For every rand you pay in tax, 58 cents goes towards public sector salaries

The Democratic Alliance has raised concerns around finance minister Tito Mboweni’s supplementary budget and how taxpayer money is being used.

In line with comments made by Mboweni, the group noted that debt repayments now takes up 22 cents out of every R1 in tax revenue.

Further, it said that an additional 58 cents go towards paying the salaries of public servants, with that figure set to increase if the government agrees to a controversial pay hike.

“This means that almost none of the taxes paid by South Africans are used for productive investments to grow the economy,” the DA said.

“With salaries and debt devouring 80% of all tax revenue, only 20 cents out of every R1 paid in taxes is now available to pay for everything from social grants to education, healthcare and infrastructure development.”

Mboweni’s supplementary budget shows that gross tax revenue collected during the first two months of 2020/21 was R142 billion, compared to the initial forecast for the same period of R177.3 billion.

“Put another way – we are already R35.3 billion behind on our 2020/21 target,” Mboweni said.

As a consequence, gross tax revenue for the 2020/21 fiscal year has been revised down from R1.43 trillion to R1.12 trillion. That means that South Africa expects to miss its tax target for this year by over R300 billion.

“Taken together the measures and adjustments we present translate into a consolidated budget deficit of R761.7 billion or 15.7% of GDP in 2020/21. This is compared to the deficit of R370.5 billion, or 6.8% of GDP projected in February,” he said.

Ratings agency, Moody’s warned on Thursday (26 June), that the government’s target to stabilise its debt by 2023 is unlikely, Reuters reported.

“In its ‘active scenario’, the government hopes to achieve a primary surplus by fiscal 2023 that would stabilise debt,” Moody’s said in a research note.

“Given South Africa’s weak track record of fiscal consolidation in recent years and the weak medium-term economic outlook, debt stabilisation by 2023 will be very difficult to achieve.”

Wage increases 

While South Africa faces a massive shortfall, the DA said that the government will spend at least R638.9 billion this year on paying salaries for public servants.

This spending includes continuing to pay the exorbitant salaries of 29,000 ‘millionaire managers’, the party said.

“To make matters worse, the amount of R638.9 billion is based on the assumption that there will be no further wage increases this year.

“The government on 1 April unilaterally froze the salaries of public servants in a belated attempt to lower the wage bill. However, the state did so in contravention of its own 2018 collective bargaining agreement that guaranteed above-inflation wage increases until 2021, after public sector wages already increased by 66% over the past decade.”

Public-sector unions have subsequently taken government to court to reverse this attempt to freeze wages.

If the unions win their court battle, the wage bill will increase to R675.2 billion this year, the DA said, which means that the state will spend 61 cents out of every R1 collected in taxes to pay wages.

Read: SARS is moving to the next phase of the tax season – what you need to know

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For every rand you pay in tax, 58 cents goes towards public sector salaries