Lifestyle audits - have we gone cuckoo?

The recent calls for lifestyle audits from some quarters is troubling. Lifestyle audits is the kind of that cancer that can quickly and silently metastasize through any government and suffocate the vibrancy of a multi-party democracy. The very term "lifestyle audit" is unclear and it also conjures up images of a big brother like monstrosity, feeding on its own citizens until it collapses under the weight of its own bellicosity.

Like other tax agencies around the world, SARS (South African Revenue Services) has a distinct, well defined mandate and vision - its primary task is to collect taxes and and ensure that our tax laws are being enforced equitably. SARS is not an anti-corruption agency to chase after people that "appear" to be breaking the tax laws based on their lifestyle, political affiliations, race or any other arbitrary criteria. There needs to be clear, concrete evidence of violation of our tax laws before SARS "goes after" after any citizen. Anyway, once a case warrants criminal investigation, it really falls into the realm of the law enforcement rather than tax administration.

The dangers of "lifestyle audits" is that its a fuzzy term that becomes nothing more than profiling law abiding citizens based on their appearance of some kind of opulent lifestyle according to the whims of some government bureaucrat who may not like you. So the chances are highly likely that YOU could very well be next! For instance, how many of us fall into one of these potential categories that may trigger a dreaded "lifestyle audit":

• Driving a fancy cars.
• Living in a large mansion.
• Too many trips on a yacht or a private airplane.
• Having a fetish for expensive jewelry, clothing, hats, books, electronic goods etc.
• A taste for expensive cocktails or fancy restaurants.
• Taking too many frequent vacations locally or abroad.
• Having too many kids or sending them to fancy private schools.
• Too many wives...I had to throw this one in. ;-)
• Member of a country club or some other organization.

Anyway, you get the picture. Its pretty easy for some of us to even fall into MORE than one of the above categories.

The objectives of lifestyle audits are equally dubious. Is the intent of the tax administration to maximize the collection of under-reported taxes? If so, lifestyle audits simply penalize citizens that display their wealth while the tax dodgers that hide their wealth in offshore bank accounts are given a free pass. Its a well known fact around the world that the major cases of tax evasion involves corruption politicians, fat cat executives, criminals etc. that make use of elaborate schemes involving complex sham financial transactions by leveraging offshore facilities e.g. unnamed Swiss bank accounts and tax havens, that totally outfox SARS who have no jurisdiction to pursue suspects overseas.

On the other hand, if the objective is to root our corruption, then the mandate of SARS needs to be expanded to include anti-corruption functions. This poses an even bigger risk of concentration of power in a single state institution that sets the stage for bad things to happen - politicization of SARS eventually leads to rampant corruption to the extent that ordinary citizens may rightfully start to feel that they need not pay their fair share of taxes any longer if they disagree with SARS political agenda. A critical mass of tax protesters may lead to a collapse of our tax system, which has huge implications for the social and financial stability of our democracy.

Using the tax system to settle political scores is a dangerous precedent that can be easily abused by ruling elite to conduct character assassinations of any political opponents. Remember, due to the nature of the complexity of tax laws, any tax administrator worth their salt, can uncover, distort and twist facts on ANYONE'S tax return, to make them look unethical, criminal etc. - pick your poison. So rest assured, ALL of us, including our families are exposed to this draconian power of lifestyle audits.

Lifestyle audits have been tried in various democracies especially in times of economic instability where everyone is sensitive to obscene wealth in a climate of financial belt-tightening. However these type of audits have been consistently ditched because of its inherent incompatibility with freedoms enshrined in democratic constitutions. For local organizations and individuals to bray for the injection of lifestyle audits in our democracy is short-sighted and myopic. Lifestyle audits should be kept where it belongs, in movies and police states and the tabloids - it has no place in a free society.