BY: Saneliso Mlambo
The Organisation Undoing Tax Abuse (Outa) has advocated for the taxation of South Africa’s taxi industry and informal sector to broaden the national tax base. Outa estimates that introducing taxation to the taxi industry could contribute between R2 billion and R9.2 billion to the national treasury. Additionally, formalizing parts of the informal sector and enhancing tax compliance through digital integration could yield an estimated R2 billion to R3.8 billion in conservative additional earnings.
The South African minibus taxi industry plays a crucial role in public transportation, with over 200,000 minibus taxis operating nationwide. In 2020, these taxis accounted for 80.2% of the 4.7 million daily public transportation trips in the country. Despite its significance, the industry contributes relatively little in corporate income taxes. In the last tax year, only R5 million was collected from the minibus taxi industry in corporate taxes, a figure that includes taxes from employment income and may not accurately reflect the industry’s actual earnings.
Outa’s proposal aims to address this disparity by integrating the taxi industry into the formal tax system, thereby increasing transparency and revenue collection. However, implementing such taxation presents challenges. The taxi industry often operates without formal business structures, making tax compliance complex. Many operators report income under generic codes, resulting in lower reported corporate tax contributions. Additionally, the informal sector encompasses a vast array of small businesses, including spaza shops and street vendors, which are difficult to formalize due to their diverse and dispersed nature.
Integrating the taxi industry and informal sector into the formal tax system could enhance public services and infrastructure, benefiting the broader economy. However, careful consideration is needed to design taxation policies that are fair, transparent, and account for the unique characteristics of these sectors. Engaging with industry stakeholders and providing education on tax compliance will be essential to ensure the success of such initiatives.