According to the Free Market Foundation (FMF), citizens only started working for themselves on 9 May this year. “From 1 January to 8 May 2013, South Africans were working to pay for government,” said Garth Zietsman, FMF statistician. “The money they’ve earned to date is equivalent to the amount needed to pay for government for one year.” He noted that Tax Freedom Day, the day from which taxpayers kept their earnings, was four days later than in 2012 and seven days later than in 2011.
“In other words, taxes increased and Tax Freedom Day is likely to be even later in 2014 because government spending, deficit and debt continue to increase. The only way government can find the money to fund its spending is to increase the taxes we pay.” Ernst Janovsky, head of Absa AgriBusiness, said that tax for farmers was on the increase due to higher incomes and tax increases.
“Capital gains tax and estate duty is increasing and farmers are paying more for water, which is also a kind of tax.
Property tax has increased, whereas 19 years ago, it didn’t exist. So the burden is bigger than ever before,” he said.
Janovsky added that those in suburban areas who benefited from services such as sewage systems and refuse removal were still getting value for their money.
But farmers were not so fortunate. “Very little tax is used to benefit farmers. They get few state services and the rural roads are not being serviced or upgraded.” Zietsman said that higher taxes resulted in less disposable income and this meant less saving. This meant less capital formation, which in turn lowered labour productivity and effectively lowered real wages.
“Estimates of optimum total government spending for maximum productivity place it at 20% to 23% of GDP. Government spending is well above this level, placing us among the worst-ranked countries worldwide at our level of development,” Zietsman added. “Even worse is that our government is growing at such an alarming pace that it is using more taxes for consumption spending rather than core functions and capital projects.” Zietsman said that reducing state spending and tax by a third would reduce unemployment and shorten the time to double average incomes from 36 to 25 years.