IRR to Ramaphosa: Govt risks tax revolt if tax burden, ‘citizen abuse’ continue

Cyril Ramaphosa. Image credit: Flickr/GovernmentZA

The Institute of Race Relations (IRR) has warned of a “de facto tax revolt” if the government does not end “citizen abuse” by reducing the tax burden on South Africans, ending corruption and cadre deployment, and canning the land expropriation policy.

In a memorandum to the Presidency earlier this month, IRR lamented that some government officials and activists are lobbying for tax increases, introduction of new taxes and even the seizure of household savings to cover state‐spending gaps.

‘Citizen abuse’

“Ordinary South Africans are thereby being forced to pay for the counterproductive policies, management failures, corruption, and ineptitude of the government in what could really now begin to be described as a phenomenon of ‘citizen abuse’ by the state,” it said.

It explained that elements of this “citizen abuse” include stealing from taxpayers, wasting resources meant for community upliftment, appointing incompetent officials, failing to tackle corruption and introducing policies that harm the economy.

Citing South Africa’s expanding budget deficit, the think-tank said the government’s financial position has become unsustainable. This is because debt levels are escalating faster than the economy is growing.

“We estimate that the government will soon be borrowing R1 of every R4 that it spends and that it is already the case that R1 of every R5 earned in revenue by the government goes to paying the interest on the money it has borrowed,” it explained.

ANC’s ‘strategy’

To respond to this situation, IRR claimed the ANC and government are pursuing the following strategy:

  1. Increase existing taxes.
  2. Introduce new taxes.
  3. Borrow more.
  4. Employ the savings and pension funds of ordinary citizens in order to prop up the government, finance parastatals, pay wages and maintain the cashflow to cadre deployment networks.

“Later, as these resources become exhausted, we fear that factions within the government and the Cabinet will turn to the printing of money,” it further claimed.

As a result of the aforementioned strategy, South Africa’s tax-to-GDP ratio has increased by over 30 percent since 1994, “from around 21 percent of GDP in 1994 to approaching 30 percent of GDP today,” the Institute said.

“No previous South African government has taken more from its citizens and investors – pre‐ or post‐1994,” it added. This is in addition to other forms of taxation such as electricity price hikes, toll road fees, and “regulatory, licensing, BEE and compliance fees” for investors.

‘Too little investment’

According to IRR, the main reason government is increasing the tax burden on citizens is that it is “attracting too little investment to grow the economy at a rate fast enough to stabilise the deficit and its debt levels.”

Investment levels have plunged since 2008 because of the threat of land expropriation without compensation, “which was first explicitly voiced in late 2007 before being translated into draft policies and laws,” IRR claimed, adding that other reasons include corruption and government incompetence.

Image credit: IRR

All this has caused some South Africans who have the means to leave the country to do so, while others try to “circumvent the government” by financing private service delivery, it aded.

To address the situation, IRR advised the Presidency to:

  • End corruption by firing implicated officials.
  • Stop cadre deployment and start hiring competent officials.
  • Provide a firm assurance that government “will not seize investment capital or the savings and businesses of South Africans.”
  • Implement structural economic reforms.

‘De facto tax revolt’

IRR concluded, “Should the government continue down its present path and should the current extent of citizen abuse continue, the prospects for a de facto tax revolt become significant.

“If, in response, the government makes the wrong call in reacting to that revolt, the effect could easily be to inspire a broader turn of public opinion against the government which could quite plausibly set in motion a chain of events that sees the ANC face an electoral defeat in either 2024 or 2029.”

The Presidency has not yet publicly reacted to IRR’s memorandum. Its response will be added as soon as it is available.

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