The government is secretly taking money from South Africans

The South African government imposes a hidden tax on South Africans by printing money, which erodes the value of the local currency and eats away at citizens’ money.

Finance Minister Enoch Godongwana’s 2025 Budget, set to be delivered on 12 March 2025, is highly anticipated as it will reveal how the government will address the budget deficit.

The Finance Minister was initially set to deliver his 2025 Budget Speech in Parliament on Wednesday, 19 February 2025.

However, a dispute over a planned two percentage point value-added tax (VAT) increase stopped this budget in its tracks.

Numerous cabinet ministers opposed the VAT increase, saying it would harm economic growth and hurt the poor people.

This caused Godongwana to postpone the 2025/26 annual budget to Wednesday, 12 March 2025, the first time this has happened in democratic South Africa.

He explained that this postponement will give stakeholders time for further deliberations within the Government of National Unity (GNU).

Many stakeholders want the finance minister to cut state expenditures instead of raising taxes, which are detrimental to economic growth.

However, others support raising taxes to fund social development programmes, like the Social Relief of Distress (SRD) grant.

Godongwane explained that the VAT increase to 17% was needed to raise an additional R58 billion to address its spending needs.

He said this money was needed to fund public sector wage increases, expand early childhood development, and retain teachers and doctors.

The money was also needed to revitalise the commuter rail system and provide above-inflation increases to social grants.

Most economists said that instead of raising taxes, the government should cut spending to ensure it creates a budget surplus.

Over the past thirty years, bloated employee compensation, government grants, and debt have constrained the national budget.

Instead of focusing on economic growth, the government raised taxes to cover its growing expenses.

Efficient Group chief economist Dawie Roodt said South Africans are now heavily overtaxed, and raising personal income or company tax is not viable.

He said the government should start cutting expenses and could start with salaries and wages. He said most government employees are overpaid and underworked.

He added that the government could cut spending on state-owned enterprises and close many unnecessary departments.

Secret way the government takes money from citizens

Most South Africans do not consider the money supply and inflation when debating state spending and raising taxes.

Renowned economist Milton Friedman said that the actual tax on people is what the government spends and not the taxes it collects.

When the government spends more than it collects in taxes, known as a deficit, it must find a way to finance that spending.

Printing money is a popular way for the government to fund its spending. However, this strategy has consequences.

Excessive money printing causes inflation and erodes the purchasing power of money. Because of this, the money people earn and save can buy less.

Friedman said that the government printing money is a form of hidden taxation as the citizens pay the price for government spending.

Economist Thomas Sowell said that inflation, which is caused by the central bank printing more money, should be seen as a hidden tax.

He explained that this hidden tax is not only confined to the rich. The weaker currency affects all citizens.

It raises the question of how much money South Africa’s government has been printing over the last thirty years and what effect it has had on inflation.

South Africa’s total money supply increased from R244.2 billion in 1994 to R5.1 trillion in 2023, a 21-fold increase over three decades.

South Africa’s average inflation rate since 1994 has been 5.9% per annum. This means that R1 in 1994 had the same purchasing power as R5.20 today.

This erosion in the value of the rand is a secret tax the government imposed on South African citizens to fund its excessive spending.

South Africa’s Money Supply

Inflation in South Africa, shown as the relative value of a rand