It’s taking longer for South Africans to pay off government’s debt each year

South Africa’s Tax Freedom Day takes place on 21 May – it represents the first day of the year on which South Africans have earned enough income to pay for government’s spending for the year.

Put another way, it’s the day that South Africans have earned enough money to pay off their total individual tax obligations for the year, and can, essentially, start working for themselves.

According to the Free Market Foundation, Tax Freedom Day is a measure of how much time you spend working for someone else’s benefit, rather than your own.

“Tax Freedom Day is the day we, the people of South Africa, at last start to work for ourselves. It is the day on which we have finally paid our tax bill in full,” said Garth Zietsman, FMF statistician.

From 1 January until 21 May, all the income earned by average South Africans is required to pay for one year of government spending.

“Tax Freedom Day is calculated by dividing General Government Revenue by GDP at market prices, then multiplying the result by the number of days in a year, and finally adding a day,” said Zietsman.

The day is determined in this way and spread over the first months of the calendar year to give us an idea of how the burden of taxes affects the average taxpayer.

The 2021 date falls two days later than in 2020 and almost six weeks later than in 1994. The average taxpayer has had to work 140 days (38.4% of the year) in 2021 instead of the 138 days (37.8%) they worked in 2020 to pay their taxes.

In 1994, South Africans took 101 days to pay for the government, 39 days fewer than the current period, the Free Market Foundation said.

“South Africa has the 12th highest income tax burden, the 9th highest company income tax burden, and the 14th highest non-resource tax burden worldwide. For our level of economic development, that is exceptionally high by international standards,” said Zietsman.

Little to show 

Zietsman said that the government has very little to show for the high tax burden.

“Our educational system is dismal, and the crime rate is high with most serious crimes going unsolved,” he said. “While taxes have been trending upwards, economic growth has been trending downwards. The result is that South Africans have had to carry a growing tax burden while getting poorer.”

Zietsman argued that growth requires lower taxes. He added that reduced taxes would provide a greater incentive for private individuals to work, save and invest.

“The net result would be greater investment, more innovation, a stronger economy, less unemployment, less poverty, and a more contented populace. Government is both less innovative and less efficient than the private sector. High taxation slows, not grows, an economy.”

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