Mervyn King: tax also in need of integrated thinking

Prof Mervyn King believes increasing taxes should be government’s last resort in bolstering the ailing economy. “Tax compliance is a two-way street. Taxation must be socially acceptable. The narrow financial prism is obsolete. The concept of value has changed, with economy, society and the environment now the central pillars of businesses,” Prof King told delegates last month at the fifth annual Tax Indaba at the Sandton Convention Centre.

The creator of the King codes of good corporate governance said President Jacob Zuma had recently called the South African economy "sick" and agreed with him that it was not up to the government to run it, but rather to see that taxes were used constructively. King bemoaned the number of multinationals earning massive profits and moving funds to other jurisdictions, urging co-operation and the elimination of the deception or fraud.

King also referred to high-profile scandals involving Starbucks in the UK, Apple in Ireland and Fiat in Luxembourg.

"Integrated thinking and social capital are the terms of the future. Society will no longer accept big companies using local infrastructure without paying tax here. Taxation is no longer about numbers in the backroom - there is an urgent need for ethical corporate citizenship."

Nevertheless, he commended the South African Revenue Service (Sars) for doing a sterling job since the dawn of democracy. "The Katz Commission recommended that Sars should be moved from public service and be operated like a private firm in the early Nineties. The move has seen the tax base grow from 1,7 million taxpayers in 1994 to 16,8 million in 2014."

Prof King added that the conventional thinking dictated that tax expenditure be examined ahead of ways to increase rates, particularly in the context of the crippling economic environment South Africa currently finds itself in.
"If there is a failure to spend the money correctly because of a lack of skill or capacity, which has happened in our country, it starts affecting the morality of the taxpayer."

In closing, he made an impassioned plea to the audience of tax professionals and government dignitaries to expose corruption on every level. "We need to ask how our money is being spent before thinking of increasing taxes. How can we justify raising taxation when unaccountable billions are being purloined through a corrupt sieve?"

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