The South African government is set to raise a broad range of taxes according to most market analysts and those insiders “in the know”.
With the Government currently increasing debt to GDP levels above manageable levels, and showing a shortfall on anticipated tax collections, as well as dismal GDP growth, it is unlikely that this will be avoided at all.
Why Are Taxes Increasing?
The simple answer is lack of financial management and controls and the question that really should be on everyone’s lips is “what are they spending all our tax money on? And – Why are they not reigning in government spending and cutting waste and deep corruption out of the current government?
With Inflation now way under the 4%-6% target range there is now a dire need to see the South African economy grow, that in turn will see tax revenues increase generically. Instead of driving economic growth to create a sustainable balance of income for development. The governments approach would seem to rather be looking to choke the life out of the economy.
The fact is we can not afford to fund mismanagement of tax funds any longer and the reality that this has not become a greater emphasis for the governments attentions defies belief.
Where are Tax increases be Implemented?
It is unlikely that personal taxes will be raised, however there is much speculation in the market of zero adjustments in tax brackets that is an effective tax increase due to inflation on the price of goods for consumers, and a 1% increase in VAT to be added, as well as the usual increases on “sin taxes” on goods such as tobacco and alcoholic beverage products.
Additional fuel levies have been touted as there have not been any increases in two years as well the looming likelihood of an additional 3% tax on corporate profits and the removal of medical aid tax credits for individuals.
In total and additional R300 billion in taxes has been floated by the finance department due to the requirements of an ever bloating budget that keeps funding wasteful entities such as the State owned enterprises such as SABC, Transnet and Eskom, that have all seen budget shortfalls and keep getting bailed out instead of sorted out.
If one takes that the average household is faced with a 12% increase on its electricity account, above inflationary increases on property rates and water supply, increasing fuel prices, school fees, security fees and health care, it is getting to breaking point for most consumers and yet the government seems to be tone deaf on these issues.
Budgetary and Fiscal Discipline Decline
It is a sickening feeling that while households are suffering, many government and municipal budgets are being wasted or miss-spent with the majority of municipalities and departments failing to get clean audits despite many years of warning and so-called financial interventions.
Government spending should simply not keep on outstripping tax revenues, with the result of additional borrowing and the need to service more and more debt, instead of building the country, its infrastructure and other elements that will enable economic growth.
When a country needs to tax its citizens and corporations even more, when they are already paying exorbitant taxes, and getting very in return for these taxes in terms of decent well run services, they need to start asking some long and hard questions.
Some Questions South Africans Should be posing to Government are:
- Why is our tax base so small – Why has the government failed to grow the economy through attracting domestic and foreign investment?
- Is our foreign policy investment friendly? -When a country deliberately alienates its second biggest trade partner, directly responsible for 250 000 jobs through AGOA alone, its perhaps time for a re-think of foreign policy
- Are Our Domestic Policies Investment Friendly? – Are the South African domestic policies and acts, investment friendly or increasingly unfriendly? Do they foster trust and confidence in the Government as a safe haven to place hard-earned funds?
- Are top Tax Payers Incentivised to Invest More or are they disincentivised to withdraw investments? – Major investors create growth in both employment andtax revenues off profits. Why have so many international companies and even those founded in South Africa disinvested in the country and invested elsewhere over the past decade?
The need for a better approach in the tax regimes in South Africa can only be described as a self-goal and increasing tax is always a sign of policy trouble. As Margaret Thatcher said “The problem with socialism, is that you eventually run out of other people’s money.
