Provisional Tax is Theft

Google the term “provisional tax” and you’ll get returned a bunch of links from South African and New Zealand.  Clearly a term reserved for former British southern hemisphere colonies!  This is one of the worst forms of tax around and at its core highlights the grubby money-grabbing thievery conducted in broad daylight by the state and tolerated by the blind lemming taxpayers who seem to think that theft is not theft when perpetrated by public sevants.

The South African revenue service describes the provisional tax as,

“…a system that makes taxpayers provide for their final tax liability by paying at least two amounts in the course of the year of assessment. Final liability, however, is determined upon assessment.”

Re-read that again.  Ja, you got it: Pre-paid tax!

Forget what your actualy income is, you need to pay your tax now and we’ll sort out the details later.  Most people don’t think too deeply about provisional tax and most assume it is a legitimate form of taxation.  The argument goes like this: the state needs taxes now but may only be able to properly assess your income later on, so why not let it tax you now what it thinks roughly you’ll be earning, and then settle the difference later on?

What this argument ignores however is the devastating effects of provisional taxation to businesses, not to mention its moral deficiencies, and the fact that it is basic theft.

Let’s assess the Revenue Service explanations of this evil tax:

“How do I know whether I am a Provisional Taxpayer or not? Any person who receives income other than remuneration is a provisional taxpayer, for example, if you are getting income such as rental income from a property, interest income from investments or other income from the carrying on of any trade. If you receive this type of income, you will always be a provisional taxpayer, even if you also earn a salary.”

In other words, if the state cannot easily track your income and deduct it directly and efficiently from your employers payroll, then you fall into a special category that requires the state to extort unearned funds from you and then force you to have to prove later why it should give it back.

“The aim is to help taxpayers meet their liabilities in the form of two payments made from income received during the tax year, instead of in the form of a single, large sum after the end of the tax year.”

Ah gee thanks, that’s so helpful.  But maybe the aim is really to give the state the cashflows it needs to keep running the Leviathan.  One payment at the end of the tax year is inconvenient for the state, not necessarily for businesses.  What is inconvenient for businesses and investors is to pay tax on profits they have not even earned at a time when business cashflow may be faltering.

SARS gives even more detail on who is classified as a provisional taxpayer here,

“Any person who is notified by the Commissioner that he is a provisional taxpayer.”

You got that citizen? You’re one if they say so!

SARS then goes on to explain in the same document the process of income estimation: 

Paragraph 19: Estimate of Taxable Income

Every provisional taxpayer… shall make an estimate of the total taxable income during every period in respect of the year of assessment in respect of which the provisional tax is payable.

Oh, so you mean we get to estimate our own income?  No exactly…

The amount of any estimate referred to in paragraph 21(1) (a), 25(2), or 23(a), that the estimate shall not be less than the basic amount unless the Commissioner agrees to accept a lower estimate.

Ja thought so: Do what the Commissioner says… 

And what is this “basic amount”?

The basic amount applicable to any estimate submitted by a provisional taxpayer shall be deemed to be:

The taxpayer’s taxable income as assessed for the latest preceding year of assessment less any taxable capital gain if included.

Got it.  So we’re just assuming I’m having as successful a year as last year and taxing me on this fiction?  Yip.

If any provisional taxpayer fails to submit any estimate as required, the Commissioner may estimate the taxable income and such estimate shall be final and conclusive.

Of course it is.  What the state says goes, remember.

The Commissioner may call upon any provisional taxpayer to justify any estimate made by him, and if the Commissioner is dissatisfied with the said estimate, he may increase the amount thereof to such amount he considers reasonable, and the estimate as increased shall be final and conclusive.

Re-translation: If the state doesn’t like your measly income estimate, it will require you to justify why you are being so stingy and ask you to prove why you won’t earn more, and then they won’t believe you anyway and force you to pay them more, by law.

This is called tyranny.

Any estimate made by the Commissioner shall be deemed to take effect in respect of the relevant period within which the provisional taxpayer is required to make any payment of provisional tax, or within any extension of such period granted.

So there we have it.  Plain and simple.  The state decides how much money it wants, levies penalties for non-compliance, and slaps you with a tab whether you can afford it or not. 

Paragraph 27: Penalty on the late payment of Provisional Tax

If any provisional taxpayer fails to pay any amount of provisional tax for which he is liable…he shall…pay to the Commissioner a penalty equal to ten percent of the amount not paid.

This is the logical reductio of the taxation philosophy of the Total State.  The understanding is that your money is not your money, it is the state’s and it is only by the state’s good grace and benevolent kindness that it lets you keep some of it.

Cashflow

Companies facing provisional tax “liabilities” can face cashflow crises when the state demands a massive payment that current business revenues cannot support.  All business owners know that cashflow is king, but since when has the state cared for, or had the slightest inkling of, how real world businesses successfully operate?

Immoral Thievery

Provisional tax, it should be clear, is the state’s way of extorting funds pre-emptively.  These funds are used before it is proven that they are indeed even owed. 

Moreover the state uses the funds now before the ravages of inflation have eroded their value, and then pays the taxpayer back in debased currency, extracting a tidy, hidden inflation tax for which the taxpayer had never agreed.

Additionally, the taxpayer is required to prove that these funds should be remitted if income estimates were in excess of actual income, meaning essentially that the burden of proof to be restored personal private property is on the one whose money was wrongfully extorted and then embezzled.

The state thieves people’s money and then ask them to prove why it should give it back.  Taxation is thievery and tyranny, and provisional taxation is one of its most pernicious forms.