Tax season has begun. And with it comes news that SA’s ticking tax time bomb is about to go off.
What are we talking about? Well, according to Mike Schussler, chief economist of economists.co.za, this year’s tax season is facing a crisis. In his ninth annual employment report, Schussler pointed out that there “are more people receiving money from social grants (13.8m) than there are people with jobs (12.8m)”. And out of those 12.8m that work, only 5m earn enough to pay tax. That means every taxpayer pays grants for 2.76 people. What’s even more concerning is the fact that South Africa currently employs 7m people less than the African average of 64% of the adult population. This disparity is clearly unsustainable.
“But what’s standing in government’s way of creating more jobs?” you ask.
It’s quite simple, explains Schussler. “By increasing its work force and setting the pace in wage increase, government is making it unaffordable for the private sector to employ more people.” Just think back to the way in which government caved in to unions who threatened to plunge the World Cup into darkness last weekend if government didn’t agree to
Eskom’s wage demands. The deal saw Eskom raise its offer to 9% from 8.5%, nearly double South Africa’s inflation rate of 4.6%.
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But it’s not just a recent issue. Since 2006, government sector wages have risen 53% – 4% more than the private sector. During the same period government sector jobs increased 13.6%, compared with a 2.9% decrease in the private sector.
Despite this worrying trend, Sars Commissioner, Oupa Magashule, remains upbeat about this year’s tax season. According to the figures, Sars collected R8.4bn more than it had anticipated last year. “Despite the economic downturn in the past year we experienced a drop in revenue but compared to the rest of the world we were better off,” stated Magashule.
One thing’s clear, however. Unless more people get jobs, there won’t be enough taxpayers to pay the social grants of the future. And we all know what will happen then. Taxes will rise.
