South Africa’s Bizarre TV Tax Even Baffles The Tax Collector

There’s an unusual brand of tax that is due for collection every year in South Africa. Basically, South Africans are mandated to pay a TV license fee to be cleared to watch or record TV as it is being broadcast. It follows that every spot or household with working cable TV is liable to a tax of ZAR 265.00 (USD 17.09), due every year.

Those fees end up in the coffers of South Africa’s state-owned broadcaster, the South African Broadcasting Corporation (SABC), which, coincidentally, has been cash-strapped for a while and needs as much capital injection as it can get. Last year, for example, the SABC reported a net loss of ZAR 511 Mn (USD 34 Mn) for the 2019/2020 financial year.

The problem? Most people opt not to pay the TV license fee, mostly because it is virtually unenforceable and partly because they are not too interested in whatever the SABC has to offer. So, there’s the problem of a tax most people prefer to not pay; a tax which the tax-collecting entity itself can’t figure out how to collect.

The SABC is facing severe financial challenges, and TV license fee collections are thought to be one of the ways to boost revenue and plug some financing gaps. But it’s no small matter enforcing a directive that is mostly only enforceable at the point of purchasing a TV.

One of the major reasons South Africa’s TV license compliance rate is quite low is because the SABC cannot enforce the payment. While it is technically possible, it will probably cost the SABC more to chase after the ZAR 260.00 (USD 19.09) license fee than what it’s worth.

Yolande van Biljon, the CFO of the SABC, recently revealed to Parliament that only around 2.5 million of the 9.5 million TV license holders on its database settled their TV licenses last year.

“The SABC billed approximately ZAR 3 Bn in TV license fees per year, but was only able to collect around ZAR 791 Mn this year,” van Biljon said. It was also mentioned that the TV license fee “evasion rate” – i.e. households which do not bother to pay for a license – is 76 percent.

Evidently, most South Africans view the TV license as a one-time forced expense; a compromise they have to make that one time they want to purchase a television, because they can’t get a TV without it. After that, it’s mostly sayonara.

And the numbers do reflect this. Out of the 401,000 TV license holders signed up in 2019, the SABC contends that only around 68,000 renewed their TV license a year later.

To get around this non-payment problem, the SABC has talked up compelling the more popular Pay-TV companies, like Multichoice which operates the very popular DStv service, to collect the license fees from their subscribers and remit the funds into the coffers of the SABC.

Also, to supplement the funds collected, the Department of Communications wants South Africans to pay TV licenses for laptops, tablets, and DStv decoders.

These proposed tactics have been described by Wayne Duvenage, the CEO of the Organisation Undoing Tax Abuse (OUTA), as a “wrong” move.

“You can’t run an inefficient service and then tax other related industries to cover your costs,” he said.

“By taxing other appliances, the state starts to interfere with pricing models and costs related to these businesses, which has all sorts of ramifications to competitiveness. Similarly, asking MultiChoice to increase their fees and give some money to the SABC interferes with their business model and makes them less competitive against Netflix.”

Experts and observers have reiterated that the SABC would be better served by adopting a properly functioning business model rather than losing sleep over the fees it feels entitled to from South Africans who can pay for cable. Measures that support cost-cutting, leaner operations, and better quality of output are among the top recommendations.

Interestingly, South Africa has in the past compelled locals to pay license fees for owning dogs, bicycles, and radio. Needless to say, all of these have been phased out over the years. And many believe it’s time for the TV license fee to follow suit.

Featured Image Courtesy: New Frame