MBAVHALELO MABOGO | Taxi industry doesn't dodge tax, it needs clarity how to pay

The SA taxi industry, a cornerstone of the nation’s transport landscape, has long been under scrutiny for its apparent underpayment of taxes. However, a closer examination reveals a more complex reality. In 2021, the industry paid only R5m in annual corporate income tax (CIT). This is a small amount compared to the industry’s estimated annual revenue of R90bn. Yet, it is crucial to understand the intricacies that lead to this apparent disparity.

The SA Revenue Service (Sars) has publicly acknowledged that the perception of the taxi industry avoiding taxes is not entirely accurate. A significant portion of the confusion stems from how the industry reports income on its CIT returns. The industry often reports income from taxi operations under a generic income source code, rather than correctly classifying it under the taxi business. This results in a lower reported CIT amount than expected, which contributes to the perception that taxi owners evade taxes.

Taxi operators’ financial contributions to tax extends beyond the realm of CIT. According to SA Taxi, the leading financiers for the taxi industry, the industry's estimated contribution is about R1bn in value-added tax (VAT) on vehicle sales annually. It also shoulders R7bn in fuel levies and R4bn in road accident fund (RAF) levies, all of which contribute to the upkeep of SA’s roads.

The intricate tax declarations facing the taxi industry are also deeply rooted in its asset ownership structure. Many taxi operators hold their vehicles in a personal capacity rather than through juristic companies capable of submitting financial statements, declaring and claiming VAT, and reporting their employees’ profiles to Sars.

In rearranging the tax position of the industry it is important to shift the discourse around taxes from mere compliance to a more educational aspect within the taxi sector. For example, many taxi owners may not even be aware of programmes such as Sars’s voluntary disclosure programme (VDP), which helps taxpayers who are in default get their tax affairs in order. Sars should spearhead this education by working closely with the department of transport, Santaco and the National Taxi Alliance through education drivers at association levels.

The taxi industry has been grappling with significant financial challenges, which have effectively transformed what was once a prosperous sector into one marked by modest profits, akin to what is colloquially known as “ramen profits”.

These escalating costs, compounded by the high expenses associated with vehicle maintenance, parts, vehicle impoundments, high-interest rates on loans, and the looming threat of vehicle repossessions, all transpire alongside a backdrop where revenue generated from commuter fares has essentially remained the same.

For instance, taxi owners operating only one or two vehicles will often find it challenging to meet the compulsory Sars VAT registration threshold of R1m. Furthermore, pricing for commuter fares is typically set at the association level, making it difficult for taxi owners to simply add VAT to these fares.

Even if taxi owners manage to navigate these complexities and meet the VAT requirements, the current tax regulations still present a major hurdle by disallowing organisations and individuals to reclaim VAT expenses on their most critical cost, namely fuel. Technology in this instance would be key in monitoring fuel expense, taxi movements and also automatically submitting refund claims.

In addition to its tax benefits, technology should assume a central role in not only delivering operational advantages but also in tackling the widespread problem of misinformation and the frequently laborious aspects of tax-related affairs within the taxi industry. Through the provision of easily accessible and user-friendly educational materials, digital platforms have the potential to simplify tax compliance, enabling taxi operators to gain the necessary knowledge to navigate this intricate landscape with confidence.

In the 1990s the SA government invested heavily in the multimedia health and social justice initiative Soul City. It was a success in raising awareness about critical health issues such as HIV/Aids sexual and reproductive health as the effort included health education and promotion, entertainment and education, community engagement, advocacy and policy influence.

The effort required to reconfigure the relationship between the taxi industry and their tax contribution will require effort at a similar level as the Soul City campaign and more.

Mabogo is founder and CEO of Quickloc8