Taxpayer collapse imminent?

The Efficient Group’s Dawie Roodt recently told Jeremy Maggs some sobering facts about the state of SA’s finances:

• Fewer than 4% of taxpayers contribute almost 50% of personal income tax
• About 1000 companies in South Africa pay more than 70% of total company taxes
• High income earners are close to these 1000 companies, meaning there’s huge reliance on very few taxpayers (and those who in big companies that authorise PAYE and corporate tax payments)
• It’s unlikely the proposed 0.5 percentage point increase in VAT will bring in the amount of money government hopes it will
• SA is past the Laffer Curve point where raising taxes increases revenue
• Tax collection is efficient but way too complicated
• There’s a tax revolt already underway with 50% of cigarettes being sold on the black market, and alcohol likely to follow if we keep raises excise duties
• SA is unlikely to hit 1.5% growth this year – as National Treasury forecasts.
• The SA economy has been flatlining for a decade, and job growth is miserable.

“There’s something that economists call the Laffer curve, which means that if you keep on increasing taxes, then eventually your tax rates, then eventually you will start collecting less taxes. Especially in things like, for example, personal income taxes and company taxes. But it applies to other taxes as well,” says Roodt.

As we’ve highlighted before, we can no longer afford a government that shows no real restraint when it comes to raising spending. It’s time for a fiscal reboot. Taxpayers are getting very little value for their taxes, and are having to double spend on private education, security, power and water. Black economic empowerment is failing. Evidence: the 33% unemployment rate and virtually unchanged wealth disparities.