Government’s new policies would double your tax bill: study

Trade union Solidarity has published a new report showing that the burden on South African taxpayers could double if the White Paper on the National Health Insurance (NHI) is accepted and the Green Paper on social security is implemented after being reviewed.

According to the report, South Africans pay incredibly high taxes in global terms, while the government generally fails to fulfill 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) shows that 3.4 million taxpayers pay 91.2% 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%. This figure considers a proposed 5.5% payroll tax, which is said to be the preferred option to fund the scheme.

However, when implementing the proposals contained within the recently withdrawn to be reviewed green paper on social security – including the 8%-12% payroll tax for the social security fund and the 10% income tax hike to fun a basic income grant – the average taxpayer would see their burden increase 85.7% on top of the NHI’s blow.

“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%),” Solidarity said.

This burden would vary depending on income group, with some hit 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% increase).

People earning between R7,276 and R28,150 per month will, on average, pay 254.8% 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,” said Solidarity chief executive Dr Dirk Hermann.

Tax revolt

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

Hermann said that Solidarity’s tax protest campaign would focus on litigation. The chief executive said that the group is preparing for the ‘mother of all tax court cases’ to stop the NHI White Paper and later the Green Paper.

The group 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,” 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.”

Hermann said that money from the state coffers typically ends up in the pockets of cadres and that looters are not brought to book.

“That is exactly why we continue with litigation to stop the state and its immoral plans in their tracks. We, as taxpayers, have power. We must stand together and remind politicians that they are supposed to work for us, the taxpayers, and not the other way around.”

Read: Bad news for South Africa’s middle-class

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Government’s new policies would double your tax bill: study