offence. Whether they will turn their words into action is of course another matter.

In the box are two examples of tax payers who are advancing two justifications for tax evasion.

Firstly, public money is openly being stolen through fraud, corruption and squandering.

There is a robber class, which is apparently with impunity making a career of pursuing state monies, or subsidising extravagant life styles. Squandering of money and theft are estimated to amount to between R30 billion and R40 billion per year.

Why would a system that requires you to account for every cent of your money, but with the other hand lets your money vanish into a black hole, deserve trust and loyalty?

In one province, the North West, 24 municipalities are already being investigated for corruption and mismanagement. The opening of the North West legislature cost the tax payer R4 million. In contrast with this extravagance, the Western Cape’s opening cost only R203 000.

Secondly, these (potential) tax evaders are arguing that we are not getting value for our tax money. Not only do we have a high marginal tax rate, but we have to buy, with after-tax income, education of high quality, professional health care and effective security. And all this while the state’s salary bill amounts to 40 per cent of the national budget, but generous allowance is made in the budget for consultants to do the work of remunerated public servants.

Apart from these two justifications, there are of course various rationalisations for tax evasion. One is that tax evasion would be a drop in the bucket of a national budget of R1 trillion, or that nobody would know, or that everyone is doing it.

These justifications, as well as rationalisations, are ethically debatable.

With regard to rationalisation: The mere fact that tax evasion is a drop in the bucket has nothing to do with its ethical justification. In any case, without drops, a bucket would not be filled.

Moreover, someone will actually always know about the tax evasion, namely the tax payer himself/herself, and knowledge of being dishonest leaves inner wounds, which influence behaviour.

And even if everyone were to evade tax (which would of course not be the case), it would still not be right. The majority can be wrong – as in the case of slavery, racial discrimination and discrimination against women.

Rationalisations are unacceptable in honest discourse, because they are untruths we tell ourselves to give ourselves permission to do what we know is wrong.

As regards the justifications of tax evaders, there are two sorts of ethical counter-argument. The first is that there will be obvious consequences – even anarchy – if tax evasion were to become common practice. The defence that not everyone will do it is poor, because it means that the tax evader is a parasite, who feeds on others who are actually fulfilling their tax obligation.

The second counter-argument is that tax payers as citizens of the state get many benefits, thereby creating a corresponding tax obligation. It would thus be a contradiction to withhold tax while, at the same time, to make use of infrastructure such as roads, educational institutions, the police, courts and all the defective services.

As an individual, I would not be able to pay for this in any way. Consequently, I am receiving much more value than what I am contributing.

Unless you emigrate, or are doing the evasion openly as an act of civil protest and face the consequences, our ethical options are the following: Pay; take part in the public debate against corruption, ineffectiveness and squandering of money; or effect change through the polling booth.

This article was written by Prof Landman in his personal capacity and was first published in Sake 24.

Useful resources:
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