Born Free, Taxed To Death
The 11th-hour postponement of last week’s budget speech arguably caused more drama and consternation than any of the speech’s content was likely to.
The official line was that “some of the government of national unity partners were not happy with a proposal to increase VAT from 15% to 17%.”
From what I can see, the Democratic Alliance is claiming somewhat smug responsibility for this.
A Bloomberg report states, “The Democratic Alliance (DA) defended its decision to obstruct a surprise plan to hike value-added tax, forcing an unprecedented delay in the presentation of the annual budget.”
“Unprecedented” is exactly the right word. This is the first time a budget speech has been postponed since the end of apartheid in 1994, possibly even longer.
The article also quotes DA leader John Steenhuisen as saying, “It prevents the implementation of a 2% VAT increase that would have broken the back of our economy.
“For the first time ever, the ANC was prevented from tabling an anti-growth budget. We will now fight with the same vigour to introduce a new budget that is anchored in growing the economy, rather than increasing taxes or debt.”
Among many other issues the move has highlighted, it throws a sharp spotlight on growing tensions within the still-fledgling Government of National Unity (GNU).
But that’s not even the main cause for concern. Here’s the real kicker:
An article in the Daily Maverick reports that the main reason behind the proposed VAT increase was to fund wage increases for civil servants!
Apparently the increase would also have been used to “retain teachers and doctors and pay for essential frontline workers; pay to fix commuter rail; and provide above-inflation grant increases.”
No one is going to deny that those are all worthy receivers of additional revenue. But to tell us that an increase millions of South Africans are going to struggle to absorb is so civil servants can earn even higher salaries is galling to say the least.
The Daily Maverick cites “circulated Budget documents” as the source of their info, and despite Treasury maintaining that it’s all still under embargo, the relevant documents are being widely shared on WhatsApp.
I know there is an argument that our current VAT rate of 15% is comparatively low by global standards. While technically, that may indeed be the case, the conveniently unspoken difference is this:
Most other countries use the money earned from VAT and other taxes to make life better for the people who pay it. Here at home? Not so much.
In South Africa, the proposed two-percentage point VAT increase would undoubtedly have led to substantial price increases. This is not something that our people, who are already stressed from high employment rates, and rocketing food and electricity prices, need to be burdened with.
SARS is very fond of telling us that paying our taxes is “the right thing to do.” And yet our government appears equally fond of not doing the right thing when it comes to using its tax earnings to deliver on its mandates.
In my book, what’s good for the goose is good for the gander. In other words, if it’s the right and moral thing for us to pay our taxes, then surely it’s also the right and moral thing for government to use those taxes to improve the lives of taxpayers.
The “moral argument” works both ways.
This is why it’s so refreshing – and encouraging – to see that someone finally has the cajónes to stand up to governmental bullying. And, what’s even more encouraging, that this resistance gets results.
In the past, we’ve seen glimmers of defiance; examples where ordinary South Africans have decided enough is enough.
The e-toll debacle is a classic case in point. The undeniable fear mongering that was used at the time to try and force people to pay unreasonable tolls backfired big time. People dug in their heels and refused to pay – not because they were opposed to the concept of tolls in principle, but because the monies raised were mostly destined for select back pockets instead of into maintaining and improving our road network.
But resistance like this is sadly rare, so I’m rather gleefully waiting to see what happens in the wake of “Budgetgate.”
Have everyday South Africans finally tired of playing the role of battered partner in an abusive relationship? Have we at last decided we’ve had enough of being backed into a corner by the people elected to serve us?
For too long we’ve been treated with contempt, disrespect and disdain. Perhaps this latest push back from elements in the GNU will be the line in the sand we have desperately needed to be drawn.
“Sit down, shut up and pay” does not sit well with the good people of our country, nor should it.
Of course, it’s not only internally that the effects of South Africa’s tax policies are felt; we’re not an attractive country to international investors either.
Because when you combine business-unfriendly tax rules with an under-performing government, you repel the very people who could plough desperately-needed foreign currency into country.
As Matthews Phosa said, “Money is a coward, it runs from risk,” and there’s no doubt South Africa is becoming increasingly risky from an investment perspective.
A big part of the problem is that we’re looking at things far too one-dimensionally. Although generally speaking, I think the country has a lot of time and respect for our finance minister, Enoch Godongwana, it’s simply not sound fiscal policy to say “we need more money, let’s raise taxes.”
There are complex issues at play here.
I read an excellent post on LinkedIn last week from Mike Abel, Executive Chairman and Founder of The Up&Up Group. Among his many pearls of wisdom was this:
“Instead of tightening the public purse, we’re expanding the number of ministers, bloating perks, and continuing to waste billions through endemic corruption and incompetence.
“If you were in financial trouble at home, what would be your first step? You’d cut unnecessary spending before running to borrow or squeeze more from those who already have nothing left to give.
“The truth is simple: We don’t have a tax problem. We have a growth problem. And until that is fixed, raising VAT is just putting a Band-Aid on a bullet wound.”
I agree, and to quote Magic Mike once again, “Enoch is Enoch.”