Shall we start with the most basic of the truths we are not told? There is nothing inherently socially beneficial about taxes. Taxes are the legal codification of a long-standing social norm: that citizens should contribute to the common well-being of the society that they live in.

The only moral justification for taxes is in its reciprocity, in its service to the common good, however, a society defines it. In 1927, US judge Oliver Wendell Holmes justified taxes as the “price we pay for a civilised society”; that is, a positive, reciprocal force.

In democratic settings, taxes are on occasion framed as the price citizens pay for representation but, more generally, taxpayers demand goods and services from the government.

In a complex and unequal context like our own, we know it is not that simple. Taxes in SA are generally not user charges; taxpayers receive fewer goods and services than would be commensurate with the taxes they pay.

The 1994 political settlement that set us on our democratic course required a society-wide commitment to transformation and inclusion. This would be accomplished through fundamental fiscal restructuring, using a tax and transfer system to fund a significant social wage.

Given how dependent the 1994 promises of inclusion and accelerated upward mobility were on economic expansion and opportunity, a pro-poor fiscal system had to delicately balance pro-growth imperatives as well. I believe most taxpayers understood this; taxes would buy an inclusive, transformed and more just future.

Though taxpayers received less for their contributions than similarly taxed citizens in say, Australia or Canada, as long as taxes worked towards the common wellbeing — that is as long as there is reciprocity — taxes are morally justified. If there is no quid pro quo, taxes are simply an involuntary tribute to the ruling powers and nothing more than a coerced extraction from hardworking citizens to the Leviathan in charge.

In short, taxes that do not pursue the particular quid pro quo to society, however, they have defined reciprocity in their context, are not morally justifiable. Tax morality is often used to describe the degree of recalcitrance of taxpayers to pay what they must. But that is far too narrow a definition. Tax morality hinges on whether taxes are used, in our case, to pay for a transformed, inclusive future.

This raises a sticky question: what is a moral taxpayer to do when taxes cease to serve the common good and are diverted towards elite interests? Should moral taxpayers pay taxes that are no longer morally justifiable?

We know the numbers. We have the highest unemployment in the world and are also among the most unequal, even more so than in 1994. The profile of our inequality has changed. According to the World Inequality Lab, black South Africans now constitute the majority of the richest 10% of the population, evidence of grand-scale elite transformation.

Ostensibly, cadre deployment in high-remuneration positions in the public service and preferential procurement in state-owned enterprises (SOEs) and municipalities served elite transformation well, according to the Harvard Growth Lab — all of it funded through taxes, of course.

Every year, taxpayers watch helplessly as the public wage bill and SOE bailouts swallow tax revenue. This is neither pro-poor nor pro-growth. It is just a part of the price society is paying for elite transformation.

Life has been less plum at the bottom end of the income scale. The World Bank rates 62% of our population as poor. No less than half of our population subsists off modest grants (counting the recently extended social relief of distress grant). Prospects for the youth in particular are grim.

Economic stagnation explains this decline, but at the root of it all is state dysfunction, the details of which are well recorded (see the 2022 reports of the Zondo State Capture Commission and the 2023 Hausmann report).

The extent of service delivery failure is known and quantified, as are the ruinous implications for the promise of a transformed and inclusive future. Our fiscal contract has been hijacked; it has been pro-elite for a long time. The escalating social grants, essential and life-saving as they are, are a transparent attempt to compensate vulnerable South Africans for the broken promise of inclusion.

Particularly jarring is that grant dependency is leveraged for political benefit by a political leadership primarily intent on accumulating power and resources. “Common well-being” features in their syrupy rhetoric on occasions such as the State of the Nation address or when wooing voters, but the scoreboard says they do not care.

Taxpayers are in a difficult position. Assessed income taxpayers are fewer than 10% of the population, yet personal income tax contributes 35%-39% of all tax revenue. Our tax-to-GDP ratio is exceptionally high for a middle-income economy. So, though taxpayers have in theory much power of the purse, enforcement is relentless, they have minimal taxpayer rights and they are electorally insignificant.

Objecting to the misuse of their taxes earns much ire, with accusations of being anti-transformation and anti-poor. It may invite sanctimonious responses, also in institutional checking forums, that unquestioning compliance is good for the social order.

Is it? To strong-arm taxpayers into complicity in the status quo of unaccountability, which hurts the poor the most, rather than disrupt a radically suboptimal order?

An encouraging institutional clarification on the matter of tax reciprocity deserves notice. Though referring to municipal and not national taxes, a 2013 Constitutional Court ruling by now Chief Justice Raymond Zondo in Rademan v Moqhaka Municipality and Others, stated that “there is no obligation on a ... ratepayer to pay the municipality for a service that has not been rendered”.

Tax morality is a double-edged sword. Ours is broken because the revenue handed over by weary taxpayers has not been used to build a transformed, inclusive, and just society. At the very least, while moral taxpayers carry on doing the heavy lifting to keep social grants and a modicum of public services (to the poor, hardly to themselves) going, let some sanity and truth seep into the debate.

Our taxes come perilously close to a mandatory tribute to the Leviathan, coercively extracted from productive citizens and with minimal reciprocal benefit to society.

It is trite that society cannot progress without collecting a decent amount of taxes; the alternatives are worse. Almost as bad though is a state that disregards its dependence on taxpayers and ignores pleas for accountability. It creates an unhelpful moral dilemma for taxpayers wanting to do right by society and wreaks havoc on voluntary tax compliance.

Where it all will end is hard to predict; history — also our own during apartheid — has shown that taxpayers punish governments they view as immoral. Coercion is no substitute for accountability, nor is it a sustainable form of governance in democracy.

Taxpayers need to see that their taxes benefit society; actual progress may salvage our precarious fiscal system. More controversial expenses, funded by more taxes and escalating debt, will do the opposite.

Dr Sansia Blackmore is a Senior Lecturer at the African Tax Institute at the University of Pretoria’s Faculty of Economic and Management Sciences.

This article first appeared on BusinessLive on 29 February 2024.

Disclaimer: The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of the University of Pretoria.