Plans to bring more taxi and e-hailing operators into South Africa’s tax net could raise state revenue, but they may also increase transport costs and put pressure on operators and cash-strapped commuters.
This is according to Dr Olebogeng Ambrocius Baikgaki, senior lecturer and programme leader in the subject group Transport Economics and Logistics Management at the North-West University’s (NWU’s) Mahikeng Campus.
The context of Dr Baikgaki’s comments is Finance Minister Enoch Godongwana’s call to broaden the country’s tax base by drawing more economic activity from informal sectors, including minibus taxis and e-hailing services, into the tax system.
Structure and strategy first
He argues that increasing tax compliance is necessary, but government should first address the structural challenges facing these transport sectors.
“While tax registration is important, government must first develop a strategy that focuses on formalising informal businesses such as the taxi industry before advocating for revenue collection,” says Dr Baikgaki.
Policymakers, he says, should recognise that many small and informal businesses operate on tight margins and may not have the administrative capacity to deal with complex tax requirements. A simpler system, supported by appropriate assistance, could encourage compliance without threatening the survival of businesses.
The taxi industry also occupies a unique place in South Africa’s public transport system. It developed partly in response to inadequate transport services for black commuters during apartheid and has since become a major provider of daily mobility.
Despite this role, Dr Baikgaki points out that the industry operates largely without the subsidies enjoyed by some bus and rail services. Taxi operators also face high fuel, vehicle, maintenance and insurance costs.
He believes this makes consultation essential before any new tax approach is introduced.
Research and consultation
“Government must return to the fundamentals by conducting comprehensive research and undertaking a thorough consultation process with all stakeholders,” he says. “The question of support and subsidies for the taxi industry should form part of that discussion.”
Dr Baikgaki warns that an additional tax burden could ultimately affect passengers. Operators faced with higher costs may have little choice but to recover some of these expenses through fares.
“Introducing an additional tax structure for the taxi and e-hailing industry will likely increase operating costs. These costs could then be passed directly or indirectly to passengers,” he says.
Higher fares would be particularly significant for commuters who depend on taxis to reach workplaces, schools and essential services.
Dr Baikgaki also cautions that additional financial pressure could make some transport businesses less profitable, potentially leading to job losses or operators leaving the market.
Taxes that operators already pay
He adds that taxis and e-hailing operators already contribute to the broader tax system through their spending. Their operating expenses include fuel, insurance, banking services, vehicle parts and tyres, many of which carry taxes or other statutory charges.
For Dr Baikgaki, expanding the tax base should therefore not be viewed only as a revenue-collection exercise.
A sustainable approach, he says, requires government to understand how the sectors operate, consult operators and tax specialists, improve formalisation and consider appropriate support measures.
Such an approach could help South Africa broaden tax compliance while protecting an essential part of the country’s public transport system and the millions of commuters who depend on it.
Photo: Dr Olebogeng Ambrocius Baikgaki
