By Melanie Peters
People pay up to 65 percent in direct and indirect taxes, says a retired bank economist in a report commissioned by the trade union Solidarity.
Although not everyone agrees, the union's general secretary, Flip Buys, said according to the research carried out by retired Absa Bank economist Adam Jacobs, the average taxpayer forks out around 25 percent of his salary in direct taxes and another almost 25 percent in indirect taxation like VAT, fuel levies and local government taxes.
He then pays another approximately 15 percent of his income for medical premiums, school fees, security company payments and other necessities for which he has, in fact, already paid through his taxes.
This double taxation means that the average taxpayer spends around 65 percent of his income before he can begin to take care of his family.
Buys said the average employee's net tax burden had gone up by approximately 200 percent since 1994. "The reason is that people are taxed to pay for services from the state, but they then have to pay extra for their own health care, education, safety, electricity, housing, pension and other services.
"In other words, the average employee works for the state from Monday to Wednesday. On Thursday he works for services like healthcare and education, which only leaves Friday's income for his family."
Of the country's 47 million people, eight million are employed in the formal sector. Only 4,6 million of these are taxpayers. The rest probably do not earn enough to be registered as taxpayers.
"Direct taxation comes to around 25 percent, which compares favourably with other countries," said Buys, "but only around 10 percent of taxpayers account for approximately 50 percent of taxes."
One out of four people in South Africa receive some kind of social grant from the government as opposed to only 4 percent in comparable countries like Brazil and Mexico. This means South Africa as a country has the largest welfare net outside Western Europe. The number of people receiving government grants has increased from around 2,6-million in 1994 to an estimated 12-million in the next financial year.
Head of tax at Mallinicks, Des Kruger, said these figures highlighted a very important issue: that while there had been significant income tax relief to taxpayers over the past couple of years, taxpayers continued to have to pay a number of indirect taxes that should be factored into any discussion of overall tax burden.
If one took all taxes paid as a percentage of Gross Domestic Product, the overall tax burden had in fact increased slightly over the past couple of years. It was 23,2 percent in 2003/2004; 24,3 percent in 2004/2005; 26,1 percent in 2005/2006 and 27,1 percent in 2006/2007.
While a number of industrialised countries had higher tax-to-GDP ratios, these were usually those, such as the Scandinavian countries, that provided their citizens with a high level of social services, said Kruger.
"Given our relatively high tax-to-GDP ratio, it would not be unreasonable to question whether we are getting our money's worth in social benefits.
"On the other hand, it could no doubt be argued by the government that the additional revenue is necessary to make good the lack of social spending in the past. There is a fine balance."
Steven Jones, an independent tax consultant, said Solidarity was trying to score political points. "Most people's tax burden has dropped significantly in real terms in the past 13 years."
He also questioned the statement "have to pay extra for their own healthcare, education, safety, electricity, housing, pension and other services".
The state did provide healthcare and education - "whether one finds the standard thereof acceptable is, of course, one's own choice".
The assertion that "the average taxpayer spends 65 percent of their taxable income before he can begin to take care of his family" also seemed tenuous, Jones said.
A minority of taxpayers would always carry the tax burden - this was the nature of progressive rate tax systems throughout the world.
"As for the 'one in four' people who received some sort of social grant, Solidarity conveniently omits a breakdown of who receives what type of grant. Most of these grants, while better than nothing, would be considered a pittance by any reasonable living standards.
"Many people (particularly those in the higher income groups) regard the state services as inadequate, hence the need to purchase medical aid, have armed response contracts and send their children to private schools. But similar considerations apply to other countries, and to call these things 'taxes', to my mind, smacks of sensationalism on the part of Solidarity."