[South Africa] Tax bills could double under government’s new policies

A new report from the trade union Solidarity shows that the burden on South Africa’s taxpayers could double if the White Paper on National Health Insurance (NHI) is accepted and the Green Paper on social security is implemented after it has been reviewed, Business Tech reports.

According to the Solidarity report, South Africans pay extremely high taxes in global terms, while the government fails to fulfil its side of the social contract. The report revealed that the tax to GDP ratio in South Africa is the second-highest in the world, after Sweden.

Data from the South African Revenue Service (SARS) reportedly shows that 3.4 million taxpayers pay 91.2 per cent of all personal income taxes in the country. These are individuals earning more than R250,000 annually.

Impact studies conducted by the group show that the implementation of the NHI could result in the tax burden of the majority of these taxpayers increasing by 36 per cent. This figure takes into account a proposed 5.5 per cent payroll tax, which is said to be the preferred option to fund the scheme.

However, when implementing the proposals contained within the green paper on social security - which was recently withdrawn to be reviewed - including the 8 per cent to 12 per cent payroll tax for the social security fund and the 10 per cent income tax hike to fun a basic income grant, the average taxpayer would see their burden increase 85.7 per cent in addition to the NHI.

Solidarity said, “It is clear that the impact of these policy documents means the end of personal wealth in South Africa. If these two policy documents were to be implemented, citizens could expect to pay on average twice as much tax (113.2 per cent).” 

The burden would vary depending on income group, with some impacted harder than others.

More specifically, with the proposed tax adjustments for both the NHI and the social security fund, individuals earning between R7,276 and R18,017 per month will be paying four times more tax than at present (338.1 per cent increase).

People earning between R7,276 and R28,150 per month will, on average, pay 254.8 per cent more tax, while people earning between R7,276 and R51,133 per month will pay an average of almost three times more tax (180.6% increase), the group said.

“The White Paper (and Green Paper) are both irrational and unaffordable. The government did not make any calculations about the actual impact of the proposals. Solidarity is the only organisation that has done proper impact studies, and our findings show that the government’s proposals are completely outrageous,” Solidarity chief executive Dr Dirk Hermann said.

Tax revolt

Solidarity’s executive council said that, given the impact of these taxes on South Africa’s shrinking tax base, it would institute a comprehensive, legal tax protest.

Dr Hermann said that Solidarity’s tax protest campaign would focus on litigation. He said that the group making preparations for the “mother of all tax court cases” to stop the NHI White Paper and subsequently the Green Paper too.

The group reportedly intends to challenge the NHI proposal in court and if the government continues with its intention to republish the green paper on the social security fund, it will challenge that in court as well. Part of the campaign will also include the prosecution of alleged looters.

Solidarity has also decided to appoint a task team to develop proposals to help people pay less tax through creative but legal methods.

“A small percentage of citizens carry a massive tax burden but get virtually nothing in return for it,” Dr Hermann said.

“The ANC government is doing everything in its power to enact more legislation that would enable them to collect more taxes and impoverish hard-working South Africans. This leaves us with no choice but to resort to a legal protest where we explore all possibilities to pay as little tax to the government as possible.”

Source: Business Tech

A new report from the trade union Solidarity shows that the burden on South Africa’s taxpayers could double if the White Paper on National Health Insurance (NHI) is accepted and the Green Paper on social security is implemented after it has been reviewed, Business Tech reports.

According to the Solidarity report, South Africans pay extremely high taxes in global terms, while the government fails to fulfil its side of the social contract. The report revealed that the tax to GDP ratio in South Africa is the second-highest in the world, after Sweden.

Data from the South African Revenue Service (SARS) reportedly shows that 3.4 million taxpayers pay 91.2 per cent of all personal income taxes in the country. These are individuals earning more than R250,000 annually.

Impact studies conducted by the group show that the implementation of the NHI could result in the tax burden of the majority of these taxpayers increasing by 36 per cent. This figure takes into account a proposed 5.5 per cent payroll tax, which is said to be the preferred option to fund the scheme.

However, when implementing the proposals contained within the green paper on social security - which was recently withdrawn to be reviewed - including the 8 per cent to 12 per cent payroll tax for the social security fund and the 10 per cent income tax hike to fun a basic income grant, the average taxpayer would see their burden increase 85.7 per cent in addition to the NHI.

Solidarity said, “It is clear that the impact of these policy documents means the end of personal wealth in South Africa. If these two policy documents were to be implemented, citizens could expect to pay on average twice as much tax (113.2 per cent).” 

The burden would vary depending on income group, with some impacted harder than others.

More specifically, with the proposed tax adjustments for both the NHI and the social security fund, individuals earning between R7,276 and R18,017 per month will be paying four times more tax than at present (338.1 per cent increase).

People earning between R7,276 and R28,150 per month will, on average, pay 254.8 per cent more tax, while people earning between R7,276 and R51,133 per month will pay an average of almost three times more tax (180.6% increase), the group said.

“The White Paper (and Green Paper) are both irrational and unaffordable. The government did not make any calculations about the actual impact of the proposals. Solidarity is the only organisation that has done proper impact studies, and our findings show that the government’s proposals are completely outrageous,” Solidarity chief executive Dr Dirk Hermann said.

Tax revolt

Solidarity’s executive council said that, given the impact of these taxes on South Africa’s shrinking tax base, it would institute a comprehensive, legal tax protest.

Dr Hermann said that Solidarity’s tax protest campaign would focus on litigation. He said that the group making preparations for the “mother of all tax court cases” to stop the NHI White Paper and subsequently the Green Paper too.

The group reportedly intends to challenge the NHI proposal in court and if the government continues with its intention to republish the green paper on the social security fund, it will challenge that in court as well. Part of the campaign will also include the prosecution of alleged looters.

Solidarity has also decided to appoint a task team to develop proposals to help people pay less tax through creative but legal methods.

“A small percentage of citizens carry a massive tax burden but get virtually nothing in return for it,” Dr Hermann said.

“The ANC government is doing everything in its power to enact more legislation that would enable them to collect more taxes and impoverish hard-working South Africans. This leaves us with no choice but to resort to a legal protest where we explore all possibilities to pay as little tax to the government as possible.”

Source: Business Tech