New SABC household ‘hut tax’ mooted

STATE-OWNED enterprise, the South African Broadcasting Corporation (SABC) has approached Parliament with a scheme to raise what is essentially a media levy on each and every household, irrespective of whether or not one possesses a television set. The scheme resembles the ‘hut’ taxes of old, which were used by the colonial authorities as a form of ‘poll tax’ (see below) to force people into the migrant labour system, and are unprecedented in modern times.

PetroSA for example, doesn’t levy fees on motorcars as such, but receives taxes at the pump. It certainly doesn’t tax those without vehicles, and the same may be said of Eskom, which charges fees for connection to the grid, but ignores the temptation to charge those without any access to electricity.

SABC now want an unusual ‘device independent’ tax to plug a gap in funding that has emerged as increasing numbers of South Africans turn to the Internet for content instead of media provided by the broadcaster. The broadcaster currently receives funding directly from the fiscus and also advertising revenue, and it remains to be seen whether or not it possesses any legal basis nor power, to implement such an extraordinary levy.

The earlier threat of a license targeted at general purpose computing and smart phones appears to have subsided somewhat, and there are a number of objections one may make when it comes to taxing the Internet, since many providers such as this outlet, provide content for gratis. In effect SABC would be charging consumers for content over which it does not possess copyright nor any resale royalty agreements.

Before the emergence of Multichoice, SABC were essentially a national broadcaster. The only pay-tv channel Mnet was that provided by a single private company. The SABC television license was thus essentially an operating tax on televisions, levied by the government, to kickstart broadcasting in the country.

The SABC is not a government entity as such but rather a corporation owned by the state, competing alongside other private companies. State-owned enterprises do not posses the power to tax the public and it is unprecedented for them to approach parliament in this manner. Telkom for instance, doesn’t tax its competitors and neither does the Post Office foolishly charge those who do not use its services, but rather email.

At the end of the day, it is the government which needs to fund its public mandate. It should do this via the usual channels — VAT, Capital Gains and Income Tax — not via introduction of a special tax, nor by attempting to create revenue streams that would place it in the world of commerce.

South African are unlikely to accept a Household ‘Hut Tax’, which is really just another way of saying ‘Poll Tax’ ( also known as head tax or capitation) which is a tax levied as a fixed sum on every liable individual (typically every adult), without reference to income or resources. In the case of a Hut Tax, the tax is levied on every dwelling or household.

Nor should we stoop to concede to the implementation of a separate tax for government media, in other words paid propaganda. Whether or not the public mandate will be fulfilled by the SABC or other service providers remains to be seen. There is no reason why other cheaper outlets for government information should be considered, instead of imposing yet another tax on already-stretched consumers.

Taxing the Internet, Gordhan’s regressive proposals

IT’S BEEN a long time coming, the new tax proposals mooted by government could end up doing more damage to Internet access than any censorship laws. In his latest budget speech, Pravin Gordhan outlined a plan whereby ” foreign businesses which sell e-books, music and other digital goods and services should be required to register as VAT vendors, in line with regulations which have been adopted by the European Union and other jurisdictions.”

Exactly why this is bound to back-fire is obvious, since many small online website stores hosted in the cloud will not be able to cater to local tax regimes. The policy will only make sense to large global concerns like Apple iTunes who are likely to monopolise the system. Mid-sized online retailers will simply refuse to ship orders to South Africa or block services that conflict with local tax laws.

The job of collecting an Internet tax, if it is ever implemented will be extremely difficult to police. It also sets a precedent whereby sites like Youtube could find themselves susceptible to industry-lead blanket copyright taxes which are bound to come on the heels of any new SARS tax initiative.

The regressive system of taxation being punted by SARS, is also the bailiwick of the music industry who see it as a way of enforcing compliance with antiquated copyright laws. There are also proposals by on-demand digital television companies for the entire Net to be licensed. Sweden recently adopted a law forcing computer users to license their computers, and South Africa could soon follow suit.  The online freeconomy which has existed for nearly two decades, and which has resulted in mashup sites like ccMixter and Soundcloud are bound to face pressure from a government which sees the digital world as ripe for the picking.

Industry pundit Arthur Goldstuck supports these proposals and has decried the use of torrents and video streaming, blaming “a few hundred bandwidth hogs” for destroying intellectual property. Clearly the old guard just don’t get free torrents and the creative commons, myopically perceiving the digital world as a threat instead of an opportunity, in other words, they fail to acknowledge the Net as anything more than another marketplace, instead of seeing it as a way to create a new form of capitalism in which all users are effectively shareholders in a global network that redistributes wealth while creating digital assets.

Customs and Excise already collect substantial tax for the exchequer from imported goods shipped via the Internet, and this duty and burden need not be shifted to online retailers. Fortunately South Africa’s Bill of Rights guarantees communication freedom and the right to privacy, it will therefore be interesting to see whether any of the Ministers proposals are able to pass constitutional muster.