PLEASE NOTE:

MyNews24 is a user-generated section of News24.com. The stories here come from users.

 
Amdyn
 
Comments: 18
Article views: 1622
 
 
Latest Badges:


 
View all Amdyn's badges.
 

Eliminating Income Tax

07 January 2013, 07:48

Somewhere along the way the middle class of South Africa was convinced that income tax is a good idea. In fact it seems that not only is income tax accepted as a reasonable way for government to generate revenue, but that as one earns more, one should pay more. During the 2011/2012 financial year the government of SA has collected R250 billion in personal income tax.

Income tax however isn't actually a good or remotely fair way of collecting taxes :

1) You get nothing directly for them - you worked, you pay. In fact the more you work the more you pay. Each hour you work is taxed at a higher rate than the last ! What kind of an incentive to work is this ?

2) You get no credit for paying income tax. Government gets all the credit for providing health care, old age grants, roads, houses etc.with your money. Not you. When last did anyone thank you for the free healthcare they receive, or that child support grant ?

3) You get no say in what the money is spent on. If you lose your house because you are paying for a public official to build a big Nkandla is that fair ? Even good causes such as welfare are out of your hands - how much welfare should you be providing ? Is three to four people on welfare per taxpayer fair ?

4) You are a criminal if you get it wrong. SARS will penalise you, charge interest, garnish your income and turn you into a criminal for daring to work and make mistakes. Since when is wanting to keep the efforts of your own work a crime ?

5) The rules are ridiculous. Driving to work everyday ? Private mileage. Company cellphone ? Perk ! Medical Aid ? Pension fund ? Provident fund ? Shares instead of salary ? All these have rules about what you can and can't do, how much you can use them, who you can save with - and these are the "easy" ones. The irony is that as soon as a big enough chunk of money is invested and you begin to understand them the rules change and you are worse off again (eg. changes to the medical aid rules in this last tax year).

6) The cost of collection is ridiculous because of all the rules. See all those SARS employees costing the country billions a year ? They cost us R8 billion a year to chase down all the middle class people who haven't paid enough. 

7) Confusion over how much you earn. When you are offered a salary it is never what you actually get paid. How do you know you aren't being cheated ? With our poor education system results I wonder how many ordinary SA taxpayers know if they are paying the right amount of tax ? eg. Do you make use of a tool allowance ? Imagine how happy workers at Marikana would be if they earned R15 000 per month without any deductions from government?

You could argue that all this tax is necessary and that government has a lot to pay for. This is partly true, and one cannot deny that the government should provide certain key services. We need policing, schooling and infrastructure... but do we need the big departments we have built ? Do we need ALL the big departments we have built ? How much government do we REALLY need ?

A study by the Duke Centre in 2008 showed that direct taxes in SA were 15% of GDP in 1960. In 2011 it was 24.6% (down from a high of over 27% in 2008). Was the government unable to manage in 1960 ? The Duke Centre study noted that 18.6% was the average for middle-income countries.

The reality is that income tax has allowed government to spend MORE than they need to. Before income tax became the tax mechanism of choice government generated tax by charging for consumption and providing services. Customs duties, sales taxes etc.

In fact income tax hasn't been around for very long. The USA only really implemented it in 1913. A tax rate of 1% on people earning less than $453000 per year. Higher incomes paid more... the maximum marginal tax rate was 7%.  How did we land up with the rates we have now ?

The key to income tax is that it has no product which government has to provide in exchange for it. People NEED to work to survive. With income tax you can increase the rates and everyone will compensate by trying to work harder, because they have no choice - they are locked into mortgages, retirement plans and will lose them if they don't work harder. Government however can manipulate voters with more promises of free stuff in return for your hard work !

Government has to be more honest with consumption taxes such as import duties. If  the taxes on a product (eg. a fancy cellphone) increase you might actually get less tax because less people would want to buy it.

I hope this highlights the difference between income tax (PAYE, SITE etc) and consumption taxes (VAT, customs etc). The point I would like to make is that ALL the taxes we need can and SHOULD be generated from consumption taxes rather than income based taxes.

Income tax is a blank cheque for government to spend the labour of the country how it sees fit. Income tax can be eliminated immediately if government chose to. The impact on employment and the economy would be immediate and enormous - imagine another R250 billion in the hands of the middle class. This is just the kind of stimulus the SA economy needs right now rather than more welfare plans (youth dole!).

The number of jobs created by an economy that suddenly had this kind of cash injected into it would practically self fund the so "lost" revenue which government will argue it needs. As is stands government will simply get an additional 14% in VAT on any expenditure without changing anything.

The additional money sloshing around the economy will increase employment because people will want to buy products and services. Increasing employment will REDUCE the need for all these youth subsidies, unemployment grants, child welfare grants etc.

In addition to new employment opportunities, new companies will start - wanting to tap into the extra R250 billion. Starting that company is also MUCH easier because you don't need a big department to ensure that SARS gets all of that payroll tax.

Within 3 years the revenue collections from the consumption based taxes would result in similar revenues being collected. The difference being that when you buy a cellphone you GET a cellphone AND help pay for the infrastructure, welfare, schooling and police services instead of getting nothing for your hard work at all.

If you like what I have to say, have questions or just want to challenge the logic please feel free to contact me. Thank you for taking the time to read this !

Disclaimer: All articles and letters published on MyNews24 have been independently written by members of News24's community. The views of users published on News24 are therefore their own and do not necessarily represent the views of News24. News24 editors also reserve the right to edit or delete any and all comments received.
 

Read News24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
18 comments
Add your comment
Comment 0 characters remaining

Read more from our Users

Submitted by
czoe
The democratic right to vote

It seems that there are so many disgruntled members in the ANC, and some of them have resorted to negative stances, floor crossing and verbal insinuations are the order of the day.  Read more...

4 comments 181 views
Submitted by
Tyronehster
Death Walks Behind me

Nothing makes me so mad as seeing a broad being mistreated, and this one was being mistreated in the most brutal way.  Read more...

4 comments 106 views
Submitted by
Desere Bosman Ray
The memory of Architecture

A few months ago our earth leakage blew. A bother of a thing to happen at any stage, but what made matters worse was the fact that it chose to blow on a Saturday morning.  Read more...

2 comments 61 views
Submitted by
LeboDang Macman
Oscar & Zuma: 'Let's play the bla...

What is it about us human beings that we are unable to accept responsibility for our actions? Read more...

6 comments 582 views
Submitted by
Celeste Maxime Lackay
Are you free? Sidikiwe! Vukani!

It is particularly uplifting to see how the public is debating these coming elections.  Read more...

3 comments 474 views
Submitted by
Pan Jandrum
Why it's dumb to spoil your ballo...

Voting is a hard-won right. Many people sacrificed their lives so we could all choose our government democratically.  Read more...

8 comments 243 views

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Escape winter, head to Mauritius

Escape winter by spending 7 nights in Mauritius' tropical bliss from R13 215 per person sharing. Includes return flights, airport transfers and accommodation. Book now!

Kalahari.com - shop online today

Get many eggs in one basket!

Gaming bundles: 2 Super Hits games for R99, 3 Disney games for R99 and more + exclusive accessory bundles only available on kalahari.com. While stocks last. Shop now!

25% off bestselling books!

The Real Meal Revolution by Tim Noakes, Jeffrey Archer’s Be Careful What You Wish for, Man’s Search for Meaning by Victor E. Frank and many more titles. Shop now!

Up to 25% off electronics

Buy top electronics and save up to 25%. Such as kalahari.com’s 1# selling product the gobii eReader, Patriot X Porter flash drive, Asus Nexus 7” 3G tablet, Samsung Galaxy SIII, Lenovo G580 Notebook and many more. Shop now!

DStv HD PVR Decoder now R949

The DStv HD PVR Decoder has further revolutionised the television experience with lifelike viewing, sharper images, more vibrant colours and precision picture quality. Now R949, save R550. Offer valid while stocks last. Shop now!

Up to 30% off appliances & homeware

Save up to 30% on appliances and homeware this Easter! Offer valid while stocks last. Shop now.

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25

 

services

E-mail Alerts The latest headlines in your inbox

RSS feeds News delivered really simply.

Mobile News24 on your mobile or PDA

E-mail Newsletters You choose what you want

News24 on your iPhone Get News24 headlines on your iPhone.

SMS Alerts Get breaking news stories via SMS.

Blogs Your opinion on you, me and everyone.

Calais Website keywords automated by OpenCalais.

 
Digital Media & Marketing Association
 
© 2014 24.com. All rights reserved.
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.








Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.