JOHANNESBURG - It’s Budget time and as usual taxpayers read stories that taxes will again go up. As usual, fear is peddled everywhere that taxes are going to go up at rocket pace.
But when the worst does not happen relief creeps back; only like the frog in the frying pan, we are slowly cooked for more.
The normal spin-cycle kicks in from the national Treasury as journalists, who are locked in a monopoly vice for a few hours, emerge with a few sensational points to boldly announce that taxpayers have escaped the worst.
But the spin can only hide so much.
The South African tax burden is one of the highest in the world. Tax revenue to gross domestic product (GDP) - excluding social security taxes as our pensions are private - is among the top 10 highest countries in the world.
Moreover, the average world tax burden is 15percent, while South Africa’s is 27percent. The International Centre for Tax and Development shows that total government revenue in South Africa is close to 38percent of GDP, which is 57percent above the world average.
Taxpayers have less money now than stones have water. So the first thing I would like to see is that the tax burden gets eased.
Total government revenue grew 27.7percent in 1994 to 38.4percent in 2016. Include state-owned enterprises and we have more than 45percent of the GDP going to the government.
That brings me to the second wish. That is that the government becomes more efficient. We are one of the highest-taxed countries, yet we get very little in return.
The Treasury cannot be the only world-class department fighting a losing battle as taxes are wasted by the other departments.
For example, South African education comes near the bottom of the class.
In public education the current world average learner-to-teacher ratio is 24 children to a teacher.
In high-tax OECD countries, this average drops to 14 children a teacher. South Africa is at 32 children to a teacher and has twice the high-tax country average with 33percent more children a teacher than the world average. Our education quality is poor, as the world test score reveals.
No wonder parents chip in another R51billion-plus to fee-paying public schools just so that their children can get a good-quality education - which should be their right, anyway. Furthermore, despite our low standards, only 40percent of our children leave school with a matric.
Efficiency
Our health system has the same non-delivery but wants to get more money from a National Health Insurance Fund.
So what I dream of is that the efficiency of the government departments - particularly outside of Treasury - is improved first before further tax increases add to money going down a drain.
I think it is crazy that the government has increased the tax burden by 26percent since 1994, but simple delivery has lagged so much. No economy can see an increasing burden but with very little more in return for taxpayers.
The third thing is perhaps the main link between the first two points - the government wage bill. South Africa has one of the highest government wages to GDP ratios in the world.
We need not retrench government workers or cut their salaries overnight. We do, however, need to increase salaries with at most inflation for a long period. We also need to lift the quality of teachers and administrators quickly and effectively.
In fact, we need more teachers of good quality, and maybe we should have a pact whereby teachers get 24 children in their classroom on average, but they get no general inflation-linked salary adjustment for say three years and only inflation after that.
The average middle-class citizen pays a lot in taxes, and that is also a pact the government could make - to not hike taxes here. The tax burden must go down to 25percent of GDP, or roughly the world average. That is my fourth wish.
We already see a tax revolt in the form of non-payment of tolls, municipal accounts, traffic fines and a host of other methods that citizens feel they can get away with.
The fifth wish would include to give title deeds to the people living in RDP houses and traditional houses. Ownership would allow people to borrow more cheaply and give them more security on tenure. It would kick-start many a rural economy as well as places further away from the cities.
Impact
This would create a whole new economy in many areas and it would impact positively on banks, estate agents, home improvement and many artisan-type businesses that do things such as plumbing, etc.
Again, while this is not Treasury directly, the money needed for this would be small and allow people to rent out homes or sell them. Africans have the highest number of second homes, but many of them are not able to be used effectively for mainstream economic purposes.
Last, my dream budget would also look at the debt burden of the state. I would make it clear that we would adopt a ceiling of total net debt of 60percent, which is similar to the EU and a Budget deficit over the economic cycle of no more than 3percent. That would help keep government interest rates lower and allow people to spend more.
These limits would also reinforce government efficiency as we have reached the limit of what more government taxation can do. As a top 10 tax-burden country this would help bring clarity to spending priorities.
Mike Schüssler is the chief economist at Economists.co.za
The views expressed in this article are not necessarily those of the Independent Group
- BUSINESS REPORT ONLINE