South Africa has the 10th highest tax-to-GDP burden in the world! South Africa also has the eighth highest government revenue-to-GDP burden in the world.
Our customs union partners, who receive most of their taxable income from SA via a 1,1% of GDP contribution from mainly the South African economy, are also all in the top 21 countries in the world out of 137 countries for which there is data (We leave out countries with fewer than a million people).
Without accounting for the SACU partner countries, SA would have the 6th highest government revenue-to-GDP burden in the world and the 8th highest tax only-to-GDP burden.
South Africa had the 12th highest personal income tax burden in 2015 and the 5th highest company income tax burden, according to the International Centre for Tax and Development (ICTD).
This is while SA earning levels are only 34th- according to Prices and Earnings around the World.
The personal income tax burden has since increased, and I estimate that SA is now in the top 10 highest countries.
No wonder that OXFAM describes SA personal tax as the most progressive in the world.
Our company profit margins are, at best, at the average rate of the OECD countries, and since the 2014 data was gathered, they will have declined further.
Our recent VAT rate increase sees our total indirect taxes among the top 35 countries.
The countries that have higher government revenues-to-GDP burdens than South Africa are mainly Scandinavian countries.
But the tax and total government revenue would make more sense if outcomes were better. You cannot simply charge for what you don’t deliver.
You are on a course to disaster when you make people feel guilty so that they pay taxes, but it the money disappears into a system that does not deliver.
The government does not deliver
For the size of our economy and the stage of our development, the tax burden is far too high. The “developmental state” simply does not deliver results but creates such bad outcomes that inequality is entrenched and services are not delivered.
This can be demonstrated by the fact that this high tax burden provides some of the worst education outcomes in the world.
We fail miserably in comprehension, reading, science and maths results.
The Scandinavian countries have about 14 children per teacher. We have 32 children to a teacher and 34 children to a teacher outside of fee-paying schools. In fact, the World Bank shows the world average is 24 children to a teacher. Even our good fee-paying school struggle to achieve this ratio.
All those private fees make up another 1% of GDP, by the way, and parents pay up simply to achieve average classroom sizes and reasonable education.
Our tax burden has resulted in high spending on education but has also resulted in the disaster of children leaving public schools who are, more often than not, considered unemployable.
Our universities have slipped in the rankings, and while we have many more young people at university, when they enter the workforce, many are just not employed, or are employed in the administrative jobs which school-leavers used to fill.
Human resource professionals report that test results show that more university graduates than before are unsuited for cognitive work. Privately, many academics confirm that quality has been replaced by quantity.
We spend more than most countries on private health care, as the overburdened state hospitals are not places where people with money go.
So our system leaks value at our expense, which is not fair for a middle-income country.
Proof of bad healthcare delivery is that our public sector employees opt for medical insurance so that they can avoid the hospitals they staff.
In fact, many staff from our public hospitals move to the private sector and some even moonlight there - telling me that the conditions are so much better.
In nearly all other highly taxed countries – even some that have half the tax burden of South Africa – you find quality medical care, and many more doctors and health professionals per capita. In others, private medical insurance is fully deductible from tax.
But the South African answer always seems to be to spend more and more – with the result that staff get higher salaries, although their performance does not improve. Many surveys and rankings point to worse results.
Even worse is that the corruption starts the minute the taxes are collected. We have seen the two highest executives at SARS being accused of wrongdoing.
The same happens on a local level, as city managers take the money for themselves, appoint friends and family -and very little happen to them.
Many South African police chiefs have been crooks, and others have found themselves completely out of their depth.
Survey results show that only half of the serious crimes get reported. The reason is that only 6% of the crimes result in convictions, and most of those are for drugs.
Leaving out drug crimes, and assuming unreported crimes were committed, then the conviction ratio falls to about 2%. Yes, in only one in 50 cases someone goes to jail.
Meanwhile, we release 40% of prisoners early on parole or for good behaviour – something which can be bought for a few hundred bucks. Corruption is so rife that many gladly go to jail, and take money along to buy favours.
Security companies grow, while citizens are scared. Neighbourhood watches pool resources and patrol the streets – even in the rich and middle-class suburbs of our metros.
South Africa’s high and rising tax burden have brought us potholed streets in almost all small towns, and even the Metros can no longer fix the holes.
Electricity and water prices have increased, and are another form of tax, as the profit is used to pay for poor people to have access to these services.
Meanwhile, power outages are increasing, and the economy produces less power- while staff numbers have increased by a third at the major power producer, Eskom.
Cities, meanwhile, employ 50% more people than 2002, and the services are - in most cases - worse. While rates and taxes have increased, libraries have fewer books while buses often run empty on the wrong routes.
The problem is that government seems to think that more money, from more taxes, will solve the problem. They appoint commissions, which despite very long periods at work, never seem to be able to publish the fact that South Africa has a very high tax burden.
In reality, the tax burden is 25% higher than in 1994. Total consolidated government revenue is 38% higher than in 1994 - as agencies and local government have increased rates and taxes too.
So, in short, South Africa now pays more for less. Imagine a grocer saying you can get less today but pay me more, and expecting to stay in business?
Yes, poverty is slightly lower, but inequality is higher, as civil servants have joined the elite and unemployment has increased.
If there has ever been a clear-cut case of higher taxes leading to higher unemployment, South Africa is it!
Unemployment increased from 5,3 million in 2001 to 9,5 million early this year.
This near-doubling of the number of unemployed has happened despite far higher educational attainment numbers. South Africa has 4,2 million more people unemployed.
The jump in the number of unemployed is the hard reality of an ineffective state with a massive tax burden.
This comes about when you protect the inefficient teachers who are destroying children’s lives - despite state employees receiving 30% more than the private sector.
I find it interesting that no government commission says anything about the anomaly of that matric numbers are growing, while more are unemployed.
The citizen knows this, however, and unfortunately so too do the taxpayers.
The South African tax revolt is not in the form of a tax boycott, but in human and investment capital rushing out.
Mike Schussler heads economists.co.za
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