South Africa – Government spending is like a runaway train fuelled by taxpayers. The more taxes that are paid, the more money the government gets to spend and the faster the train goes. Unfortunately, it seems most of the money goes into deep pockets and anything but the right places. Citizens are fed up.
In an effort to have their voices heard, many are seeking legal ways to pay less tax. Dawie Roodt, a chief economist at the Efficient Group, understands everyone wants more. More services and infrastructure, but nobody wants to pay more taxes, and this is a dilemma politicians have to face. They need to find a way to bridge this gap.
“They can fill that gap between how much they spend and how much they get in the way of taxes by borrowing this money. Unfortunately, in the case of South Africa, we’ve reached a point where we have borrowed too much money and the debt levels have reached levels that have become totally unsustainable.”
The government has propagated the notion that if we all pay tax, we pay less tax which Roodt claims is false. It is just something being said to get people to pay more tax. The more tax we pay, the more money politicians have to spend.
What tax should be used for
There are legal loopholes one can use to pay as little tax as possible. The question that needs to be asked and answered is what government is supposed to be spending our taxes on, said Roodt. What the government should be responsible for.
“It all depends on your school of thought. Economists typically break that down in the primary functions and the non-primary functions. The primary functions of the state are things like defence, the police and the judiciary. You can argue maybe even infrastructure and so on but there’s absolutely no reason why the state should own an airline. The private sector can do that very well and this government has proved itself to be highly inefficient in managing our money.”
The less fortunate rely on taxes
While there is a case to be made to pay as little taxes as possible, one should not stop paying tax entirely. The less fortunate rely on social grants to survive. These grants are only available because of the tax citizens pay. It is one of the main reasons Roodt is against a complete tax boycott.
“We have about 30 million people receiving a grant from the state. We as South Africans have a responsibility to make sure that fellow South Africans don’t die of hunger. We need to support and assist people that are in dire straits. I have no issue that we need to do that and that’s part of the reason why I’m against a tax boycott because those many millions of people are actually dependent on us.”
The real issue is the environment is not conducive for economic activities. This is solely the fault of the government, believes Roodt. They have not created a “friendly environment for business to do business in” which in turn has created a weak economy. Governments failure to lessen the amount of people who receive social grants speaks volumes of how the economy has slowed over the years.
A narrow base of taxpayers
The tax base in South Africa is very limited. According to Roodt, less than a thousand companies pay about two-thirds of company taxes and approximately less than 200 000 people pay about a third of personal income taxes. These people in fact pay tax twice as they use private services instead of government services.
“They pay for education, but they send their kids to a private school. They pay for health services, but they have their own medical facilities or medical fund. They pay for the police, but they make use of a private sector security company … There are many other taxes like for e.g., if you pay for electricity at Eskom, that in a way is a tax or part of that is a tax because the state owns Eskom. So don’t think it’s only the deduction from your salary that is the tax that you’re paying. There are many other indirect and hidden taxes that you’re also paying.”