Budget: Taxes are not the solution to get rich quick, argues Solidarity

Henry

South Africa cannot get rich through taxes. Nor can even more hard-earned money be drained from already overtaxed South Africans.

That’s what Solidarity says in the run-up to Finance Minister Enoch Godongwana’s budget speech next week.

Theuns du Buisson, economic researcher of the Solidarity Research Institute (SNI), says the state does not have a problem with income, but rather a problem with its expenses.

“Currently about a quarter of all money in circulation in South Africa is spent on taxes. It simply cannot go on like this. Minister Enoch Godongwana must realize that taxes cannot make a country rich. Growth is necessary and here with us it is urgently needed,” says Du Buisson.

Du Buisson suggests the government loosen the stranglehold of high taxes on the economy.

“That is why the personal income tax brackets must be adjusted this year by more than inflation. Citizens are under great financial pressure. They certainly cannot afford to have their increases taxed more heavily than is already the case.

“Solidarity hopes that common sense and good judgment will prevail so that the minister can announce plans that will lead to better results for the money spent.

“How is it that South Africa spends significantly more on education than most other countries, but our outcomes are simply pathetic? The same can be said of health care, policing and all sorts of other departments. The inputs and the outcomes do not add up.

“Every year the minister talks about how excessive expenses are going to be fixed, but we don’t see anything happening. The state’s salary account is the best example of that. The account itself is not necessarily as big a problem as the fact that the return, in terms of productive outcomes, is only there.

“South Africa has become a country of projects without plans. How does a government spend almost R400 billion on social grants in a year, without any plan to break those people’s dependence on grants, and get them to work?” said Du Buisson.

Solidarity says these questions must be answered as soon as possible. The organization says that concrete action is also needed to pay attention to the country’s problems.

Solidarity suggests

Solidarity proposes a special priority fund of approximately R5 billion, which is allocated annually.

“If the priority fund is simply allocated to the relevant department, it forms part of the general budget of that department and creates an expectation that that money will be available again next year. It is therefore important that it be handled separately,” says Du Buisson.

“Our proposal is to firstly restore law and order by ensuring that the police’s equipment and vehicles are properly replenished. Next year the transport crisis may be the priority, and the year after that infrastructure at schools may receive attention. How do we expect learners to work in the modern era when most schools are still plodding along in a bygone era without computers or internet access?”

Du Buisson also hopes that the minister will announce urgent action that is conducive to attracting investment to South Africa.

“The National Development Plan sets targets for economic growth, for example that 30% of the gross domestic product (GDP) must be fixed capital formation. However, we do not see anything in the government’s policy that will fuel this growth.

“We therefore want to propose that all investments in infrastructure, buildings or machinery should be immediately tax deductible in the year of capital outlay. The local steel industry urgently needs a revival in new construction projects.

“For employees to thrive, their employers must also thrive. The treasury must take urgent steps to establish a more business-friendly policy. Lowering corporate income tax in 2023 was a step in the right direction, but it was definitely not enough.”

Du Buisson believes the state’s lack of planning is reflected in state debt that worsens every year. According to him, there is still no indication of how the state intends to curb the budget deficit.

Solidarity therefore now proposes that regulations be relaxed to allow, and even encourage, the private sector to solve the problems at state enterprises.

“Privatize our ports and privatize our railways. Allow the private sector to build new ones. The country is losing billions of rand in stocks that accumulate and cannot be exported. There are solutions available, but then the minister must comply.”