Call to exempt some public workers from income tax – Treasury responds

Finance minister Enoch Godongwana has responded to a call to exempt healthcare workers and police officers from personal income tax – saying that the already progressive tax system allows for an acceptable level of exemption and anything based on profession would be impractical.

In a parliamentary Q&A that took place at the end of May 2023, a member of the National Freedom Party (NFP), Shaik Emam, called for the finance minister to consider exemptions for healthcare workers and police officers up to a certain level.

Emam proposed that, given that police officers in the republic are poorly paid with limited benefits, low danger allowance, live in informal settlements and are at high risk, Godongwana should consider exempting police officers from paying income tax.

The same sentiment was directed towards healthcare workers, and he proposed that Godongwana consider an exemption from pay-as-you-earn tax (PAYE) for all healthcare workers up to a certain level.

In response to these requests, Godongwana simply said no.

“The law does not allow for such exemptions in line with the principle that all residents earning an income, be they the president, a worker or a businessperson, are subject to our tax laws without exception,” he said.

Godongwana said he recognises the role played by healthcare officials is significant in ensuring the provision of efficient and adequate healthcare to the public and ensuring the provision of healthcare as a fundamental human right. 

He mentioned a similar regard for police officers. He said he also recognised the role played by the police is significant in ensuring public order and providing citizens’ safety and security as a fundamental human right.

However, Godongwana noted, “the government funds the provision of such safety and security as a public good, and such funds are raised through the levying of taxes”.

He explained the levying of taxation is a crucial mechanism utilised to generate revenue as part of the country’s flagship fiscal policy, adding that “one of the linchpins of a good tax system is the principle of equity, which incorporates the concept of horizontal equity”.

Horizontal equity ensures that all taxpayers who receive employment or other income are taxed the same based on their ability to pay, irrespective of their vocation. Low-income taxpayers earning below R91,250 are also exempt from personal income tax, said Godongwana.

Because the South African personal income tax system is progressive in nature, he noted that the exemption of a group of taxpayers based on their profession would be impractical and go against the principles of a good tax system.

Godongwana argued that marginal tax rates that increase with income and rebates that apply equally to all taxpayers are the primary tools to express society’s preference to relieve lower incomes through the tax system.

He added that it would also impede the fiscus, negatively impacting the ability to raise sufficient revenue to fund government social programmes.

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