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News Room

Tax Will Be The Death Of South African Consumers

You're paying taxes on things that you didn't even know about, and if that isn't bad enough, they're introducing new taxes as well...

It’s difficult to take South Africa’s economic woes seriously when we read about the record-breaking Black Friday sales this year. Takealot alone pulled in around R196 million on the day. That doesn’t make much sense, does it? There seems to be a lot of money being thrown around, and here the country is facing junk status, with a recent technical recession to boot.

The truth is that these persistent economic woes are very much real, and we see it each and every day. Most are well-documented, thanks to corruption in government, gross mismanagement, inefficient use of our tax money – take a bow, SANRAL – and the ever-burdensome SEOs that continue to suck the treasury dry. Government debt is rising as fast as the unemployment rate, the crime rate and the rate of qualified specialists fleeing our shores for better prospects abroad.

Then, of course, we had the 1% VAT increase. See, tax plays a huge part, and South Africans are now paying more tax for far less in return, and, as is often the case, we don’t even know about all the other hidden taxes we’re paying.

In this article we’re going to take a look at the hidden taxes you’re paying, why you’re paying them, and the ways in which the government is trying to squeeze every last drop of money out of you without you even knowing it.

Overspent on Black Friday? You played yourself. You just bought a Minister a new Lamborghini.

Hidden Taxes, Say What?

Let’s see if we can clear things up a little. As most of us are aware, the South African tax system works according to how much money you earn. The higher your salary, the higher percentage of tax you’re going to pay, right?

According to economist Dawie Roodt, a person who earns R10 million per year, for example, will probably pay around R6 million in taxes, which include income tax, corporate tax, VAT and all the others such as fuel levies, road tolls and sin tax.

And of course, the wealthier you are, the more you’re going to spend. You’re going to get private education for yourself and your children, private healthcare, private security services for your home and private insurance on your belongings. Why? Because government services are pathetic, inefficient, incompetent and far more likely to kill you.

Have a look at our public schools. Have a look at our public hospitals. Have a look at all other public services. They’re a disgrace. So, if you have the money – even if you’re lower down on the income ladder – you’re almost always going to opt for something better.

Here’s the trick. Even if you’re not using these hopeless public services, and paying a lot of money for decent private services, you’re still paying for the wretched, tragically inept public services through taxes. This essentially means that if you’re trying to build a better, safer, healthier future for yourself and your family, you’re paying twice.

Redistribution Fiasco

The reasoning behind this makes sense, but that doesn’t mean that it works. The government’s goal here is take from the rich and give to the poor – a redistribution of wealth, if you will. Unfortunately, this doesn’t always actually help South Africa’s poor improve their financial positions.

According to Roodt, what we can take from this is that while people are being charged extra taxes for the purpose of helping the poor, thanks to the government’s inferior services, the poor just aren’t being helped sufficiently enough. The government, after all, can barely run its own departments with any semblance of aptitude while spending billions on salaries for ministers and public servants.

The public sector wage bill will run at almost R550 billion this year – accounting for about a third of the country’s total annual budget.

South Africa has one of the most bloated and ineffective cabinets in the world, funded by the tax payer, and wait, it gets even better.

Could There Be New Taxes On The Way?

The State of City finances report, by the South African Cities Network, looks at the finances of the nine largest cities in South Africa, being Johannesburg, Cape Town, eThekwini (Durban and surrounds), Ekurhuleni (East Rand, Gauteng), Pretoria, Nelson Mandela Bay (Port Elizabeth and surrounds), Manguang (Bloemfontein and surrounds) Msunduzi (Pietermaritzburg and surrounds) and Buffalo City (East London and surrounds).

The report then looks at the systemic issues in each city and offers recommendations for fixing the problems. These problems, in a nutshell, are that the metros need more money. If municipalities are anything to go by, the money is probably for KFC and fancy chairs, but who knows; maybe they’ll actually use it to run the city. 

One of these recommendations involves the implementation of local taxation in order to generate more revenue. Five revenue options have been assessed, being:

  • A surcharge on personal income tax (PIT);
  • A surcharge on corporate income tax (CIT);
  • A surcharge on transfer duties (property taxes);
  • An occupancy tax/tourism levy;
  • A local business tax. 
The PIT, CIT and transfer duties would be fairly easy to administer but the PIT and CIT would require a constitutional change and would have a negative economic impact, while transfer duties would be unlikely to be assigned to local government because of national fiscal constraints,

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Because these days, we can just change the constitution willy-nilly no problem to suit whatever terrible thing we want to do.  

The SACN added that of all the awful and blatantly greedy options, the occupancy tax seems most viable – involving charging a tax for guests temporarily staying in a hotel, b&b, Airbnb, boarding houses or camping sites. That’s it; let’s milk the tourists and the travellers.

It is a tax because taxpayers experience no direct benefit from the municipality, and it can be used to fund municipal general revenues

Which sounds like somebody just ordered a ton of KFC and doesn’t know how to pay for it.

Many US cities also have this tax, including New York City. The tax is based on the rental amount of the room. It is paid by the person occupying the room, and collected by the person providing the service of the room.

Oh but wait, there’s even more.

Now There Are Driving Taxes, And Now It Hurts

The SACN – who, by the way, sound like just the nicest bunch of people ever – have also suggested the introduction of private vehicle taxes. Apparently, the road use charges don’t reflect the actual marginal costs of drivers using the roads.

So, not only do we pay our fuel levies and toll fees – the real toll fees, mind you – and not only is it incredibly expensive to purchase a car, maintain a car and keep a car full of very, very expensive petrol, but now we may be faced with what they’re calling a Road User Tax.

Apparently, our insidious private vehicles increase:

  • Environmental costs: local noise and air and aesthetic pollution (i.e. despoiled landscapes);
  • Accident costs: the costs of injuries and fatalities to individuals and property from road accidents, which are particularly high in South Africa;
  • Congestion costs: overcrowded roads increase journey times; and
  • Road maintenance costs: vehicles cause physical degradation of and damage to roads.

Once again, just a fabulous job you’ve all done of keeping the low-income population in mind. Oh? It’s only the private vehicles you’ll be taxing, you say? Not the public transport, such as taxis, which are the absolute scourge of the roads? Nice.

Although road pricing schemes aimed at private vehicle users have been designed and implemented around the world, formulating appropriate policies for taxing private road use is not straightforward because of social and external costs and intergovernmental relations. Ideally, an efficient road-user tax charges each private road user for their precise social or external cost, but in practice this cost can only be approximately reflected by the available tax instruments

The SACN went on to elaborate on the different kinds of Congestion, Pollution, Employer / Employee and Per km charges which could be implemented based on the amount of precious road you’ll be using, the time of day you’ll be using the precious road, the amount of pollution your car emits while on the precious road and so on and so forth, but we’ll not get into that.

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