Remember the rule of law, Pravin, the rule of law

I see the South African Minister of Finance, Pravin Gordhan, is putting together a tax review committee, ostensibly to tackle things like tax evasion through “profit shifting”, by looking at ways to overhauling the tax policy framework so that modern revenue streams generated by new types of economic activity can be caught in the tax dragnet.

Now, I’m pretty sure that “tax evasion” is not the correct term to have used because examples that were given of the kind of problems to be tackled seem to me to relate to tax avoidance, which is legal, rather than to tax evasion, which is illegal.

The erroneous thinking this seems to encapsulates is that, if the intention is to make what is currently legal tax avoidance illegal, then it is OK in the mean time to treat it as illegal and call it tax evasion rather than tax avoidance.

Pity the rule of law.

To my mind therefore, the primary and fundamental challenge to the committee’s success will, above all else, lie in whether it is able to redraw the line in the sand between tax evasion and tax avoidance that has become blurred, in a way that will allow that distinction to be made clearly and crisply.

Will the committee be able to achieve this?

A first glance at the who’s who of the committee members, and to my mind, I doubt it:

I see there’s someone who will just not be able to sort the wheat from the chaff because they don’t have the tools of logic, reason and rationality at their disposal. Then, there’s someone who can apparently use these tools but who is so academic as to make the result impractically and useless. Then, there’s someone really focused on growing what’s healthy on the theory that osmosis will do its work who will be accused of putting a nail in the coffin of every currently popular development model, whose starting points are where the most unhealthiness can be found. Then, there’s someone so confused as to the nature of the commercial beast that they happily pull the old mantra of “anti-avoidance is unethical therefore should be illegal therefore should be treated as illegal, no legislation required” hat on. Then there’s the someone with that other popular hat on, the morality one, who cannot get up from the on the floor position that government is for and by the people and therefore anyone who tries to interpret tax legislation at more than its (far from obvious) intended face value is immoral therefore must be treated as illegal, again no legislation required to deal with them. Then, there’s that inevitable someone whose audience is politicians, always politicians, who will be trimming the spare fat off every single idea and policy that committee members put forward, in order to carry out the balancing act politicians require before getting on board. Then lastly, there’s also that someone so firm in a “we can DO it” mode that they would be happy to try and sell any mugglewump package the tax review committee ends up with, to anyone. Oh, and then there’s Dennis Davis, who has to take all this by the throat and try and make something of nothing.

Sorry, I just don’t see anyone in this clump of people, who has or will be able to embrace the new and international world of finance and currency that has already taken firm root around the globe, and use the absolutely incredible opportunities these offer to South Africa to drive Africa into the future, from the front, by assisting in the development of the tax regime we need to do so.

In fact, I see in this sort of member mix (OK, maybe excluding the one that will focus on growing what is healthy, but then this attitude is wonderful for self-serving activity, so who knows what will transpire) all the fundamentals necessary for the basic principles of the rule of law in South Africa to be further seriously undermined, even at the starting blocks.

So, I’d imagine that killing the “it should be illegal, therefore it is illegal” mantra is the fundamental challenge to Davis in chairing this committee, and to do that, he’ll have to make sense of the muddied ideas in s1(c) of the SA Constitution. It should be interesting. If we ever get to see it.


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