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Budget Speech: Taxation ever increasing; burden on economy becoming heavier

Thursday, February 28th, 2013

Gross debt and total revenue since 1995Amid difficult economic conditions, the public had to learn today that Minister Nene was going to further expand state expenditure, would incur more state debt and would implement more redistribution, trade union Solidarity said in reaction to today’s budget speech. 

Piet le Roux, Head of the Solidarity Research Institute, says Minister Nene’s announcement of a significant increase in personal income tax is, unfortunately, a continuation of recent harmful trends. “In fact, there were already increases in personal income tax during the past three years as taxpayers then too had to cede larger proportions of their income to income tax. It’s simply not true that taxpayers have experienced relief during this period,” Le Roux says.

As far as the so-called fiscal consolidation Minister Nene referred to is concerned, Le Roux said it doesn’t constitute any real savings in government spending. “Government spending will only increase at a slightly slower rate than was previously planned, but will nevertheless still increase.”

Le Roux said the reduction in employees’ contributions to the Unemployment Insurance Fund (UIF) is one of the only rays of light in the minister’s budget speech. “Since 2013, Solidarity has been arguing that UIF contributions should be reduced permanently. Unfortunately, it seems that this relief measure is only temporary compared to all the other permanent tax increases the minister has announced,” Le Roux said.

According to Le Roux, it is perturbing that taxpayers have to pay more in taxes on an ongoing basis to redeem growing public debt. During the period 2003-’04 to 2007-’08 public debt only increased by only 27%, while it increased by a massive 244% from 2007-’08 to 2015-’16. “As an alternative, government should rather cut back on its spending of tax revenue, thus reining in public debt. Although Nene had much to say about expenditure efficiency, it is a refrain that is repeated every year, while the reality shows the opposite,” Le Roux says.

Le Roux said the billions in unauthorised, irregular, fruitless and wasteful expenditure disclosed by the Auditor General every year, are only the most obvious ways in which government is spending tax money inefficiently. “Government spending that is not technically irregular is often still wasteful and inefficient because it takes up resources that should be available to the private sector,” Le Roux said. 

Solidarity maintains that the wealth of South Africans cannot be multiplied by means of a redistribution budget. It is clear that it is government’s first priority to be efficient in the way it milks hard working people through more taxation.

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