In my hometown of Knysna, Lauren Waring, the Municipal Manager, wrote off R30 million of taxpayer’s debt in December 2012 (and refused to give us the details).
In a small tourist town with tourism as the only main industry, disparity is far more evident here than in the cities but it’s indicative of the financial crisis that South Africa is in; an unsustainable increasing of misnamed ‘public service’ salaries and a vanishing few paying more and more.
In a country of 51 million people, how can 3.3 million pay 99% of all income tax? It’s a policy that can only lead to a financial crash.
Piet le Roux, Senior Researcher at the Solidarity Research Institute, responded recently to the Medium Term Budget and Policy Statement 2013. Here’s an excerpt from his speech:
“The 2013 MTBPS is a fiscal framework by which it is proposed that the South African state should operate for public benefit. In this framework, we find items of revenue and items of expenditure. While tax is the primary source of government revenue, taxpayers don’t provide it all. To finance its substantial budget deficit the government runs up debt, expecting future generations to pay for current expenses.
Even though they do not have a choice in the matter, hard-working South Africans are – by and large – willing to pay tax. The reason that keeps them willing, is that they believe that paying tax can be for the public benefit. And since they want to contribute to the public good, they accept taxation.
However, among tax-paying, hard-working South Africans a conviction is growing that their taxes are contributing increasingly little to the public good. My goal here today is to convey this sentiment of scepticism, a sentiment real and a sentiment swelling.
Certain things aggravate such tax scepticism. When Finance Minister Pravin Gordhan, in delivering his MTBPS speech, thanks everyone from President Zuma to SARS to the SARB and many other public office holders, but spares no word for the 3,3 million people who pay 99% of all income tax in South Africa and the bulk of other taxes, then taxpayers hear that they are being taken for granted. When they hear no apologies about how their hard-earned money – money the loss of which they had consoled themselves with in the belief that it would be availed to public benefit – has been wasted, and given no reason to believe that next year won’t be business as usual, then their scepticism is encouraged.
When Minister Gordhan announces “tax relief”, but taxpayers then inspect the numbers and see that real tax revenue continues to rise, they feel affronted. When Minster Gordhan announces cuts on government’s liquor bills, credit cards, and so on – estimating that R2 billion may so be saved – taxpayers welcome it, but they immediately wonder how such lavish practices came to be established in the first place. When taxpayers then do the math and realise that this R2 billion amounts to less than 0,2% of total state expenditure, they are reassured that there is no real commitment to cut back on what has become an oversized bureaucracy.
When taxpayers read the newspaper and see – as they do in today’s Beeld – that the National Intelligence Agency appears to have been operating on a R14 billion a year budget without the requisite financial oversight for three years now, they wonder if their money really contributes to the public good. When they see how the Department of Correctional Services finances its court cases to defend a policy of making their workforce representative of the national race demographics on every level and at every site, they wonder: could it be that the money we pay in taxes does not contribute to the public good, but actually to the public bad?
Personal income tax is the single largest expense in the budgets of many employees and virtually all of Solidarity’s members.
A very small number of South African taxpayers bear almost the entire weight of the South African state on their tired shoulders. In analysing recent income tax statistics, the first figure that stands out is the 13,7 million people who were registered as taxpayers for the 2011/12 tax year. However, as can be seen on the graph below, only a small number of those registered actually paid significant amounts of income tax. Of the 13,7 million people registered in 2011/12, 3,3 million taxpayers paid almost 99% of all income tax; 2,3 million paid 93%; and 1,5 million paid 84%.”
You can read the full speech here.