SARS has reached its limit of effective collection

IN A new series of TV advertisements called "Paranoia", the South African Revenue Service (SARS) warns people: "We’re closing in on you." The character in the advert is jumpy and sweaty. For good reason. Presumably SARS has picked the low-hanging fruit — the 4% of personal income taxpayers who, being easily audited, contribute 41% of all personal income taxes.

But the public isn’t stupid. It knows personal income tax receipts have grown at a compound annual rate of 10.7% (double the rate of inflation) since the 2008 global financial crisis; that the ratio of taxes to gross domestic product has increased from 22.9% to 26.1% since 1994; that public servants’ wages devour 88% of state spending; that 16-million social grants consume 76% of the income taxes paid by the upper middle class; and that at least one-third of all personal income taxes are evaded.

An internet search for "how to evade tax in SA" yields 380,000 highly readable results. SARS’s ads are an inducement, not a warning.

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