The noose on the goose just gets tighter

29 January 2012 - 02:04 By Matthew Lester
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Matthew Lester
Matthew Lester

Every year we are led to believe that the individual taxpayer gets a better deal in the national budget. And, yes, tax tables for individuals are adjusted favourably every year. For example, Finance Minister Pravin Gordhan put back R5-billion in 2010/11 and R8-billion in 2011/12.

You can bet you boots there will be a similar announcement for 2012/13, which will be touted as great stuff in the press. But is the individual taxpayer better off?

The 3.5million individual taxpayers above the tax threshold are literally holding South Africa together. They are budgeted to pay R224-billion for 2011/12 - that's 35% of total taxes and nearly 10% more than 2010/11. This excludes VAT, customs and excise duties, a fuel levy, and odds and sods. These more than double the individual taxpayer's contribution.

In the tax year ending February 28 2012, around 500000 taxpayers lost the benefit of their travel allowance deduction. That can be as much as R22000 additional tax each year. Another 100000 taxpayers with company cars were also hammered: the deemed fringe benefit was increased to 3.5% of determined value a month. And that's not all.

From March 1 2012, those in the super-tax bracket will lose 37% of the tax-free medical allowance. Employer group life-insurance scheme contributions will become a taxable fringe benefit as well. If that's not enough to absorb the annual tax reduction in the 2012/13 budget, call me Jean Pierre.

Then add the inevitable annual inflationary adjustment to fuel and electricity levies and sin taxes.

The shift of the tax burden to the individual is inevitable. Particularly as we apparently have to maintain corporate tax rates at 28% and give away another R8-billion to R10-billion to companies when dividend tax is implemented on April 1. All in an attempt to attract foreign investment that gets chased away by Dewani.

Will the cherry on the top be the increase in the super-tax rate to 42%? I doubt it. After all, it would affect only 150000 taxpayers. Increasing the individuals' inclusion rate for capital gains tax from 25% to 35%, or even 50%, would achieve far more.

Increasing taxes is never going to solve South Africa's problems. The point is how our taxes are spent. In 2011 alone, for example, Limpopo's apparent unauthorised expenditure was R2.7-billion. And this is a province which pays only 6% of the country's taxes. That's about equivalent to half of the electricity levy collections. Pass the sick bag, Maude!

  • Lester is a professor at the Rhodes University Business School, Grahamstown
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