Right now there is a fight dragging on over Tom Moyane at SARS.
He has been suspended basically because he sucks – having achieved a R50 billion tax revenue shortfall according to News 24.
His record of sucking includes insisting that a report by KPMG into the so-called rogue unit was not flawed despite the fact that KPMG withdrew the report.
In fact he wanted to go after KPMG for withdrawing it, claiming their conduct was “unprecedented, unethical, unprofessional and unlawful”.
He also made the bizarre argument that the report belonged to SARS as SARS had commissioned it.
Why is the bizarre? Because the issue wasn’t who owned the report, the issue was that the people who compiled it found it wasn’t reliable.
Nobody would have blamed Moyane for believing KPMG, it was one of the most highly regarded auditing firms in the world, one of the big four in fact, it wouldn’t be unreasonable to expect them to know what they were doing.
But whether it be that he was just that bought or just that egotistical, once he accepted the report he couldn’t accept that it was bunk, once KPMG admitted to how badly done it really was.
So that R50 billion shortfall isn’t a surprise. The rogue unit saga shows what kind of leadership he led.
So why does it matter?
Right now government is pushing a policy of radical economic transformation. A bad taxman works precisely against that because tax is pretty central to this project.
Essentially it goes like this: Lower taxes tend to result in more assets pooling in the hands of the already rich. You end up with higher income inequality because if you’re really rich you can invest your money in more stuff, get bigger returns and gradually accumulate more assets.
This is why the 8 richest people in the world own about as much as the bottom 50% – they’ve got the money to spend in order to make more money. This is a bad thing, because over time you end up with monopolies forming and anti-competitive behaviour. Your economy gradually loses diversity as well.
In 1994 the biggest mistake the new admistration made was dropping taxes. This was not a negotiated settlement with the old Apartheid regime – they could hardly demand the new government charge people less than they did.
This was the result of global economic neo-liberalism, a system which repeatedly failed in the 60s and 70s in South America and Egypt, only to then get adopted by the US with the rise of Ronald Reagan.
The reason that the neo-liberal economic regime came into being was essentially the baby boom. During the high tax welfare state era the boomers got rich, they got houses, they developed savings as wages grew and businesses innovated so as to use fewer, but higher paid staff.
The trouble is – with higher wages came inflation. So long as the economy grew faster than inflation that was fine, but eventually you hit a point where that stopped happening, and you ended up with stagflation.
This was bad for the boomer generation, who had savings, so they voted in Ronald Reagan who preceded to begin the process of undoing all of the stuff that made the welfare state work.
In the 1950’s the US’s top tax rate was 91%, with the effective top rate being 71%. Now it is 37%. Where is the rest of the money they need to keep government going coming from? Debt and higher taxes in the lower brackets. Inflation has been defeated essentially by not giving the working class a real increase since the 1970s.
So what has all of this economic history got to do with South Africa? Nelson Mandela came into power in 1994, and Bill Clinton very much believed in the virtues of the neo-liberal state, so when looking to establish trade ties globally, and open South Africa’s markets to the world after sanctions were lifted – what advice was Mandela getting from the world’s top economists, politicians and corporations?
Cut taxes to improve our competitiveness and open up our market to more foreign investment. So not only were we getting advice designed to benefit the rich, but advice to benefit the rich in other countries. Foreign direct investment is not an unqualified good. If I invest in something, I want to get more money out than I put in.
So with foreign investment capital comes in, but more capital flows out. This is fine when the foreign investment comes with new skills and industries which provide benefits that allow new local innovators to shine, but when it is simply a foreign company buying Edgars, that is money flowing outwards.
The fact that our economy had only just opened up after sanctions would have been enough to attract foreign investment anyway – we could have afforded to be more critical about it.
We weren’t actually in a position in 1994 where the neo-liberal intervention was required, we were and still are in a position where the Keynesian welfare state approach is required. In a relatively young country with high levels of debt, inflation isn’t the same problem as in a country with high levels of savings, the reduction in the value of your money, is actually the reduction in the value of banks’ money.
Yet our central bank’s constitutionally mandated policy is inflation targeting, not because of the old regime, but because of the global trend right from the start of our era of economic freedom. In 2015, the median age of our population was just over 26, and our economic policy is designed to protect the assets of retirees.
And of course economic inequality continues along racial lines, who has the assets?
So bringing this back to Moyane – if the taxman is incompetent to the point where he’s relying on reports that the very people who compiled them say are unreliable, you’re going to get the same result as if you dropped taxes even more. It is not simply a matter of the state needing money to function, though that is important in itself, it is a matter of the role taxes play in transformation.
So obviously we’ve got Dali Mpofu of the EFF, the party that is supposed to be all about radical economic transformation, claiming Moyane’s hasn’t gotten a fair shake according to TimesLIVE.
- The picture is of suspended SARS Commissioner Tom Moyane. Picture by GCIS, via Flickr.